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TMI Blog2015 (9) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... ified in the First Schedule of the Central Excise Tariff under heading 27160000, but it is not subjected to a duty of excise since under the 'rate column' the duty of excise is indicated as 'nil'. Merely, rate of duty is mentioned 'nil', it cannot be construed that it is non-excisable good. In "CCE, Hyderabad versus Vazir Sultan Tocacco Co.Ltd., reported in [1996 (2) TMI 138 - SUPREME COURT OF INDIA] the Hon'ble Supreme Court has held that though by virtue of an exemption notification, the rate of duty was nil, this does not mean that they were not excisable goods. They were excisable goods. Nil rate of duty is also a rate of duty. Therefore, electricity is excisable good and can be construed as exempted goods by virtue of the above notification No.89/95-CE, dated 18.05.1995 as it has been clearly clarified in the Explanation that "....for the purpose of this notification, the expression "exempted goods" means excisable goods which are chargeable to "Nil" rate of duty. Therefore, as rightly contended by the learned counsel for the petitioner, the exemption Notification No.89/95-CE would squarely applicable to the product 'fly ash', which is a waste arise during the course of manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... second respondent has stated that the petitioner has contravened the provisions of Rule 4,6,8 to 12 of Central Excise Rules, 2002 (in short, the Rules) since it had cleared 'Fly Ash' and 'Fly Ash Bricks' without payment of appropriate Excise duty, without taking Central Excise registration, without filing statutory monthly returns and without following the prescribed procedure. Therefore, CENVAT duty of ₹ 1,40,70,803 /- including Education cess and Secondary Higher Education cess has been demanded under erstwhile Section 11A(1) / Section 11A(5) of Central Excise of the Act 1944 (in short, the Act) for the clearance of 'Fly Ash' and further CENVAT duty of ₹ 1,85,443/-, including Education and Secondary Higher Education cess has been demanded for clearance of 'Fly Ash Bricks'. Apart from this, the respondent has also demanded interest and also proposed to impose penalty under the Rules. Challenging the same, the petitioner has come forward with the present Writ Petition. 3. A counter affidavit has been filed on behalf respondents, inter alia, it is stated that during the process of production of electricity, 'Fly Ash' emerges as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ', is excisable goods classified under chapter 68159910 of the Act and effective rate of excise duty was applicable on such goods cleared. It attracts duty at 8% from February 2009 to 2010, 10% from March 2010 to 16th March 2012 and 12% from 17th March 2012. Since 'Fly Ash' finds a place in the Central Excise Tariff, the petitioner is liable to pay Central Excise duty on the 'Fly Ash' clearances from 01.03.2011. 4. It is stated that electricity is not an exempted product and it finds a place in the first schedule to the Act and thereby it is classified as tariff item. Being non-excisable goods, electricity cannot be regarded as exempted goods and as the 'Fly Ash' arising during the production of electricity is not covered by the Notification No.89/95-CE dated 18.05.1995, duty is to be paid on the 'Fly Ash'. The petitioner has not paid duty on the 'Fly Ash' in lieu of the levy of duty on the clearance of 'Fly Ash' with effect from 01.03.2011 with an intent to evade payment of duty which was detected during the investigation carried out by the department. The extended period of limitation is applicable. The petitioner being a pub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 68159910 of the Act, attracts duty at 8% from February, 2009 to February 2010, at 10% from March, 2010 to 16th March 2012 and at 12% from 17th March, 2012. In view of this, it appears that the second respondent has issued a show cause notice, dated 21.3.2014, impugned in this writ petition, proposing to raise demand towards CENVAT duty along with interest and penalty, inasmuch as, the petitioner have cleared 'fly ash' and 'fly ash bricks' without payment of appropriate excise duty, without taking central excise registration and without filing statutory monthly returns. 8. This issue needs a reference to the relevant statutory provisions. Section 3 of the Act insists imposition of duties specified in first schedule, reads as under: 3. Duties specified in the First Schedule to be levied. (1) There shall be levied and collected in such manner as may be prescribed, duties of excise on all excisable goods other than salt which are produced or manufactured in India and a duty on salt manufactured in, or imported by land into, any part of India as, and at the rates, set forth in the First Schedule. Excisable goods and manufacture have been defined in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve to satisfy the test of being produced or manufactured in India. Excise duty is a duty leviable only on the manufactured goods. 11. It is appropriate to describe the meaning of fly ash and fly ash bricks as under: Fly ash, also known as flue-ash, is one of the residues generated in combustion, and comprises the fine particles that rise with the flue gases. Ash which does not rise is termed bottom ash. In an industrial context, fly ash usually refers to ash produced during combustion of coal. Fly ash is generally captured by electrostatic precipitators or other particle filtration equipment before the flue gases reach the chimneys of coal-fired power plants, and together with bottom ash removed from the bottom of the furnace is in this case jointly known as coal ash. Depending upon the source and makeup of the coal being burned, the components of fly ash vary considerably, but all fly ash includes substantial amounts of silicon dioxide (SiO2) (both amorphous and crystalline) and calcium oxide (CaO), both being endemic ingredients in many coal-bearing rock strata. Fly ash brick (FAB) is a building material, specifically masonry units, containing class C fly ash and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t fully and leaves pieces behind, is called 'cinder' whereas, when it is fully burnt and reduced to ash, is called 'fly ash'. Therefore, I am of the considered view that the ratio decided in the above said decision would squarely apply in the case of 'fly ash' also since the product 'fly ash' also cannot be said to have gone through any manufacturing process. In fact, to attract excise duty under Section 3 of the Central Excise Act, the article must satisfy the twin attributes of excisable goods, i) Mobility and ii) Marketability or it should find a place by that name in the Schedule to the Act, as held by the Apex Court in Commissioner of Central Excise, Mumbai versus Josts Engineering Co. Ltd., reported in 2002 (146) ELT 29 (SC). 14. However it is pertinent to note that in the above referred to decision, viz., Ahmedabad Electricity Co.Ltd., case, the Hon'ble Apex Court, though has held that the cinder cannot be subjected to levy of excise duty since it did not satisfy the test of being manufactured, however, as regards marketability of the said product, it has observed as under in para 36, which reads as follows. 36. In view of our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /95 CE, dated 18.5.1995 issued by the Government of India, which grants exemption from the levy of duty on waste, parings and scrap arising in the course of manufacture of exempted goods and falling within the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986). According to the learned counsel, since the fly ash is a waste or scrap arising in the course of manufacture of 'electricity' which is exempted good, by virtue of the above said Notification, no excise duty can be levied on the fly ash. 18. On the other hand, the learned counsel appearing for the respondent would contend that benefit of exemption granted by Notification No.89/95 CE, dated 18.5.1995 would be extended only on waste, parings and scrap arising during the manufacture of exempted products and electricity is not an exempted product, but it is a non-excisable good found place in the First Schedule to the Central Excise Tariff Act, 1985 and though the rate of duty is left blank in the relevant column, it denotes that electricity is classed as tariff item and hence, it cannot be construed that the electricity is an exempted good. The learned counsel pointed out that admittedly, the fly ash is used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A, even though there was no intention to manufacture the product B, the product B would be called a by-product. The waste is a by-product which is of no value or very low value. Larger Bench of the Tribunal in the case of Markfed Vanaspati Allied Indus v. CCE, Chandigarh reported in 2000 (116) E.L.T. 204 (Tribunal) after observing that by-product means something of value produced in making the main product or a substance obtained in course of a specific process but not a primary object, has held that the spent earth arising in course of refining of oil, being of no value, is not a new product or a by-product. Though the Tribunal in the case of CCE, Hyderabad v. Priyanka Refineries Ltd. (supra) has held that soap stock arising in course of refining of oil is waste, no reasons have been given for arriving at this conclusion. In this order, the observations of the Tribunal that the decision of Hon'ble Supreme Court in the case of Khandelwal Metal Engineering Works v. Union of India reported in 1985 (20) E.L.T. 222 (S.C.) would cover the issue in favour of the respondent are also not correct as the issue involved in the case of Khandelwal Metal Engineering Works was as to wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... products. It has been held so, by the Tribunal in para 4, which reads as under: 4. The waxes and gums obtained in course of refining is covered by heading 1522. As regards soap stock, the same would also be covered by Heading 1522, as, as per HSN Explanatory Notes of heading 1522, this heading among other things, covers soap stocks which are the by-product of oil refining, produced by neutralisation of free fatty acids with a base (sodium hydroxide) and consist of mixture of crude soap, natural oils or fats. As regards, fatty acids obtained in course of refining, the same by virtue of Chapter Note 1(e) to Chapter 15 are excluded from the purview of Chapter 15 and the same are specifically covered by Heading 3823. Therefore, each of the three by-products, soap stock/fatty acids, waxes and gums are the manufactured products covered by Central Excise Tariff and since it is not under dispute that the same are marketable, the same have to be treated as excisable product chargeable to Central Excise Duty. But in the present case, it has already been held by this Court that the fly ash has not gone under the process of manufacture and it cannot be said to be a manufactured produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty or the same are fully exempt from duty under an exemption notification other than exempt notification granting full duty exemption based on value or quantity of the goods cleared in a financial year; and (iv) other than the exempted final product no other dutiable excisable goods are manufactured and cleared 23. It is the specific contention of the department that the 'fly ash' would emerge as a by product in the course of burning of pulverized coal for the manufacture of electricity and electricity is not an exempted product, but a non-excisable good, found place in the First Schedule to the Central Excise Tariff Act, 1985 and though the rate of duty is left blank in the relevant column, it denotes that electricity is classed as tariff item and hence, it cannot be construed that the electricity is an exempted good. 24. It is not in dispute that 'electricity' has been specified in the First Schedule of the Central Excise Tariff under heading 27160000, but it is not subjected to a duty of excise since under the 'rate column' the duty of excise is indicated as 'nil'. Merely, rate of duty is mentioned 'nil', it cannot be construed th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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