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TMI Blog2000 (4) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... bility and had a distinct commercial identity known to the trade. Admittedly, the expression "coal ash" and the word "cinder" were used as synonyms by the Board. 2. According to the petitioners of Special Civil Application No. 1966/99, the petitioner No. 1-Ahmedabad Electricity Company Limited is engaged in the business of generation, transmission and distribution of electric power and has, for that purpose, an electric power station at Sabarmati. For generating electric power, boilers are used and they are fired by using coal as a primary fuel. In stoker fired boiler coal which is fed is not fully burnt but residue and waste in the form of partly burnt coal, commonly known as "cinder" remains. In other type of boilers which are not being used by the company, coal is pulverized and fine powder thereof is fed to the boiler and what comes into existence is only 'fly-ash' having carbon contents and no cinder comes into existence. There is however, no controversy regarding 'fly-ash' and the present dispute in the petition relates only to cinder. According to the petitioner company, it has been generating electric power since more than 85 years and using coal as a fuel in the boilers b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the business of manufacture of various goods like starch, glucose, dextrose etc. In the factory of the petitioner company, boilers for generating steam are used in the process of manufacturing their final products. The company uses coal as a fuel for firing such boilers for generating steam. After the coal is so burnt in the boilers, it leaves a residue known as "coal-ash or cinder", which is known in vernacular as "Kolsi" or "Bhuki". According to the petitioner, cinder just arises, as a result of burning of coal in a boiler and cannot be described as excisable goods produced or manufactured by the petitioner. This petitioner has also referred to various decisions of the CEGAT, holding that cinder was not a manufactured commodity and it being only a waste, or residue, it was not chargeable to excise duty. This petitioner also challenges the Circular issued by the Board and the consequential Trade Notice by which cinder is treated as an excisable commodity under Heading No. 26.21 of the Schedule to the Central Excise Tariff Act. Over and above its challenge against the Circular and the Trade Notice, this petitioner challenges the show cause notices at Annexure "D" collectively to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture, in the process of removing impurities from the raw material and that such waste and scrap was prime metal in its own right. The decision was rendered in context of Tariff Item 27 "waste and scrap of aluminium", which was exigible to excise duty and under which the explanation provided that 'waste and scrap' means waste and scrap metal fit only for the recovery of metal by remelting or for use in the manufacture of chemicals, but does not include sludge dross, scalings, skimmings, ash and other residues. In paragraph 13 of its judgment, the Court held that it was not possible to accept the contention that aluminium dross and skimmings are "goods" or marketable commodity which can be subjected to the levy of excise. It was observed that undoubtedly, aluminium dross arid skimmings do arise during the process of manufacture, but these are nothing but waste or rubbish which are thrown out in the course of manufacture. The Supreme Court held that everything which is sold is not necessarily a marketable commodity as known to the commerce and which, it may be worth while trading. (b) Indichem v. Union of India, reported in 1996 (88) E.L.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oposition that the production of waste and scrap is a necessary incident of the manufacturing process and that they are the by-product of manufacturing process. It was held that 'intention' is not the gist of the manufacturing process. The Supreme Court held that sub-standard goods which are produced during the process of manufacture may have to be disposed of as 'rejects' or as 'scrap' but still they are the products of the manufacturing process. In context of this decision, it may be noted that in Hyderabad Industries Ltd. and Another v. Union of India, reported in 1999 (108) E.L.T. 321 (S.C.) = AIR 1999 S.C. 1847, Khandelwal Metal & Engineering Works' case (supra) came to be considered in paragraphs 16 and 17 of the judgment and it was held that the decision in Khandelwal Metal & Engineering Works to the effect that additional duty of customs is leviable merely on the import of the article even if it was not manufactured or produced in India, does not appear to be correct inasmuch as the said conclusion is based on the premises that Section 12 of the Customs Act, and not Section 3(1) of the Customs Tariff Act, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the residuary entry 68, which was liable to duty under Section 3 of the Excise Act. The Madras High Court had, in the process, relied upon the decision in Khandelwal's case (supra). (v) State of Gujarat v. Raipur Manufacturing Co. Ltd., reported in AIR 1967 SC 1066, which was a decision in context of the Bombay Sales Tax Act, was cited to point out that in paragraph 10 of the judgment, it was held by the Supreme Court that cinder i.e. "kolsi" would be appropriately regarded as a subsidiary product in the course of manufacture, because it results from coal which remains unburnt. It was held that when such subsidiary product is turned out in the factory regularly and continuously and is being sold from time to time, an intention to carry on business in "kolsi" may be reasonably attributed to the company. (vi) Oudh Sugar Mills Ltd. v. Union of India and Ors. reported in 1982 E.L.T. 937 (All.) was cited for its proposition that any by-product or intermediary product will be covered by the word 'production' in Section 3 of the Central Excise Act and that Section 3 of the Act does not concern itself wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, these companies use coal in the boilers for heating purposes. Use of coal just for heating purposes in their activity of production or manufacture cannot be said to be for producing 'other ash' within the meaning of sub-heading 26.21. Even if coal is substituted by any other heating element or agent, the manufacture or production of the respective petitioners will still be electricity and starch. Cinder would only be a residue of the burnt-up coal which cannot fall under sub-heading 26.21 of the Schedule. As held by the Supreme Court in Indian Aluminium's case (supra), mere refuse or ashes which are given out in the course of manufacture cannot be considered as 'goods' or as a commercial or marketable commodity and that everything which is sold is not necessarily a marketable commodity. 8. When any process or manufacture is undertaken for completion of the manufactured product, then even if the manufactured product is not yet completed, such process shall be deemed to be "manufacture" in view of the inclusive definition of word "manufacture" in Section 2(f) of the Excise Act. The word "manufacturer" is to be construed accordingly. Therefore, when the process for manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de of compressed coal dust used as fuel are subject to "nil" rate of duty under the Heading No. 27.01 of the Schedule to the Tariff Act. However, when coal is burnt, the cinder that is left behind would become subject to excise duty, if treated as "other ash" under the heading No. 26.11 of the Schedule. This result is not warranted from the plain and harmonious reading of the entries and could not have been contemplated by the legislature. Again if cinder is to be treated as coal being its residue, it would not be subject to any duty in view of Heading 27.01 of the Schedule to the Tariff Act, prescribing "nil" rate of duty for coal. Chapter 26 deals with ores, slag and ash while Chapter 27 deals with mineral fuels, mineral oils etc. Therefore, if cinder was to be made excisable, it would have found its place more appropriately in Chapter 27 which contains the entry of coal, rather than in Chapter 26 which covers 'metal ores, slag and ash'. 11. An attempt to cover cinder under the residuary entry 68 under the repealed law had failed on the anvil of adjudication by the Tribunal, which was upheld by the Supreme Court. This admitted fact can be gathered from the averments made i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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