Custom, Excise & Service Tax Tribunal
Commissioner, Central Excise & ... vs K G Metalloys on 22 December, 2023
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. I
Excise Appeal No. 50746 of 2021
[Arising out of the Order in appeal no. 54(SM)/CE/JPR/2021, dated 10.03.2021 passed
by Commissioner (Appeals), Central Excise & CGST, Jaipur]
Commissioner, Central Excise & CGST- ...... Appellant
Alwar
A Block, Surya Nagar
Alwar, Rajasthan
Versus
KG Metalloys ...... Respondent
F-37-38, RIICO Industrial Area, Ondela Road, Dholpur Rajasthan-328001 APPEARANCE:
Shri Bhagwat Dayal, Authorised Representative for the Department None for the Appellant CORAM :
HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT HON'BLE MR. P.V. SUBBA RAO, MEMBER (TECHNICAL) FINAL ORDER NO.51701/ 2023 Date of Hearing/Decision: December 22, 2023 JUSTICE DILIP GUPTA The order dated 10.03.2021 passed by the Commissioner (Appeals) setting aside the order dated 23.09.2019 passed by the Additional Commissioner has been assailed by the department in this appeal. The Additional Commissioner had, by the aforesaid order dated 23.09.2019, confirmed the demand of central excise with interest and penalty.
2. Despite service of notice upon the respondent, no one has appeared on behalf of the appellant. This appeal is, accordingly being decided after hearing Shri Bhagwat Dayal, learned authorised 2 ST/50746/2021 representative appearing for the department and after perusing the records.
3. It transpires that the respondent is engaged in the manufacture of lead ingot and lead rods. During the course of audit, it was noticed that the respondent had purchased and segregated the scrap of used batteries, telephone sets and other e-wastes and extract scraps of PVC, plastic, hard rubber, iron, copper, aluminium, brass and lead through a manual process. The extracted lead is used to produce lead ingot and lead rods, which were cleared on payment of Central Excise duty. However, the other extracted items i.e. PVC, plastic, hard rubber, iron, copper, aluminium and brass were being cleared without payment of duty. The department believed that since the scraps so cleared appeared to be generated out of a process, which would amount to manufacture as per the definition contained in section 2(f) of Central Excise Act, 1944, and were also a marketable commodity as they were fetching some value, they would be chargeable to excise duty. Accordingly, a show cause notice dated 20.05.2019 was issued to the respondent. The respondent filed a detailed reply denying the allegations, but the Additional Commissioner by order dated 23.09.2019 confirmed the demand of excise duty.
4. Feeling aggrieved, the respondent filed an appeal before the Commissioner which appeal has been allowed by order dated 18.03.2021. The relevant portions of the order passed by the Commissioner (Appeals) are reproduced below:
"6.4. I find that in the case of Union of India v JG. Glass [1998 (97) E.L.T. 5 (S.C.)], the Hon'ble Supreme Court has clearly held that to define a process as manufacturing process, a new different commercial commodity comes into 3 ST/50746/2021 existence. In this case the appellant had brought scrap without payment of duty and even after segregation of lead required by him the remaining thing remained scrap of different materials. Even without segregation, the scrap was sellable as the appellant had bought it. Thus, this is a case of scrap arising out of scrap and no different commodity has emerged. Further, the segregation was a manual process and the purpose of segregation was to recover the desired input and therefore the process was not incidental or auxiliary to manufacture of the final product i.e., lead ingots or lead rods. The case of Satnam Overseas v. CCE, New Delhi [2015 (318) ELT. 538 (S.C.)] also supports the contention of the appellant as it deals with a mixture and an independent ingredient of the mixture just like the case of the appellant.
The case of Servo Med Industries Pvt Ltd v. CCE, Mumbai [2015 (319) E.L.T. 578 (S.C.)] is also applicable since every time the appellant extracts one metal or material, it cannot be said that every time a manufacturing process has taken place. In the case of Markfed Vanaspati V. CCE 2000(116) ELT 204 (CEGAT Larger bench), the larger bench has held that waste will be dutiable only if there is 'manufacture. It was held that spent earth is not dutiable even if it is marketable and even if it is specified in tariff as it is not manufactured.
6.5 I find that in the case in hand, the process of manufacture starts from the use of the scrap of 'Lead' in the furnace to manufacture Lead Ingots & Lead Rods. For assumption, had the appellant created a separate business entity to manually segregate the non duty paid scrap, whether the segregated scrap including the lead scrap, which would have been sold by that entity, attracted Central Excise duty. The certain answer is no. Thus, only for the reason that the scrap is cleared from manufacturer's premises, the same cannot be treated as manufactured goods.
6.6. Therefore, I hold that the process of segregation of various kind of scraps from non-dutiable scrap does not satisfy the definition of 'manufacture' as given in Section 2(f) of the Central Excise Act, 1944 and as the appellant has not availed Cenvat Credit on such scrap also, therefore no duty liability arises in this case on clearance of such segregated scrap. As the duty has been held not leviable, accordingly no question of interest & penalty arises. Further, as the demand, as a whole, has since been held unsustainable, I find the discussion on the issue of as such clearances of scrap redundant."
5. Learned authorised representative appearing for the department has contended that the Commissioner (Appeals) committed an illegality in setting aside the order passed by the Additional Commissioner. It is 4 ST/50746/2021 his submission that the Additional Commissioner for good reason had confirmed the levy of duty of excise.
6. It is not possible to accept the contention made by the learned authorised representative appearing for the department. The Commissioner (Appeals) clearly held that the process of segregation of various scraps would not amount to manufacture under section 2(f) of the Central Excise Act and as the respondent had not availed CENVAT credit on such scrap, no duty liability would arise on clearance of such scrap. This finding is based on decisions of the Supreme Court in Satnam Overseas vs CCE, New Delhi1 and also Sarvo Med Industries Pvt. Ltd. vs CCE, Mumbai2. The findings recorded by the Commissioner (Appeals) do not suffer from perversity. The appeal is liable to dismissed and is, accordingly, dismissed.
(Dictated and Pronounced in the open court) (JUSTICE DILIP GUPTA) PRESIDENT (P. V. SUBBA RAO) MEMBER (TECHNICAL) Diksha 1 2015(318) ELT 538 (SC) 2 2015 (319) ELT 578 (S.C)