2023 (7) TMI 578 - AT - Central Excise

Valuation - Receipt of consideration for clearance of waste / rubbish - inclusion of additional consideration received by the appellants in the form of credit notes from M/s. Indrox Global Pvt. Ltd. (IGPL) for sale of Ferric Oxide by IGPL, which emerged through chemical reaction of Waste Pickle Liquor, (generated during the course of manufacture of finished goods in the factory of the appellants) in assessable value or not - Rule 6 of Excise Valuation Rules, 2000. HELD THAT - On identical set of facts wherein also the credit notes were issued by IGPL to the assessee therein and differential duty was demanded from the assessee by considering it as additional consideration received in terms of Rule 6 ibid, this Tribunal in the matter of M/S. TATA STEEL LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI 2019 (1) TMI 2021 - CESTAT MUMBAI has held that WPL is not an excisable goods therefore Rule 6 of Valuation Rules, 2000 has no application and the question of undervaluation does not arise. It is settled position that receipt of sale proceeds of the by-product i.e. Ferric/ Iron Oxide emerged as a result of chemical reaction of a waste product WPL in IGPL s reactor cannot be said to be the consideration for WPL as the product has to be assessed in the form in which it is cleared. WPL is nothing but waste which emerges in the process of manufacture of steel articles or finished goods. It s not an end product or finished product and merely because it fetches some price in the market does not bring it out from the category of waste. It has neither any marketability nor saleability and therefore it s not liable to any duty. Waste or rubbish, which is thrown up in the course of manufacture, cannot be said to be a produce of manufacture and cannot be said to be exigible to excise duty - the appellant is not at all involved in converting of Ferric/Iron Oxide out of the said WPL and resultantly no demand can sustain against the appellant on that count also. The appeal filed by the appellant is allowed.

Issues involved:
The issue involves whether additional consideration received by the appellants in the form of credit notes for sale of Ferric Oxide by another company, which emerged through a chemical reaction of Waste Pickle Liquor supplied by the appellants, is required to be added to the transaction value as per Rule 6 of Excise Valuation Rules, 2000.

Comprehensive Details:

Issue 1: Valuation of additional consideration received

The appellants supplied Waste Pickle Liquor (WPL) to another company, which resulted in the generation of Ferric Oxide. The other company issued credit notes to the appellants for 50% of the proceeds from the sale of Ferric Oxide. The department contended that the credit notes constitute additional consideration under Rule 6 of Valuation Rules, 2000, and issued a show cause notice for differential Central Excise duty. The appellants argued that WPL is a waste product and not an excisable good, citing precedents where similar situations were deemed non-dutiable.

Issue 2: Applicability of Valuation Rules

The Tribunal differentiated the present case from a previous case where the issue was the inclusion of scrap value in transaction value. In the current matter, WPL is considered waste emerging during the manufacturing process and does not qualify as an excisable good. Relying on precedents, the Tribunal concluded that Valuation Rules, 2000 do not apply to WPL, as it is not a marketable or saleable product. Therefore, the demand for additional duty based on the credit notes issued for Ferric Oxide sales was deemed unsustainable.

Final Decision

The Tribunal set aside the impugned order, ruling in favor of the appellants. The Tribunal emphasized that WPL, being a waste product, is not liable to duty. The consideration received for Ferric Oxide cannot be deemed consideration for WPL, as WPL is not a marketable product. The appellants were not involved in the conversion of Ferric Oxide, further supporting the decision to allow the appeal.

*(Pronounced in open Court on 11.07.2023)*

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