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TMI Blog2003 (10) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... enue. They have done nothing to discharge this onus. For this reason alone they must fail. Thus as cinder cannot be subjected to levy of excise duty because it is not an item of goods which has been subjected to process of manufacture, it is not necessary for us to go into any other point.The result is that the contention of the revenue that cinder is liable to payment of excise duty is hereby rejected. - Civil Appeal No. 2168, 2169 of 2001, - - - Dated:- 29-10-2003 - Ruma Pal and Arun Kumar, JJ. Civil Appeal No. 7792, Civil Appeal No. 7793, Civil Appeal No. 7794, Civil Appeal No. 7795 of 2001, Civil Appeal No. 626, Civil Appeal No. 627, Civil Appeal No. 2013, Civil Appeal No. 3194, Civil Appeal No. 4183, Civil Appeal No. 4184, Civil Appeal No. 4185, Civil Appeal No. 4186, Civil Appeal No. 4187, Civil Appeal No. 4188, Civil Appeal No. 4724, Civil Appeal No. 8642, Civil Appeal No. 8643, Civil Appeal No. 8644, Civil Appeal No. 8649 of 2002, Civil Appeal No. 87, Civil Appeal No. 88, Civil Appeal No. 89, Civil Appeal No. 4490, Civil Appeal No. 4491, Civil Appeal No. 4492, Civil Appeal No. 4493 of 2003 decided on October 29, 2003 Mukul Rohtagi, Additional Solicitor-General ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tariff Act, 'cinder' is per se exigible to excise duty as it is covered under an entry in the First Schedule to the Tariff Act. According to him, the fact that an item finds mention in the Schedule to the Tariff Act per se becomes excisable. The said Schedule contains a list of excisable goods and all items in the Schedule are liable to payment of excise duty. (2) Section 3 of the Central Excise and Salt Act is the charging Section from which the twin test of excisable goods being manufactured in India and capable of being marketable emerge. According to the learned ASG both the test are satisfied in the present case. It is argued that 'cinder' is a by-product of coal which emerges in the course of manufacture of the end product. 'Cinder' is sold by the various assessees from their factories. Therefore, it is marketable. Thus both the tests are satisfied. (3) The question involved in the present appeals is more a question of fact which the High Court should not have entertained in a petition under Article 226 of the Constitution of India. 4.Apart from the above points urged on behalf of the Revenue, some points emerge from the contentions raised by the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duct of coal, it is not a by-product of the raw material used in a factory for manufacturing the end product. It is a by-product of an item of fuel. Point 1 : 7.Whether inclusion of an item in the entries to the First Schedule to the Tariff Act per se makes the item exigible to excise duty ? This point needs a reference to relevant statutory provisions. Material portion of Section 3 of the Central Excise Act, 1944 is reproduced as under : "Section 3 : Duties specified in the First Schedule to be levied There shall be levied and collected in(1) such manner as may be prescribed, duties of excise on all excisable goods other than salt which are produced or manufactured in India and 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." 8.The following key words occurring in this provision have been defined in the Act as under : "Section 2 (a) . (b) . (c) . (d) "excisable goods" means goods specified in the First Schedule as being subject to a duty of excise and includes salt; (e) . (f) "manufacture" includes any process incidental or ancillary to the completion of a manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia. The argument on behalf of Revenue was that waste and scrap is mentioned in Entry 26A of the First Schedule to the Tariff Act and is therefore exigible to excise duty. Since reliance was placed on the argument that waste and scrap being found in relevant entry in the First Schedule to the Tariff Act and therefore were exigible to customs duty, this authority was pressed into service in support of the argument that presence of an item in an Entry to the First Schedule to the Act makes it per se subject to levy of excise duty. In our view, this authority is of no help to the appellants. This was basically a case of levy of additional customs duty, for which different considerations apply. He also relied on the following observations contained in Associated Cement Company Ltd. v. Commissioner of Customs [(2001) 4 SCC 593]. Under the Central Excise Act, 1944 in the definition of the words 'excisable goods' under Section 2(d), the very specification or inclusion of goods in the First and Second Schedules of the Central Excise Tariff Act would make them excisable goods subject to duty." 12.These observations were made in the context of provisions of the Customs Act, 1962. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the definition of the word "manufacture" as contained in Section 2(f) of the Act. According to this definition, manufacture includes any process incidental or ancillary to the completion of a manufactured product. The word 'manufacture' used as a verb is generally understood to mean as bringing into existence a new substance. It does not mean merely to produce some change in a substance. To quote from a passage in the Permanent Edition of Words and Phrases Vol. XXVI "manufacture implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation: a new and different article must emerge having a distinctive name, character or use". 'Manufacture' may involve various processes. The aim of any manufacturing activity is to achieve an end product. Depending on the nature of manufacturing activity involved, processes may be several or one. The natural meaning of the word 'process' is a mode of treatment of some material in order to produce a good result. Every process which is incidental or ancillary to the completion of manufactured product is include ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cter and use of the substance remained the same. It was held that no manufacturing activity was involved and therefore there was no further liability to excise duty. It was emphasized that the taxable event under the Excise Law is "manufacture". Since there was no manufacture in this case there was no liability to pay excise duty. 20.On the same lines there is a recent decision of this Court in Collector of Central Excise v. Technoweld Industries [2003 (155) E.L.T. 209]. The process in this case was drawing wires from wire rods that is from bigger guage wire rods smaller guage wire rods were drawn. The goods continued to be described as wire rods. It was held that no manufacture as such was involved and therefore there was no liability to pay excise duty. It was reiterated that a product becomes excisable only if there is manufacture. 21.In Collector of Central Excise, Jaipur v. Rajasthan State Chemical Works, Deedwana, Rajasthan and Others [(1991) 4 SCC 473], this Court adverted to the meaning of process as well as manufacture. The following passages occurring in the judgment are useful for present purpose : Manufacture implies a change but every" change is not manufacture, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' to exclude its application to handling. There may be a process which consists only in handling and there may be a process which consists only in handling and there may be a process which involves no handling or not merely handling but use or also use. It may be a process involving the handling of the material and it need not be a process involving the use of material. The activity may be subordinate but one in relation to the further process of manufacture." 22.Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. M/s. Thomas Stephen and Co. Ltd., Quilon [(1988) 2 SCC 264] is a case under the Kerala General Sales Tax Act, 1963. The assessee used to purchase cashew shells for use as fuel in the kiln in the factory. Under the Act levy of tax was on consumption of goods in the manufacture of other goods for Sale or otherwise. The difference between use of goods in manufacture as raw material and use for other ancillary purposes was brought out. Goods used for ancillary puposes like fuel in the process of manufacture were held not to be exigible to tax. Since cashew shells were used only as fuel and they did not get transformed into the end product they we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstant burning of coal produced cinder. Could it be said that the engine driver was manufacturing cinder? Is any manufactring activity involved ? Burning of coal for purposes of producidng steam cannot be said to be a manufacturing activity. Therefore, neither ash nor cinder can be said to be products of a manufacturing process. From burning coal when you get either cinder or ash, it cannot be said that a new product had emerged. Cinder remains coal, In fact, the Department has itself described it as unburnt part of coal in the grounds of appeal in C.A. Nos. 2168-2169 of 2001 in the Ahmedabad Electricity Supply Company case 'Cinder' is not a new product. After correctly describing cinder as unburnt part of coal, the Revenue cannot equate it to ash simply to somehow bring it within Entry 26.21 of the Tariff Act. In the First Schedule to the tariff, cinder does not find any place anywhere. It appears that it is because of this that the Revenue had to fall back upon Entry 26.21 in the First Schedule in order to cover cinder within the excise net. The new Tariff that is Tariff Act, 1985 does not have a residuary entry like Entry 68 in the old Tariff. Instead the new Tariff has interpre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th a case of excise duty sought to be levied on 'spent earth'. This was in Commissioner of Central Excise, Chandigarh v. Markfed Vanaspati and Allied Industries [2003 (153) E.L.T. 491]. Excise duty was being paid on "earth". 'Spent earth' is a residue resulting room treatment of fatty substances. The 'spent earth' remained 'earth' even after processing though its capacity to absorb was reduced. It was held that no excise duty was leviable on 'spent earth'. The facts in this case are quite similar to the facts of the case in hand. In Markfed case 'earth' was reduced to 'spent earth' with a reduced potency to absorb. In the case in hand coal was reduced to inferior quality coal which was no longer of use in the furnaces in the factories, therefore, it could reasonably be said that 'cinder' i.e. coal of reduced quality still was coal and not exigible to excise duty. 29.In Modi Rubber Ltd., Modi Nagar, U.P. and Anr. v. Union of India and Others [1987 (29) E.L.T. 502 (Del.)] it was held that waste/scrap obtained not by any process of manufacture but in the course of manufacturing the end product was not exigible to excise duty. This was a case of manufacture of tyres, tubes etc. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he lower authorities show that TISCO had been paying substantial amounts for removing cinder to a dumping ground. From the dumping ground it was picked up by parties to whom it was sold . As per the averment, TISCO is spending many times more on removing cinder than what it realizes from its sale. These are matters of fact which have not been gone into by the authorities concerned and therefore it is too late for us to go into all this. 31.Applying the tests laid down in these judgment, it is not possible to say that cinder satisfies the requirement of being manufactured in India. 32.From the above discussion it is clear that to be subjected to levy of excise duty 'excisable goods' must be produced or manufactured in India. For being produced and manufactured in India the raw material should have gone through the process of transformation into a new product by skilful manipulation. Excise duty is an incidence of manufacture and, therefore, it is essential that the product sought to be subjected to excise duty should have gone though the process of manufacture. Cinder cannot be said to have gone through any process of manufacture, therefore, it cannot be subjected to levy of exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f being manufactured in India. It is for failing this test that the item was excluded from levy of excise duty earlier in 1975. How can you ignore it now ? 36.In view of our finding that cinder cannot be subjected to levy of excise duty because it is not an item of goods which has been subjected to process of manufacture, it is not necessary for us to go into any other point. We may only note that courts have evolved another test of marketability i.e., to be exigible to excise duty goods must be marketable. It is not disputed that cinder is being sold by the assessees. But can it be said to be marketable goods in the sense word marketable is used ? We doubt it. However, this need not detain us since cinder does not satisfy the test of being manufactured in India. Even if it is saleable, it does not make any difference. The result is that the contention of the revenue that cinder is liable to payment of excise duty is hereby rejected. Point 3 : 37.The objection is that the High Court should not have entertained a petition under Article 226 of the Constitution of India in the facts and circumstances of the case. At the outset we may note that we have only one Civil Appeal in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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