Custom, Excise & Service Tax Tribunal
M/S. Magnum Ventures vs C.C.E., Ghaziabad on 7 March, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
WEST BLOCK NO.2, R.K. PURAM, NEW DELHI 110 066
Date of Hearing 10.10.2013
Date of Decision 07.03.2014
For Approval &Signature :
Honble Mrs. Archana Wadhwa, Member (Judicial)
Honble Mr. Manmohan Singh, Member (Technical)
1.
Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2.
Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
No
3.
Whether Lordships wish to see the fair copy of the order?
Seen
4.
Whether order is to be circulated to the Department Authorities?
Yes
Appeal No.E/2039/2011-EX[DB]
[Arising out of Order-in-Appeal No.50-CE/GZB/2011-12, dated 10.05.2011 passed by the C.C.E., Ghaziabad]
Appeal No.E/2162/2012-EX[DB]
[Arising out of Order-in-Appeal No.64-CE/GZB/12, dated 30.03.2012 passed by the C.C.E., Ghaziabad]
Appeal No.E/3763/2012-EX[DB]
[Arising out of Order-in-Appeal No.156-CE/GZB/12, dated 31.08.2012 passed by the C.C.E. & S.T., Ghaziabad]
M/s. Magnum Ventures Appellant
Vs.
C.C.E., Ghaziabad . Respondent
Appearance Shri Rakshit Verma, Advocate - for the appellant Shri B.B. Sharma, Advocate - for the respondent CORAM: Honble Mrs. Archana Wadhwa, Member (Judicial) Honble Mr. Manmohan Singh, Member (Technical) Final Order Nos.50888-50890, dated 07.03.2014 Per Honble Mrs. Archana Wadhwa :
All the three appeals are being disposed of by a common order as the issue involved is identical. The appellants are engaged in manufacturing of paper, paper board out of waste paper as their main raw-material. During the process of manufacture of paper, sludge is formed in Effluent Treatment Plant (ETP) where water of the plant is purified for re-use. Such sludge is being sold by the appellants on different intervals. During the process of manufacture of paper, pulper waste and refuse also emerges which the appellant is selling at regular intervals.
2. Revenue entertained a view that such sludge and pulper waste and refuse is a excisable commodity and was required to be cleared on payment of duty. Accordingly, proceedings were initiated against the appellants by issuance of three Show Cause Notices raising demands and proposing imposition of penalties, which Notices stand adjudicated against them and such orders stand upheld by the Commissioner (Appeals). The details of confirmation of duty and imposition of penalties are as under:-
Sl.
No. Appeal No. Period covered Date of Show Cause Notice Amount Demanded (Rs.)
1.
E/3763/2012 September, 2010 to April 2011 08.08.2011 Duty - Rs.26,135/-
Along with interest and penalty Rs.26,135/-
2. E/2162/2012 February, 2009 to August, 2010 09.12.2010 Duty Rs.1,73,115/- along with interest and penalty Rs.1,73,115/-
3. E/2039/2011 2004-05 to 2007-08 29.04.2009 Duty - 1,58,816/-
Duty Rs.1,58,816/- along with Interest (penalty set aside by Commissioner (Appeals)
3. We have heard both the sides duly represented by Shri Rakshit Verma, Ld. Counsel for the appellants and Shri B.B. Sharma, Ld. Departmental Representative for Revenue.
4. It is seen that the lower authorities have upheld the duty payments on the ground that by virtue of Section 78 of the Finance Act, 2008, the definition of the excisable goods in Section 2(d) of the Central Excise Act, 1944 was amended by adding an Explanation, which reads as for the purpose of this clause 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. The lower authorities have also referred to and relied upon the Board Circular No.904/24/2009-CX, dated 28.10.2009, which has clarified that it is clarified that with this amendment in Section 2(d), the bagasse aluminium, zinc dross and other such products termed as waste, residue or refuse which arise during the course of manufacture and are capable of being sold for consideration would be excisable goods and chargeable to payment of excise duty.
5. Ld. Counsel for the appellants has strongly contended that in as much as the sludge and the pulper waste and refuse is nothing but the refuse which comes into existence during the course of manufacture of paper, it cannot be said that they have manufactured the said sludge and pulper waste. Merely because the appellants are disposing of this sludge and the pulper waste against consideration would not make the said products arising as a result of manufacture. He has relied upon the Tribunal decision in the case of Indian Potash Ltd. Vs. C.C.E., Allahabad reported in 2012 (281) E.L.T. 622 (Trib Del.).
6. It was also submitted before us that the Board Circular strongly relied upon by the lower authorities has been quashed by the Honble High Court of Allahabad in the case of Balrampur Chini Mills Ltd. Vs. Union of India, vide their order dated 18.05.2012. The appellants also claimed exemption, if the product is held to be excisable, in terms of Notification No.76/86-CE, dated 10.02.1986, which exempts sludge obtained in the sewage or effluent treatment plant belonging to municipal corporation, local authorities or an industrial unit. The demand also stands assailed on the point of limitation, in one of the appeals.
7. Shri B.B. Sharma, Ld. Departmental Representative appearing for the Revenue reiterates the reasoning of lower authorities and submits that in as much as the provisions of Rule 2(d) were amended with effect from May, 2008 by way of adding an explanation, the goods which are sold in the market are to be considered as excisable goods. As such, the appellants were required to discharge their duty liability in respect of sludge and pulper waste and residue. He also submitted that the sludge and pulper waste sold by the appellant are further being consumed by the buyers in the manufacture of paper and as such, has to be held as excisable goods.
8. We have considered the submissions made by both the sides and have carefully gone through the impugned orders. The issues involved in the present cases as to whether the sludge obtained in the effluent treatment plant situated in the appellants factory has to be held as excisable goods for discharging of excise duty or alternatively, if excisable, the same would be exempted in terms of Notification No.76/86-CE, dated 10.02.1986. The other issue required to be decided is as to whether the pulper waste, which emerges in the pulp plant of the appellant can be said to be a manufactured goods and consequently excisable.
9. The lower authorities have strongly relied upon the amendment made in Section 2(d) of the Central Excise Act on 10.05.2008 vide which the explanation was introduced vide Section 78 of the Finance Act, 2008. The said explanation was to the effect that any material which is capable of being bought and sold for consideration shall be deemed to be marketable. However, first of all, it has to be seen whether the said goods can be held to be result of any manufacturing activity. The expression manufacture stands defined under Section 2(f) of Central Excise Act, 1944 and is to the effect that the same would include any process incidentally or ancillary to the completion of a manufactured product or which is specified in relation to any goods in Section Chapter notes of the First Schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture or which involves packing or re-packing or labelling or re-labelling of container or declaration or alteration of retail sale price or adoption of any other treatment on the goods to render the product marketable to the consumer. Admittedly, the sludge as also pulper waste emerges during the course of manufacture of paper and paper board and such emergence is inevitable. The same cannot be held to be any incidental or ancillary process to the completion of a manufactured product. Similarly, there is no deeming provision under any section or Chapter notes so as to hold the said emergence of waste in the shape of sludge or pulper waste, as amounting to manufacture. Admittedly, the third situation involving packing or re-packing, labelling or re-labelling or declaring MRP, etc. on the said sludge and paper waste is not involved in the present cases. As such, the emergence of sludge and pulper waste during the course of manufacture of paper or paper board cannot be held to the result of any manufacturing activity.
10. The lower authorities have relied upon the addition of explanation to Section 2(d) of the Central Excise Act, 1944. However, if a product is not a result of a manufacture, such explanation relatable to the excisability of the goods, based upon the marketability of the same, cannot be used for holding a product to be the result of manufacture in as much as the same not only relates to the marketability of the product but also the criteria of manufacture is still required to be satisfied.
While dealing with the legal effect of an explanation to the main section, the Honble Supreme Court in the case of Sulochana Amma Vs. Narayana Nair reported in 1995 (77) E.L.T. 785 (SC) observed as under:-
It is settled law that explanation to a section is not a substantive provision by itself. It is entitled to explain the meaning of the words contained in the section or clarify certain ambiguities or clear them up. It becomes a part and parcel of the enactment. Its meaning must depend upon its terms. Some time it would be added to include something within it or to exclude from the ambit of the main provision or condition or some words occurring in it. Therefore, the explanation normally should be so read as to harmonise with and to clear up any ambiguity in the same section. In as much as the Section 2(d) of the Act defines the excisable goods as the goods specified in the First Schedule and Second Schedule to the Central Excise Tariff Act, 1985, has been subject to duty of excise. As rightly contended by the appellants, the goods are first required to be specified in the First and Second Schedule of the Central Excise Tariff Act and then only the test under explanation would come into picture. Admittedly, the sludge in the effluent treatment plant and the pulper waste emerged as rubbish and are sold by the appellants as discarded stores. While dealing with an identical issue, the Honble Supreme Court in the case of Union of India Vs. Indian Aluminium Co. Ltd. reported in 1995 (77) E.L.T. 268 (SC) held that merely because aluminium dross and skimmings are sold and some amount may be recovered from the same will not make them marketable commodity. However, in terms of the addition of explanation to Section 2(d), the marketability expect may be satisfied but the Court further observed as under:-
It is also not possible to accept the contention of the appellant that aluminium dross and skimmings are goods are marketable commodity, which can be subjected to the levy of excise. Undoubtedly, aluminium dross and skimmings do arise during the process of manufacture but these are nothing but waste or rubbish which is thrown by in the course of manufacture.
11. At this stage, we may take note of the Tribunals decision in the case of Indian Potash Ltd. Vs. CCE, Allahabad reported in 2012 (281) E.L.T. 622 (Trib.- Del.), wherein after taking note of the addition of explanation to the provisions of Section 2(d), Tribunal held that the beggass, which emerges by way of crushing sugarcane to extract sugar juice is a waste product. The amendment in the Finance Act, 2008 would not make any difference in the facts and circumstances of the case. The said decision stands followed by the Tribunal in a number of decisions wherein it has been held that the press mud emerging as waste material during the course of manufacture of sugar from sugar juice cannot be held to be an excisable product. Reference in this regard can be made in Tribunals Final Order in the case of M/s. Kisan Sahkari Chinni Mills Ltd. Vs. C.C.E., Lucknow in Appeal No.2978/2011, dated 23.05.2012 and M/s. Manakpur Chini Mills Vs. C.C.E., Allahabad in Appeal No.1317/2012, dated 31.05.2012 and
12. It is seen that the lower authorities have strongly relied upon the Board Circular No. 904/24/09-CX, dated 28.10.2009 issued after the amendment and addition of explanation to Section 2(d) of Central Excise Act, 1944 clarifying that any waste, scrap, refuse, etc. if sold would become an excisable product, liable to pay duty. The said circular stands quashed by the Honble High Court, Allahabad in the case of Balrampur Chini Mills Ltd. Vs. Union of India reported in 2013 (38) STT 635/30 Taxmamn.com 175 Allahabad. By referring to explanation added to Section 2 (d) of Central Excise Act, 1944, the Court observed that it only refers to the goods which is capable of being bought and sold which shall be deemed to be marketable. Earlier also, beggass was being bought and sold for a consideration and even after the amendment in 2008, it is being bought and sold for a consideration. Hence, it was marketable earlier also and no difference has been made about the marketability of beggass on account of addition of explanation to Section 2 (d) of Central Excise Act, 1944, in as much as it does not ceases to be waste and it does not become a manufactured final product for the purpose of Rule 6 of CENVAT Credit Rules, 2004. As such, by referring to the decision of the Honble Supreme Court in the case of CCE Vs. Shakumbhari Sugar & allied Industries Ltd. reported in 2005 (189) E.L.T. 62 (SC) it is held that beggass obtained during the course of manufacture of sugar out of sugarcane may find an entry in Schedule to the Central Excise Tariff Act, 1985 but it does not become a final product merely on such entry. Such beggass is nothing but a waste obtained during the manufacture of sugar and cannot be regarded as a final product. By observing so, the Honble Court quashed the Board Circular No.904/24/09-CX, dated 28.10.2009 issued by CBEC. As such in terms of the said decision of the Honble Supreme Court, the circular relied upon by the lower authorities cannot be pressed to service and sludge as also the pulper waste cannot be held to be excisable product in view of the addition of explanation to Section 2(d).
13. It may also be seen that the lower authorities have classified the sludge and pulper waste as falling under the Head 4707 90 00. The said heading 4707 relates to (recovery of waste and scrap) paper or paper board. The sub-heading 47 07 90 00 specifies unsorted waste and scrap. In as much as the entry relates to waste and scrap of paper or paper board and not to sludge and pulper waste, the same cannot be held to be covered by the said entry.
14. As we have already held that the sludge and pulper waste are not excisable, having not arisen as a result of manufacturing activity, we are not dealing with the alternative plea of the appellant that in any case, the same are exempted from payment duty under Notification No.76/86-CE, dated 10.02.1986.
15. As we have allowed the appeals on merits, the plea of limitation is not being adverted to, though we note that demand in one of the appeals is barred by limitation.
16. In view of the foregoing, the impugned orders are set aside and appeals are allowed with the consequential relief to the appellants.
Pronounced on 07.03.2014 (Archana Wadhwa) Member (Judicial) (Manmohan Singh) Member (Technical) SSK -2-