2015 (11) TMI 771 - AT - Central Excise

Levy of duty on by-product or a waste - Lower authorities have referred to an addition of Explanation in the provision of Section 2(d) of the Central Excise Act laying down that if for the purpose of this clause, goods include any article, material or substance which is capable of being bought and sold for a consideration and in such case shall be deemed to be marketable - Held that - Only difference in the facts of the present case and the decisions relied upon by the learned advocate is the addition of Explanation to Section 2(d) of the Central Excise Act, w.e.f 10.5.2008. However, I find that the Board s Circular No.904/24/09-CX dated 28.10.2009 strongly relied upon by the lower authorities stands struck down by the Hon ble Allahabad High Court in the case of Balrampur Chini Mills Ltd. vs. UOI reported as 2013 (1) TMI 525 - ALLAHABAD HIGH COURT . Further, vide a recent decision, the Hon ble Bombay High Court in the case of Hindalco Industries Ltd. 2014 (12) TMI 657 - BOMBAY HIGH COURT has set aside the Larger Bench decision of the Tribunal reported as 2014 (11) TMI 385 - CESTAT MUMBAI (LB) and has observed that the amendment in Section 2(d) will not change the scenario inasmuch as the manufacture of waste, refuse, scrap, etc., cannot be considered to be manufactured items in terms of Section 2(f) of the Central Excise Act. - amendment in Section 2(d) has not changed the scenario. Accordingly, the law declared in the above decisions of the Hon ble Supreme Court and the Hon ble Bombay High Court would apply, read with the decisions of the Hon ble Allahabad High Court. The impugned orders are accordingly set aside - Decided in favour of assessee.

Summary

Issues:
Interpretation of Section 2(d) of the Central Excise Act regarding the classification of slag as excisable goods and liability to pay duty. Applicability of Rule 6 of CENVAT Credit Rules, 2004 on the value of exempted by-products. Relevance of Board's Circular No. 904/24/09-CX dated 28.10.2009 in determining excisability of goods. Impact of judicial decisions on the classification of by-products and payment of duty.

Analysis:
The judgment dealt with the classification of slag as excisable goods and the liability to pay duty under Section 2(d) of the Central Excise Act. The appellants, engaged in manufacturing sponge iron, faced a demand for payment of duty on the sale of slag, considered a by-product or waste. The lower authorities relied on an Explanation in Section 2(d) and Rule 6(3)(i) of the CENVAT Credit Rules, 2004, to confirm the duty demands. The appellant argued citing the Bombay High Court and Supreme Court decisions that exempted by-products are not excisable goods, thus not subject to Rule 6. The Revenue contended that these decisions were pre-amendment and not applicable to the current case.

The Tribunal analyzed the impact of the Explanation added to Section 2(d) post-amendment and the validity of Board's Circular No. 904/24/09-CX. It noted the Allahabad High Court's ruling against the Circular and the Bombay High Court's decision stating that the manufacture of waste, refuse, or scrap does not constitute manufactured items under Section 2(f) of the Central Excise Act. Considering these precedents, the Tribunal concluded that the amendment did not alter the scenario, and the decisions of the Supreme Court and Bombay High Court applied. Consequently, the impugned orders were set aside, and the appeals were allowed in favor of the appellants, granting them consequential relief.

In essence, the judgment clarified the classification of by-products like slag, the applicability of Rule 6 on exempted goods, and the impact of judicial decisions on determining excisability and duty liability. It emphasized the significance of legal interpretations post-amendment and the relevance of precedents in resolving disputes related to excise duty obligations on manufacturing by-products.