IMPORTANT POINT
It is essential that the product sought to be subjected to excise duty should have gone through the process of manufacture, and as cinder cannot be said to have gone through any process of manufacture, therefore, it cannot be subjected to levy of excise duty.

Headnote:Excise-Central Excise and Salt Act-Section 3-Central Excise Tariff Act-Entry No. 26.21, First Schedule- Cinder , exigibility to excise duty-Respondents use coal as fuel for producing steam to run machines in their factories to manufacture end product-Coal is burnt in boilers or furnaces for producing steam-Normally coal when it is burnt in boilers is reduced to ash-Unburnt or half burnt portion of coal left in boilers is cinder -Whether cinder is exigible to excise duty-(No)- Cinder is used as a fuel and not as a raw material for the end product-Test of being produced or manufactured in India not satisfied-Burning of coal cannot be called manufacturing-Whether all items listed in First Schedule to Tariff Act, per se become subject to levy of excise duty-(No).
       Held : 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 goods. Unless goods are manufactured in India, they cannot be subjected to payment of excise duty. There is no merit in the argument that simply because a particular item is mentioned in the First Schedule, it becomes exigible to excise duty. [See Hyderabad Industries Ltd. and another vs. Union of India and others (1995) 5 SCC 338 and Moti Laminates Pvt. Ltd. and others vs. Collector of Central Excise, Ahmedabad (1995) 3 SCC 23]. Therefore both on authority and on principle, for being exigible to excise duty, excisable goods must satisfy the test of being produced or manufactured in India. (Para 15)
       In 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. In 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 manufacturing process either on its own or in conjunction 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 manufacturing process does not arise. (Paras 26 and 27)
       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 through the process of manufacture. Cinder cannot be said to have gone through any process of manufacture, therefore, it cannot be subjected to levy of excise duty. The onus to show that particular goods on which excise 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. (Paras 36 and 37)

JUDGMENT

Arun Kumar, J.-The question which arises for consideration in this bunch of appeals is regarding exigibility 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 manufacturing different end products, one thing is common between them and that is that they all use coal as a fuel.

2. The First Schedule to the Central Excise Tariff Act contains various entries which is a list of excisable goods. The list also gives rates of duty leviable on the respective items. Cinder is not mentioned in any of the entries to the First Schedule. Chapter 26 of the Schedule contains an entry at Serial No. 26.21 which is as under:

"Other slag and ash, including seaweed ash (kelp)-8

3. The Revenue seeks to cover cinder under the said entry to make it subject to levy of excise duty. The respondents have resisted this claim of the Revenue. This has led to the present litigation. The learned Additional Solicitor General appearing for the Union of India, i.e. the Central Excise Department, raised following points in support of the stand of the Department that "cinder" is liable to be subjected to levy of excise duty:

(1) In view of the Entry No. 26.21 in the Central Excise 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 tests 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.

Apart from the above points urged on behalf of the Revenue, some points emerge from the contentions raised by the learned counsel appearing for the assessees. They are:

In the statutory appeals filed 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.

4. Another point raised in the Tata Iron Company 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 b

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2003 Supreme(SC) 351

IMPORTANT POINTIt is essential that the product sought to be subjected to excise duty should have gone through the process of manufacture, and as cinder cannot be said to have gone through any process of manufacture, therefore, it cannot be subjected to levy of excise duty.

Cases Referred (14)

IMPORTANT POINT
It is essential that the product sought to be subjected to excise duty should have gone through the process of manufacture, and as cinder cannot be said to have gone through any process of manufacture, therefore, it cannot be subjected to levy of excise duty.