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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 ..... Ms. Meenakshi Arora, Uday Joshi, Harris Beeran, George Paulose, Devang S. Nanavati, H.A. Ahmedi, Saurin Mehta, Mrs. V.D. Khanna, Mrs. Nirmala Gupta, K.V. Viswanathan, Mrs. Gauri Rasgotra, Suman J. Khaitan, Ajay Aggarwala, Rajan Narain, Thomas Vellapally, M.H. Patil, Shri Narain, Sandeep Narain, Mrs. Anjali Jha, Jay Savla, Ms. Reena Bagga, Sanjeev Kapur, Umesh Kumar Khaitan, Ms. Indu Malhotra, Ms. Madhu Sweta, A.R. Madhav Rao, V. Balachandran, Ms. Suruchi Aggarwal, Ambhoj Kumar Sinha and Sanjay Kapur, Advocates, with them) for the respondents. [Judgment per : Arun Kumar, J.]. - The question which arises for consideration in this bunch of appeals is regarding exigibilty of 'cinder' to excise duty. The respondents in all the appeals use coal as fuel for producing steam to run the machines used in their factories to manufacture the end product. Coal is burnt in the boilers or furnaces for producing steam. Normally coal when it is burnt in boilers is reduced to ash. Some part of coal does not get fully burnt because of its low combustible quality. This unburnt or half burnt portion of coal is left out in the boilers. It is called 'cinder'. Though the respondents are engaged in m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Revenue against the judgment of the Customs, Excise & Gold (Control) Appellate Tribunal in the case of Tata Iron and Steel Company (C.A. No. 4051/2003), it has been argued that the show cause notice issued by the departmental authorities was beyond time. Section 11A of the Central Excise Act which allows an extended period of limitation for issue of Show Cause Notice could not be invoked in the facts of the case because all necessary facts were being disclosed regularly by the Company to the Revenue authorities and there was no concealment or suppression or misrepresentation. Therefore, the show cause notice being highly belated was liable to be quashed. 5.Another point raised in the Tata Iron Company's case is that 'cinder' is a waste emerging from coal and the Company was spending much more on its removal from the site as compared to what it was getting from its sale. This point has been raised in some other cases also. This is a point which would arise on the facts of particular cases. Proper pleadings have to be there. The Tribunal being the fact finding body ought to have adverted to it. Unfortunately, this aspect has not received any attention before the Tribunal. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral appearing for the Union argued that Section 3 of the Act is the charging Section. It provides that excise duty is to be levied on all excisable goods. Excisable goods are listed in the First Schedule to the Tariff Act. According to him, Section 3 read with Section 2(d) makes it clear that an item which is listed in the First Schedule to the Tariff Act is exigible to excise duty. It is further submitted that in view of the entry No. 26.21 in the First Schedule 'cinder' is liable to levy of excise duty. According to him, cinder is nothing but ash. From this argument, it follows that cinder is being equated to ash in order to bring it within Entry No. 26.21 to the First Schedule. As seen earlier, cinder is not ash - it is something between coal and coal ash. 10.For the sake of deciding this issue, we will assume that cinder is ash and, therefore, is liable to be covered under Entry 26.21. The real question to be considered is whether all items listed in the First Schedule to the Tariff Act, per se become subject to levy of excise duty. According to the learned Counsel for the Revenue, all excisable goods listed in the first Schedule are subject to the liability to pay excise duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'dutiable goods'. The expression 'dutiable goods' has been defined in Section 2(14) of the Act as goods which are chargeable to duty and on which duty has not been paid. In the present case however, we are considering the expression 'excisable goods' in the light of provisions contained in Section 3 of the Central Excise Act, 1944. Section 3 qualifies to expression 'excisable goods' by laying down the further requirement that such goods should be produced or manufactured in India. Such a requirement is not there in the Customs Act. Therefore, the above observations have no bearing on the issue involved in the present case. 13.We are unable to accept the proposition advanced by the learned Additional Solicitor General. A close look at Section 3 of the Central Excise Act shows that the words 'excisable goods' have been qualified by the words "which are produced or manufactured in India". Therefore, simply because goods find mention in one of the entries of the First Schedule does not mean that they become liable for payment of excise duty. Goods have to satisfy the test of being produced or manufactured in India. It is settled law that excise duty is a duty levied on manufacture of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en defined in the Act. In its ordinary meaning 'process' is a mode of treatment of certain material in order to give a desired shape to the material. It is an activity performed on a given material in order to transform it into something. 16.The word "manufacture" has been defined in various judgments of this Court. In South Bihar Sugar Mills v. Union of India [AIR 1968 SC 922], this Court observed : "The Act charges duty on manufacture of goods. The word "manufacture implies a change 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." 17.In M/s. Hindustan, Polymers v. Collector of Central Excise [(1989) 4 SCC 323] this Court observed : "Excise Duty 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 only that manufacture takes place attracting duty. In order to be goods, it was essential that as a result of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manipulation. Naturally, manufacture is the end result of one or more processes through which the original commodities are made to pass. The nature and extent of processing may vary from one class to another. There may be several stages of processing, a different kind of processing at each stage. With each process suffered the original commodity experiences a change. Whenever a commodity undergoes a change as a result of some operation performed on it or in regard to it, such operation would amount of processing of the commodity. But it is only when the change or a series of changes takes the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place. Manufacture thus involves series of processes. Process in manufacture or in relation to manufacture implies not only the production but the various stages through which the raw material is subjected to change by different operations. It is the cumulative effect of the various processes to which the raw material is subjected (sic that the) manufactured product emerges. Therefore, each steps towards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture of goods and as such they did not attract levy of tax. 23In the case. in hand also coal which leads to production of cinder is not used as a raw material for the end product. It is being used only for ancillary purpose that is as a fuel. Therefore, irrespective of the fact whether any manufacture is involved in production of cinder it should be held to be out of the tax net for the reason that it is not a raw material for the end product. 24In. producing 'cinder', there is no manufacturing process involved. Coal is simply burnt as fuel to produce steam. Coal is not tampered with, manipulated or transformed into the end product. For purposes of manufacture the raw material should ultimately get a new identity by virtue of the manufactruing process either on its own or in conjuction or combination with other raw materials. Since coal is not a raw material for the end product in all the cases before us, the question of getting a new identity as an end product due to manufactruring process does not arise. 25In. Collector of Central Excise, New Delhi v. M/s. Ballarpur Industries Ltd. [(1989) 4 SCC 566], the raw material in the course of chemical reactions got burnt up an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uded for taxability it has been so said in the interpretative notes. However, regarding coal their is no interpretative note nor there is anything about cinder. When cinder is derived from coal it could have at best been treated as coal for purposes of entries in the First Schedule to the Tariff Act. But that would not suit the department because coal is exempt from excise duty. The department now describes cinder as "coal ash". But coal ash also falls the test of being manufactured in India. It cannot be subjected to levy of excise duty. 27The learned. Counsel appearing for the assessee brought to our notice several judgments of the CEGAT holding that cinder was not exigible to payment of excise duty. Against some of the judgments statutory appeals filed before this Court were dismissed. In Commissioner of Central Excise, Calcutta v. Papyrus Papers [1988 (33) E.L.T. 97] it was held by CEGAT that cinder obtained by burning coal in boiler does not constitute manufacture of excisable commodity even if sold for a price. In Collector of Central Excise v. Kesoram Rayons the CEGAT held that cinder obtained on burning coal in the boiler as a fuel is not exigible to excise duty. Civil app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tyres, tubes, flaps etc. waste was obtained in the shape of cuttings. It was held that this was not exigible to tax even though the waste may have some saleable value. The essential reason for this was that there was no transformation in the case of waste/scrap to a new and different article. No new substance having a distinct name, character and use was brought about. Manufacturing process involved treatment, labour or manipulation by the manufacturer resulting in a new and different article. It requires a deliberate skillful manipulation of the inputs or the raw materials. This was not so in case of scrap. 30.It is worth mentioning that in UOI and Ors. v. Indian Aluminium Co. Ltd. and Anr. [1995 Suppl. (2) SCC 465], it was held that waste or rubbish which is thrown up in the course of manufacture could not be said to be a produce of manufacture exigible to excise duty. In this case the assessees manufactured aluminium products out of the aluminium ingots. In the process of manufacture dross and skimmings arise and accumulate in the furnace in the shape of ashes as a result of oxidization of metal. Aluminium dross contain an amount of metal from which they come but they lack not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty is sought to be levied have gone through the process of manufacture in India is on the revenue. They have done nothing to discharge this onus. For this reason alone they must fail. 34.The Department has been consistently taking a stand that cinder is not excisable as it does not involve any manufacturing activity. The Department issued a clarification vide Circular No. B. 352/75-TRU (Pt.), dated 6th June, 1975. According to it coal ash left out in burning of coal would not attract duty under Item 68 for the reason that in the burning of coal as fuel, resulting in coal ash as a waste product no manufacturing process is involved. With the introduction of the new Tariff in 1986 and specific entry for ash being included in the Tariff Chapter 26, the issue again revived. Notification No. 76/86, dated 10th February, 1986 exempted cinder from levy of excise duty. The whole thing was sought to be overturned after the annual budget for the year 1996-97. The Tariff Act, 1975 was amended by virtue of the Tariff Act, 1985. The exemption was withdrawn by virtue of Notification No. 11/96, dated 23rd July, 1996 in view of the annual budget for the year 1996-97. The Commissioner of Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arising from proceedings before the High Court under Article 226. The remaining matters in the bunch are statutory appeals under Section 35L of Central Excise Act. Therefore, this Court has to go into the matter on merits. Moreover, in the Ahmedabad Electricity Company's case challenge by way of Writ Petition under Article 226 was to a Circular dated 7th April, 1998 issued by the Central Board of Excise and Customs and the consequential Trade Notice No. 36/98, dated 22nd May, 1998 issued by the office of the Commissioner of Central Excise and Customs, Ahmedabad by which it was clarified that "coal ash (cinder)" is an excisable commodity classifiable under sub-heading No. 26.21 of the Central Excise Tariff Act, 1985. In the first place no objection regarding maintainability of the Writ Petition seems to have been taken before the High Court. Even if such an objection was raised, the same would have been a futile attempt. In the facts of the case the High Court would have been justified in rejecting such an objection. The impugned circular could not have been challenged before the departmental authorities as they would have felt bound by it. We find no merit in the objection. The sam ..... 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