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TMI Blog2017 (1) TMI 222X X X X Extracts X X X X X X X X Extracts X X X X ..... t is usable only as one of the materials in the production of other products. Therefore, there being no manufacture of 'fly ash', but 'fly ash' gets formed as a by-product during the production of electricity, merely because the goods 'fly ash' finds a place in the specific or residuary entry in the schedule it cannot be termed as an excisable commodity, since it satisfies the test of marketability. - mere marketability of the product alone would not be suffice to levy duty on the 'fly ash', there being no manufacturing process involved. Whether the product 'fly ash', which is a by-product during the production/manufacture of electricity could be termed as a waste in order to attract Notification No. 89/95-CE dated 18.5.95? - Held that: - The product is capable of being bought and sold, whereby marketability of the product is such that it has a value in the market. Once a product is said to have a value in the market to enable it to be sold for the purpose of manufacture of various commodities, it cannot be termed as waste or scrap. - Such being the case, learned single Judge has misled himself into giving a finding that the by-product 'fly ash', which is generated during the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , is a marketable commodity having intrinsic value in the commercial market, which is used for the production of fly ash bricks, asbestos, cement, etc., and, therefore, by virtue of the notification dated 1.3.2011, duty is chargeable on the manufacture of the said 'fly ash', which is in turn cleared to various other customers. Since no duty has been paid by the petitioner on the 'fly ash' since 1.3.2011, with an intent to evade payment of duty, the show cause notice was issued invoking the extended period of limitation. Since, production of 'fly ash' and consequential manufacture of fly ash bricks attract excise duty since 1.3.2011, the date from which exemption was withdrawn, evasion of payment of duty warranted the issuance of the show cause notice. 4. Learned single Judge, after exhaustively considering the submissions advanced on either side, held that the 'fly ash', which is a by-product on the generation of electricity due to the burning of coal during the production of electricity cannot be said to be a product manufactured, but is only an off-shoot of the manufacturing activity, which has been carried out for the generation of electricity. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of time 'fly ash' was an exempted good and, therefore, the contention of the respondent that the Apex Court has held that 'fly ash' is not an excisable commodity is per se impermissible and has no legs to stand. It is the further contention of the learned counsel for the appellants that the respondent having not challenged the notification, whereby excise duty was levied on 'fly ash' and 'fly ash bricks' way back in the year 2011, cannot now, at this point of time challenge the show cause notice, which is an off-shoot of the notification. The root, viz., the notification, having been allowed to continue, challenging the show cause notice is highly improper and against the well accepted law of the land. 7. It is the further contention of the learned counsel for the appellants that the reliance placed on Notification No.89/95-CE dated 18.5.95 by the learned single Judge is totally erroneous as the said notification is in no way applicable to the case on hand. It is the submission of the learned counsel for the appellants that the said notification deals with waste, parings and scrap, whereas the goods in the present case, viz., 'fly ash' is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en manufactured so as to be visited with duty. 10. It is the further submission of the learned counsel for the respondent that learned single Judge, after careful consideration of the marketability of the product and Notification No.89/95-CE dated 18.5.95 relating to exemption granted to waste, etc., has held that the notification is squarely attracted to the case on hand. In fine, on the contentions above, it is submitted by the learned counsel for the respondent that no interference is called for with the well considered findings rendered by the learned single Judge. 11. Heard the learned counsel appearing for the appellants and the learned counsel appearing for the respondent and perused the materials available on record as also the decisions and the notification relied on by the learned counsel for the parties. 12. The moot question that arises for consideration in this appeal is :- Whether 'fly ash' as formed during the production of electricity is a product, which falls within the meaning of manufacture as defined under Sections 2 (f) of the Central Excise Act. The incidental question that also falls for consideration is :- Whether the produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bought and sold for a consideration and such goods shall be deemed to be marketable. 16. In the case on hand, there is no quarrel that the product 'fly ash' falls within the definition of 'excisable goods' under Section 2 (d) of the Act. In that, the product 'fly ash' is capable of being bought and sold. The said issue is not in dispute, as the 'fly ash' is utilised in the production of cement, asbestos, fly ash bricks, etc. and, therefore, its capability of being bought and sold is unquestionable. So there is no quarrel that the product 'fly ash' is a marketable product. 17. Now the point to be determined is whether 'fly ash' that is formed during the production of electricity would fall within the ambit of manufacture as defined under Section 2 (f) of the Act. 18. Manufacture , as defined under Section 2 (f) of the Act takes within its fold any process incidental or ancillary to the completion of a manufactured produce. Section 2 (f) uses the term any process incidental or ancillary to the completion . The broader meaning that can be attributed to the term incidental or ancillary is that it is a happening which is subsidia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the first test of manufacture having not been satisfied, as no manufacture is involved, the product in the said case not was not exigible to excise duty. 23. In the case of Moti Laminates (P) Ltd. - Vs CCE (1995 (3) SCC 23), the Supreme Court had occasion to deal with the exigibility to excise duty with regard to goods manufactured and held that goods produced or manufactured ipso facto do not attract duty unless they are marketable or capable of being marketed. The Supreme Court, after discussing in detail very many judgments of its Co-ordinate Benches, held that manufacture and marketability are twin tests, which are to be satisfied to make a product exigible to excise duty. For better clarity, the relevant portion of the order of the Supreme Court is extracted hereinbelow :- 8. The duty of excise is leviable under Entry 84 of List I of the Seventh Schedule on goods manufactured or produced. That is why the charge under Section 3 of the Act is on all excisable goods produced or manufactured . The expression excisable goods has been defined by clause (d) of Section 2 to mean goods specified in the Schedule. The scheme in the Schedule is to divide the goods into two broad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... General Mills Co. Ltd. [AIR 1963 SC 791] , a Constitution Bench of this Court while construing the word goods held as under: These definitions make it clear that to become goods an article must be something which can ordinarily come to the market to be bought and sold. Therefore, any goods to attract excise duty must satisfy the test of marketability. The Tariff Schedule by placing the goods in specific and general category does not alter the basic character of leviability. The duty is attracted not because an article is covered in any of the items or it falls in residuary category but it must further have been produced or manufactured and it is capable of being bought and sold. In South Bihar Sugar Mills Ltd. - v -Union of India [AIR 1968 SC 922 : (1968) 3 SCR 21] it was held by this Court: The Act charges duty on manufacture of goods. The word manufacture implies a change but every change in the raw material is not manufacture. There must be such a transformation that a new and different article must emerge having a distinctive name, character or use. The duty is levied on goods. As the Act does not define goods, the legislature must be taken to have used th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces to attract a market. It was explained in Bhor Industries Ltd. v. CCE [(1989) 1 SCC 602 : 1989 SCC (Tax) 98 : (1989) 40 ELT 280] : (SCC p. 607, para 6) It appears to us that under the Central Excise Act, as it stood at the relevant time, in order to be goods as specified in the entry the first condition was that as a result of manufacture goods must come into existence. For articles to be goods these must be known in the market as such or these must be capable of being sold in the market as goods. Actual sale in the market is not necessary, user in the captive consumption is not determinative but the articles must be capable of being sold in the market or known in the market as goods. It was reiterated in Hindustan Polymers v. CCE [(1989) 4 SCC 323 : 1989 SCC (Tax) 118 : (1989) 43 ELT 165] : (SCC p. 334, para 11) Excise duty, as has been reiterated and explained, is a duty on the act of manufacture. Manufacture under the excise law, is the process or activity which brings into being articles which are known in the market as goods, and to be goods these must be different, identifiable and distinct articles known to the market as such. It is then and then o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttract Notification No.89/95-CE dated 18.5.95 , it is the contention of the learned counsel for the appellants that Notification 89/95-CE dated 18.5.95 would not stand attracted to the case of the respondent, as the product 'fly ash' is not a waste or scrap to attract the said notification. It is the further contention of the appellants that the by-product, viz., 'fly ash', which emerges during the process of manufacture of an non-excisable exempted product, finding place in the First Schedule of the Central Excise Tariff Act, though rate of duty is quantified as 'Nil', it cannot be construed that electricity is an exempted commodity and, therefore, the said notification would not stand attracted. 26. Learned single Judge, referring to the decision of the Supreme Court in CCE, Hyderabad Vs Vazir Sultan Tobacco Co. Ltd. (1996 (3) SCC 434), wherein the Supreme Court held that 'Nil' rate of duty is also a rate of duty and that such goods are also excisable goods. Learned single Judge, therefore, went on to hold that explanation appended thereto clearly clarifies that excisable goods means goods which are chargeable even to 'Nil' rate of duty ..... X X X X Extracts X X X X X X X X Extracts X X X X
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