Custom, Excise & Service Tax Tribunal
M/S. Kec International Ltd vs Cce, Jaipur-I on 1 May, 2012
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH NEW DELHI
Date of Hearing:01.05.2012
Date of Decision:29.05.2012
Honble Mr. Justice Ajit Bharihoke, President
Honble Mr. Rakesh Kumar, Member (Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982.
2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3
Whether Their Lordships wish to see the fair copy of the Order?
4
Whether Order is to be circulated to the Departmental authorities?
Excise Appeal No.E/1841 and 1842 of 2011 along with
Stay Applications Nos.E/ST/2434, 2435 of 2011
(Arising out of Order-in-Appeal No.137-138(DKV)CE/JPR-I/2011 dated 21/26.4.2011 of the Commissioner of Central Excise (Appeals), Jaipur).
M/s. KEC International Ltd. Appellant
Vs.
CCE, Jaipur-I Respondent
Coram : Honble Justice Shri Ajit Bharihoke, President Honble Shri Rakesh Kumar, Member (Technical) Appearance: Shri A.R. Madhav Rao, Advocate for the appellants.
Shri Nagesh Pathak, AR for the respondent.
Order No. .
Per Rakesh Kumar:
The Appellant are engaged in the manufacture of Galvanised Transmission Line Towers and parts thereof chargeable to central excise duty under Chapter 73 of the Schedule to the Central Excise Tariff Act, 1984. The manufacturing process consists of two major activities - fabrication of tower parts and their galvanization. During the course of galvanization the tower parts are passed through molten zinc and in that process, zinc dross and ash is generated as top layer of the molten zinc, as on coming in the contact with air the top layer of the molten zinc gets oxidized to from zinc oxide. The zinc dross and ash consists of zinc metal and zinc oxide. The period of dispute in this case is from July, 2008 to Jan. 2009 and Feb. 2009 to October, 2009 when the Appellant cleared zinc dross/ash on sale without payment of duty by considering the same as non-excisable. The Department were of the view that since
(a) It is specifically covered by sub-headingno.26201900 of the Central Excise Tariff; and
(b) it was being regularly sold by the Appellant, which showed that it is capable of being bought and sold and hence in view of Explanation to Section 2 (d) of the Central Excise Act, 1944 introduced w.e.f. 10.05.2008, it is deemed to be marketable,
(c) the same would be excisable goods within the meaning of this term, as defined in Section 2(d) of the Act and hence the clearances of the same attracted duty; and
(d) Since the Appellant have not paid this duty, the same is recoverable along with interest.
1.1 It is in this background, that two show cause notices dated 29.05.2009 and 22.2.2010 were issued to the Appellant for recovery of non-paid duty amounting to Rs.11,11,503/- and Rs.8,93,741/- respectively for period from July 2008 to Jan. 2009 and Feb., 2009 to October, 2009 respectively under provision to Section 11 A(1), along with interest on this duty under Section 11 AB and also for imposition of penalty on the Appellant company under Section 11 AC and on Shri Atul Kumar Agarwal, Authorised Representative of the Appellant Company under Rule 26 of the Central Excise Rules, 2002.
1.2 The show cause notices were adjudicated by the Addl. Commissioner vide order-in-original each dated 12.11.2010 by which where the duty demands as made in the show cause notices were confirmed along with interest and penalty of equal amount was imposed on the Appellant company under Section 11 AC. The penal proceedings against Shri Atul Agarwal were, however, dropped.
1.3 On appeal being filed to the Commissioner of Central Excise (Appeals) against the above order of Addl. Commissioner, the same were dismissed by a common order-in-appeal no.137-138(DKV)CE/JPR-I/2011 dated 21.4.2011.
1.4 Against the above order of the Commissioner (Appeals), these appeals have been filed along with stay applications.
2. Heard both the sides. Though these matters were listed for hearing of stay applications only, since only a short issue relating to interpretation of the provisions of Central Excise Act, 1944 is involved, with the consent of both the sides, it was decided to hear the appeals for final disposal. Accordingly, the requirement of pre-deposit under Section 35 F is waived and the appeals are heard for final disposal.
3. Shri A. R.Madhavrao, ld. Counsel for the appellant pleaded that zinc dross and ash though specially covered by Heading No.26201900 of the Central Excise Tariff is not excisable as the same is not marketable, that Honble Supreme Court in the case of CCE, Patna Vs. Tata Iron & Steel Company Ltd. 2004 (165) ELT 386( SC) had held that mere selling of a commodity does not mean that it is marketable as even rubbish can be sold, that marketability mean selling of a commodity known to the commerce and which may be worthwhile to trade in, that applying this criteria for marketability, inspite of the amendment to Section 2(d) of the Central Excise Act, 1944 w.e.f. 10.05.2008 by adding an explanation to it providing that for the purpose of Section 2(d), the goods includes any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable and, hence, excisable goods, the zinc dross & ash can not be treated as marketable, as there is no evidence that the zinc dross and ash are items worthwhile to trade in and are a commodity known to the trade and commerce, that same view has been taken by the Apex Court in the case of CCE Vs. Indian Aluminium Co. Ltd. reported in 2006 (203) ELT 3 (SC), wherein it was specifically held that zinc dross and flux skimming are not liable to duty, as the same are not excisable, that in any case, since the point of dispute relates to interpretation of provisions of Central Excise Act, the imposition of penalty under Section 11 AC was not called for and that in view of this, the impugned order is not correct.
4. Shri Nagesh Pathak, ld. Senior Departmental Representative, defending the impugned order pleaded that there is no dispute about the fact that the zinc ash and zinc dross is capable of being sold, as the same was being regularly sold by the appellant, that period of dispute in this case is after the amendment to Section 2 (d) w.e.f. 10.05.2008, by which an explanation was added to Section 2 (d) which provides that for the purpose of this section, goods includes any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable, that amended Section 2(d), thus, creates a legal fiction by which any material which is capable of being sold is deemed to be marketable, that the judgement of the Apex Court in the case of CCE Vs. Tata Iron & Steel Co. Ltd. (supra) cited by the learned Counsel for the appellant pertained to the period prior to the amendment to Section 2(d) and has not taken into consideration the explanation added to Sectiodn 2 (d) w.e.f. 10.05.2008 which creates a legal fiction, that taking into account, the amendment to Section 2(d) w.e.f. 10.05.2008, the Honble Allahabad High Court in the case of Hindalco Industries Ltd. Vs. Union of India reported in 2009 (243) ELT 481 (All.) has held that that insertion of Explanation to Section 2(d) of the Central Excise Act provides for a deeming fiction, according to which any material capable of being sold shall be deemed to be marketable and taking into account this explanation to Section 2 (d) of the Central Excise Act, Honble Allahabad High Court has held that the Aluminium dross is excisable, that extended period for confirmation of duty demand has been correctly invoked and penalty under Section 11 AC has been correctly imposed, as the appellant have suppressed the relevant information regarding clearances of zinc dross and ash without payment of duty and that in view of this, there is no infirmity in the impugned order.
5. We have carefully considered the submissions from both the sides and perused the records. There is no dispute about the fact that the zinc dross and ash is being sold by the appellant for a consideration. There is also no dispute that zinc dross and zinc ash is specifically covered by the heading no.26201900 of Central Excise Tariff. However, for being excisable, the goods not only must be mentioned in the Central Excise Tariff as being chargeable to duty but must also be marketable. The point of dispute in this case is about the criteria of marketability. The Apex Court in the case of CCE Vs. Tata Iron & Steel Co. Ltd. (supra) has held in clear terms that mere sale of a commodity does not mean it is marketable since even rubbish can be sold and the marketability means selling of a commodity known to the trade and commerce and which is worthwhile to trade in. In other words, the criteria for marketability is that the commodity should be known in the trade and commerce as a product, which is bought and sold and which is worthwhile to trade in. However, this judgement pertains to the period prior to 10.05.2008 when Section 2 (d) simply defined the impugned goods as the goods specified in first schedule to the Central Excise Tariff as being subject to duty of excise. With effect from 10.05.2008, an explanation has been added, which provides that for the purpose of this clause, the goods includes any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable. Thus, the explanation creates a legal fiction by which any goods which are capable of being bought or sold for some consideration are deemed to be marketable. Taking into account this provision, the Honble High Court in the case of Hindalco Industries Ltd. (supra) has held that explanation to Section 2(d) creates to a legal fiction by which any goods which are capable of being bought and sold for a consideration shall be deemed to be marketable and on this basis, has held that Aluminium Dross and Skimmings are marketable. Since in this case, the period of dispute is after amendment to Section 2(d), we hold that the goods, in question, were marketable and, therefore, excisable.
6. We are also of the view that the goods in question even on the basis of the criteria in this regard prescribed by the Apex Court in the case of CCE Vs. Tata Iron and Steel Co. Ltd. have to be treated as marketable, as
(a) The fact that the zinc dross and ash is specifically mentioned in the Harmonised System of Nomenclature (HSN) which is an international catalogue of the goods and which are traded in the course of international trade, would show that zinc dross and ash are marketable; and
(b) even on the internet, it can be seen that there hundreds of e-commernce websites quoting the price of zinc dross and ash, which is a clear evidence of the fact that, this commodity is known in the trade and commerce circles as being traded.
7. As regards the point of limitation and imposition of penalty on the appellant under Section 11 AC, we find that the order-in-original in both the appeals mentions that during the course of scrutiny of ER-6 Returns of the appellant, it was notice that they have been clearing zinc dross and ash without payment of duty, but the same has not been shown in the ER-I Returns of the respective months. In our view, when the appellant had declared the clearances of zinc dross and ash in the monthly ER-6 returns regarding cenvat credit takne and utilized they can not be accused of having suppressed the fact regarding manufacture and sale of zinc dross & ash from the department, even if the production and sale of zinc dross/ash was not mentioned in the ER-I Returns. In view of this, keeping in view the principles laid down by the Apex Court on the question of the applicability of proviso to Section 11 A(1) in its judgements in the cases of Padmini Products Vs. CCE reported in 1989 (43) ELT 195 (SC); CCE Vs. Drugs & Leminents reported in 1989 (4) ELT 276 (SC) and Continental Foundation Joint Venture Vs. CCE, Chandigarh reported in 2007 (216) ELT 177 (SC), we are of the view that extended period cannot be applied for the recovery of non-duty paid and only the normal period of limitation would be applicable. As regards penalty under Section 11 AC since the criteria for invoking extended period under proviso to Section 11A(1) is identical to the criteria for imposition of equal penalty under Section 11 AC and since extended period is not applicable, there would be no justification for imposition of penalty on the appellant under Section 11 AC. In view of this, the duty demand would survive only for the normal limitation period.
8. In view of the above discussion, while holding that the zinc dross and ash manufactured and cleared by the appellant during the period of dispute was chargeable to duty, we hold that duty would be recoverable only for the normal limitation period along with interest. However, penalty would not be imposable and accordingly, the order regarding penalty is set aside. The duty demand for the period beyond the normal limitation period is also set aside. The Original Adjudicating Authority is directed to quantify the duty demand for the normal limitation period only.
[ pronounced in the open court on 29.05.2012] ( Justice Ajit Bharihoke ) President ( Rakesh Kumar ) Member (Technical) Ckp.
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