2022 (2) TMI 731 - AT - Central Excise

Levy of central excise duty - waste and scrap products cleared by the appellant, without payment of duty - period from February 2013 to June 2017 - HELD THAT - The issue was involved in M/S VARUN BEVERAGES LIMITED VERSUS C.C.E. AND ST, JAIPUR-I 2018 (4) TMI 823 - CESTAT NEW DELHI where it was 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. It will also be appropriate to refer to the decision of the Supreme Court in UNION OF INDIA VERSUS KAMLAKSHI FINANCE CORPORATION LTD. 1991 (9) TMI 72 - SUPREME COURT . The order passed by the Assistant Collector not only ignored the order of the Collector (Appeals) remanding the matter, but also distinguished the decision of the Tribunal by observing that the decision of the Tribunal had not been agreed to by the Department as an appeal had been filed in the Supreme Court. The assessee filed a writ petition in the Bombay High Court to challenge the said order of the Assistant Collector. The High Court not only quashed the order passed by the Assistant Collector but also directed the Department to allocate the matter to a competent officer for passing a proper order - The Supreme Court also observed that the order of the Tribunal is binding upon the Assistant Collectors who functions under the jurisdiction of the Tribunal and that the principles of judicial discipline require that the orders of higher appellate authorities are unreservedly followed by the subordinate authorities. The aforesaid decisions of the Supreme Court have been referred to by the Supreme Court in COMMISSIONER OF INCOME-TAX VERSUS RALSONS INDUSTRIES LIMITED 2007 (1) TMI 184 - SUPREME COURT and it has been observed that when an order is passed by a higher authority, the lower authority is bound keeping in view the principles of judicial discipline. The appeal before the Commissioner (Appeals), therefore, should have been allowed solely on the ground that on the same issue the Tribunal had earlier decided that no excise duty could be levied but the Commissioner (Appeals) refused to accept this decision as a binding precedent and dismissed the appeal - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Levy of central excise duty on waste and scrap products.
2. Precedential value of Tribunal decisions.
3. Judicial propriety and discipline in following superior tribunal orders.

Detailed Analysis:

1. Levy of Central Excise Duty on Waste and Scrap Products:
The appellant, engaged in the manufacture and sale of aerated water, packaged water, and fruit juice-based drinks, faced eight show cause notices alleging that it had cleared excisable goods, namely scrap, without payment of duty from February 2013 to June 2017. The appellant contended that the waste materials, including petroleum coke ash, used carbon, PVC shell, sugar juice, and other wastes, were not subject to excise duty as they did not emerge from a manufacturing process. The Assistant Commissioner confirmed the demand for duty, interest, and penalty, which was upheld by the Commissioner (Appeals).

2. Precedential Value of Tribunal Decisions:
The appellant argued that the Commissioner (Appeals) was bound by a previous Tribunal decision dated March 14, 2018, in the appellant’s own case, which held that the scrap material did not emerge due to a manufacturing process and thus was not subject to excise duty. However, the Commissioner (Appeals) refused to treat this decision as a precedent, asserting that the Department had accepted the Tribunal's order only on monetary grounds.

3. Judicial Propriety and Discipline in Following Superior Tribunal Orders:
The Tribunal emphasized that the Commissioner (Appeals) was bound to follow the Tribunal's decision unless it was set aside by a higher court. The refusal to accept the Tribunal's decision as a precedent was criticized as a violation of judicial propriety. The Tribunal cited several Supreme Court decisions, including *The Bhopal Sugar Industries Ltd. vs. the Income-Tax Officer, Bhopal*, *Dharma Chand Jain vs. The State of Bihar*, and *Union of India vs. Kamlakshi Finance Corporation Ltd.*, which underscored the importance of following superior tribunal orders to maintain judicial discipline and prevent chaos in the administration of justice.

Conclusion:
The Tribunal concluded that the Commissioner (Appeals) should have allowed the appeal based on the earlier Tribunal decision, which had determined that no excise duty could be levied on the scrap materials. The impugned order dated April 22, 2019, was set aside, and the appeal was allowed, reaffirming the binding nature of superior tribunal decisions and the necessity of adhering to judicial propriety.