2016 (2) TMI 283 - AT - Central Excise

Manufacture - whether the items i.e. impure dowtherm diphyl; old and damaged PTA scrap, wash water - 50% concentration of lactum, old and used sludge oil; old and used all types of oil, spin finish oil and old assorted bearings cleared from the factory premises of the assessee are liable to duty? - Held that - It is on record that the items on which duty demands are made are arising during the course of manufacture of the final products for the period in question. It is also undisputed that the assessee-appellant is clearing the products on commercial invoices and gets some consideration for the said items. At the outset, on perusal of the items which are cleared from the factory premises, description as per the annexure to the show cause notices, it may be seen that they are either used, old or damaged wash water, old and used sludge oil and old assorted bearings. The description itself would indicate that these products are not manufactured nor they are associate product and therefore cannot be said to be distinct products as contended by the learned Departmental Representative. There is nothing on record to indicate that these items, which were sought to be considered as distinct product, were being manufactured in the appellant s factory premises. Secondly, as find, arising out of the very same audit objection, another show cause notice was issued demanding duty on the used/waste MEG/TEG that arises during the course of manufacture in the factory premises of the appellant and the said demand was set aside by the first appellate authority; Revenue s appeal before the Tribunal 2008 (7) TMI 677 - CESTAT, MUMBAI , was rejected by an order dated 23/07/2008 (wherein I was one of the Member) holding that these items (used MEG) is not a manufactured product for demand of duty. In the case in hand, undoubtedly there is nothing on record to show that these products, which arise during the process of manufacture, are manufactured products. - Decided in favour of assessee

Summary

Issues Involved:
1. Whether the items cleared by the appellant-assessee are liable to duty.
2. Whether the first appellate authority erred in not quantifying the demand, interest, and penalty.

Detailed Analysis:

1. Whether the items cleared by the appellant-assessee are liable to duty:

The core issue for consideration is whether items such as impure dowtherm diphyl, old and damaged PTA scrap, wash water with 50% concentration of lactum, old and used sludge oil, old and used all types of oil, spin finish oil, and old assorted bearings, which were cleared from the factory premises of the appellant-assessee, are liable to duty.

Appellant's Argument:
The appellant-assessee contended that these items are waste products that arose during the manufacture of nylon yarn and are not liable to duty unless they are manufactured. They relied on several judgments, including:
- Grasim Industries Ltd. vs. Union of India (2011) 273 ELT 10 (SC): The Supreme Court held that excise duty is levied on the manufacture of goods, and unless goods are manufactured, they cannot be subjected to excise duty.
- Commissioner of Central Excise & Customs vs. Dhakad Metals Pvt. Ltd. (2010) 257 ELT 535 (Guj): The Gujarat High Court held that waste arising during the manufacture of a product is not an excisable article.
- Union of India vs. DSCL Sugar Ltd. (2015-TIOL-240-SC-CX): The Supreme Court held that bagasse, a waste product, is not a manufactured product and thus not liable to excise duty.

Department's Argument:
The Departmental Representative argued that the goods cleared by the appellant-assessee were marketable and fetched some value in the market. He cited the judgment of the Supreme Court in Bharat Petroleum Corporation Ltd. (1995) 77 ELT 790, which stated that if distinct products arise during the manufacture of final products and have commercial identity, then duty liability arises.

Tribunal's Findings:
The Tribunal noted that the items in question were either used, old, or damaged and were not manufactured products. There was no evidence to indicate that these items were manufactured in the appellant's factory premises. The Tribunal found strong force in the appellant's contention that the issue was covered by the Supreme Court's judgment in Grasim Industries Ltd., which emphasized that goods must be manufactured to be liable for excise duty. The Tribunal also referred to the judgments in Dhakad Metals Pvt. Ltd. and DSCL Sugar Ltd., which supported the appellant's case.

2. Whether the first appellate authority erred in not quantifying the demand, interest, and penalty:

The Revenue's appeal was based on the ground that the first appellate authority did not quantify the demand, interest, and penalty while setting aside the order-in-original.

Tribunal's Findings:
The Tribunal found that the first appellate authority's order was unsustainable as it failed to establish that the items in question were manufactured products. Consequently, the Tribunal set aside the impugned order, allowed the assessee's appeal, and rejected the Revenue's appeal.

Conclusion:
The Tribunal concluded that the items cleared by the appellant-assessee were not manufactured products and thus not liable to excise duty. The impugned order was set aside, and the assessee's appeal was allowed, while the Revenue's appeal was rejected.