2023 (11) TMI 1378 - AT - Central Excise

Extended period of limitation - classification of goods - flue gas - to be classified as Nitrogen under CTH 28043000 or not - HELD THAT - This Bench vide the decision in the case of TATA Steel Limited 2023 (8) TMI 698 - CESTAT KOLKATA has held that The flue gas generated during the course of manufacture metallurgical coke is not a manufactured product and is also not marketable. Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal are:

- Whether the flue gas generated during the manufacture of coke constitutes a "manufactured product" liable to Central Excise duty.

- Whether the flue gas, being a waste or by-product inevitably arising during manufacturing, fulfills the test of manufacture under excise law.

- Whether the principles laid down by the Hon'ble Supreme Court and various High Courts regarding excisability of by-products and waste materials apply to the present case.

- Whether the present periodical proceedings for the period April 2015 to March 2016 can be distinguished from or are covered by the earlier decision of the Tribunal on the extended period.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Whether flue gas generated during coke manufacture is a manufactured product liable to duty

Relevant legal framework and precedents: The Tribunal referred extensively to judicial precedents including the Hon'ble Bombay High Court's decision in Hindalco Industries Ltd., the Hon'ble Supreme Court's rulings on excisability of by-products and waste, and the Ahmedabad Electricity Co. Ltd. case. The Supreme Court has established twin tests for excisability: the goods must be produced by a manufacturing process and must have a distinct identity as a product. The courts have consistently held that waste or by-products which are not intended products and do not acquire a new identity are not excisable goods.

Court's interpretation and reasoning: The Tribunal noted that flue gas is a waste gas inevitably generated during coke manufacture and is not produced by the appellant as a primary product. It is not "manufactured" in the sense contemplated under excise law. The Tribunal relied on the Bombay High Court's observation that waste and scrap arising inevitably in manufacture do not qualify as manufactured goods for excise duty. The Tribunal also cited the Supreme Court's affirmation that dross and skimming of metals, which are by-products, are not manufactured goods.

Key evidence and findings: The factual matrix shows that flue gas arises inevitably during coke manufacture and is not separately produced or intended. It is a waste product without a new identity or commercial use as a manufactured good.

Application of law to facts: Applying the twin tests, the Tribunal held that since flue gas is not intentionally produced nor transformed into a new product, it does not qualify as excisable manufactured goods.

Treatment of competing arguments: The appellant's counsel argued that the issue was already decided in their favor for an extended period and the present proceedings relate to the same issue for a subsequent period. The authorized representative for the department reiterated the lower authority's findings but did not contest the binding nature of the prior decision. The Tribunal accepted the appellant's submission and applied the prior ratio.

Conclusions: Flue gas generated during coke manufacture is not a manufactured product liable to Central Excise duty.

Issue 2: Whether the present proceedings for April 2015 to March 2016 are covered by the earlier decision

Relevant legal framework and precedents: The principle of consistency and binding effect of Tribunal decisions on identical issues is well established. The appellant relied on the Tribunal's earlier final order for an extended period on the same issue.

Court's interpretation and reasoning: The Tribunal observed that both parties agreed the issue was covered by the earlier final order. Hence, with consent, the Tribunal took up the appeal for disposal applying the same reasoning.

Key evidence and findings: The earlier decision in the appellant's case was reported and binding. The present show-cause notice related to the same issue and similar facts.

Application of law to facts: The Tribunal applied the earlier ratio to the present period, holding that the flue gas is not excisable.

Treatment of competing arguments: The department's representative reiterated the lower authority's findings but did not dispute the applicability of the earlier decision.

Conclusions: The present proceedings are covered by the earlier decision and the appeal is allowed accordingly.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"It is a fact that the flue gas is generated during the course of manufacturing of coke. It is not manufactured by the appellant, but it is a waste gas which arises inevitably without beyond the control of the appellant. In that circumstances it is to be seen that the flue gas which was not intended to be produced by the appellant can fulfill the test of manufacture or not."

"Waste and scrap emerge as a by-product in the course of manufacture of other products. The whole purpose of making these observations is to justify the conclusion that because there is a reference to these items in the Tariff Entry or the Tariff Schedule that would change the colour of the controversy. That would enable the Tribunal to then hold that the earlier Judgments and in the case of this very Assessee are no longer good law. However, we do not see how the decision in the case of Grasim Industries Ltd. and particularly the above reproduced paragraphs could have been brushed aside by the Tribunal. The Hon'ble Supreme Court listed the twin tests and which have to be satisfied before the goods can be said to be excisable to tax or Central Excise duty."

"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. In view of the above judicial pronouncements, we hold that the flue gas which is generated in the manufacture of coke is not manufactured product, therefore, duty is not payable."

Core principles established include:

• Waste or by-products inevitably arising during manufacture, which are not intended products and do not acquire a new identity, are not excisable goods.
• The twin tests for excisability require that goods be produced by a manufacturing process and have a distinct identity.
• Consistency in application of Tribunal decisions is essential; identical issues and facts attract the same legal conclusions.

Final determinations:

The appeal is allowed. The flue gas generated during coke manufacture is not a manufactured product liable to Central Excise duty for the period April 2015 to March 2016, following the binding precedent established by the Tribunal in the appellant's earlier case.