2018 (4) TMI 823 - AT - Central Excise

Liability of Excise Duty - waste and scrap - The view of the Revenue is that after the introduction of Explanation under Section 2(d) for excisable goods if such scrap is being capable of bought and sold for a consideration the same shall be treated as marketable - Held that - the various goods on which the Revenue seeks to collect Excise duty are all, admittedly, products incidentally arising during the manufacture of finished goods on which in any case, the appellant is discharging duty. These scrap material are not emerging due to a process of manufacture. Hence, they do not qualify to be taxed for excise levy. The view of various judicial pronouncement on this issue has been consistent and clear. Such scrap materials arising as incidental products and even if they were sold for a consideration cannot be considered as excisable products. Reference made to the decision in the case of Magnum Ventures vs. CCE, Ghaziabad 2014 (4) TMI 416 - CESTAT NEW DELHI , where it was held that the emergence of sludge and pulper waste during the course of manufacture of paper or paper board cannot be held to the result of any manufacturing activity. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Central Excise duty liability on waste and scrap products cleared by the appellant.

Analysis:
The appeals revolve around the Central Excise duty liability of the appellant concerning waste and scrap products cleared by them. The appellant, engaged in the manufacture of sweetened/non-sweetened aerated water, availed cenvat credit on various items. The Revenue initiated proceedings against the appellant for demand and recovery of Central Excise duty on assorted scrap cleared by them. The Revenue's stance was that if such scrap could be bought and sold for a consideration, it should be treated as marketable, leading to the initiation of proceedings resulting in the impugned orders.

Upon hearing both sides and examining the appeal record, the Tribunal noted that the proceedings did not identify the goods with any tariff heading to charge Excise duty. The appellant's manufacturing process of sweetened/non-sweetened assorted water resulted in various scrap materials emerging, which could not be considered as products arising from a manufacturing process. Citing judicial pronouncements, the Tribunal emphasized that such scrap materials, even if sold for a consideration, cannot be deemed excisable products. Referring to a specific case, the Tribunal highlighted that the emergence of waste during the manufacturing process does not qualify as a manufacturing activity, thus not subject to excise duty.

Furthermore, the Tribunal referenced a Supreme Court case to emphasize that excise duty cannot be automatically imposed solely based on the marketability of goods. The Supreme Court held that for goods to be liable for excise duty, they must undergo a transformation into a new product through skillful manipulation. In the present case, the scrap materials in question arose incidentally during the manufacture of finished goods, and as they did not emerge from a manufacturing process, they were deemed not subject to excise levy.

Consequently, considering the discussions and analysis presented, the Tribunal set aside the impugned orders and allowed the appeals, ruling in favor of the appellant.