2017 (6) TMI 898 - AT - Central Excise

Waste - Liability of duty - Fly Ash generated during generation of electricity - Held that - the fly ash emerging during the course of generation of electricity cannot be considered as a manufactured product liable to Central Excise Duty - reliance placed in the case of The Central Board of Excise & Customs Government of India, The Commissioner of Central Excise Versus M/s. Mettur Thermal Power Station (A Unit of Tamil Nadu Generation & Distribution Corporation Ltd. (TANGEDCO) 2017 (1) TMI 222 - MADRAS HIGH COURT , where it was held that the fly ash produced during combustion of coal in the manufacture of electricity is a waste by-product. The same is not emerging out of any manufacturing process - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues: Liability to pay Central Excise Duty on fly ash generated during electricity production.

Analysis:
1. Issue: The liability of the Appellants to pay Central Excise Duty on fly ash generated during electricity production.

Analysis: The Appellants, engaged in manufacturing Sponge Iron and other goods, also generate fly ash during electricity generation in their captive thermal power plant. The dispute arose regarding the duty liability on the fly ash cleared by the Appellants. The original authority confirmed a duty liability of &8377;2,02,057 and imposed an equal penalty. On appeal, the original order was upheld, leading to the current appeal.

2. Issue: Interpretation of whether fly ash is a waste by-product or a manufactured product liable to Central Excise Duty.

Analysis: The Appellants argued that fly ash, a by-product of coal combustion during electricity generation, is not a manufactured product but a waste by-product, citing a decision of the Hon’ble Madras High Court. The lower authorities classified fly ash under Chapter 26 of the Central Excise Tariff, imposing a duty of 1% / 5% if no Cenvat Credit was availed. However, the Tribunal noted that fly ash generated during electricity production cannot be considered a manufactured product liable to Central Excise Duty.

3. Issue: Application of the tests of manufacture and marketability to determine excisability of fly ash.

Analysis: The Tribunal referred to the Supreme Court's judgment emphasizing that excise duty is levied on manufactured goods that are marketable. The Hon’ble Madras High Court's decision highlighted that fly ash, being a by-product of electricity production and not a marketable commodity on its own, does not satisfy the tests of manufacture and marketability required for excisability. As fly ash is not a manufactured item and is usable only in other product production, it cannot be considered excisable merely based on marketability.

4. Conclusion: The Tribunal found the dispute aligned with the Madras High Court's findings, concluding that fly ash generated during electricity production is not liable for Central Excise Duty. Therefore, the impugned order was set aside, and the appeal was allowed.