TMI Blog2014 (12) TMI 657X X X X Extracts X X X X X X X X Extracts X X X X ..... om the aluminium ingots was not dross and skimmings but the aluminium sheets. It was the aluminium sheets therefore that were the endproduct or the finished product and not the dross and skimmings which were merely the refuse or scum or rubbish thrown out in the course of the manufacture of the finished product, namely, the aluminium sheets. As stated earlier, in the affidavitinreply, there has throughout been a repeated emphasis that the dross and skimmings are a byproduct and that the aluminium ingots were used by the company in the manufacture of dross and skimmings. To be subjected to levy of excise duty 'excisable goods' must be produced or manufactured in India. For being produced and manufactured in India the raw material should have gone through the process of transformation into a new product by skilful manipulation. Excise duty is an incidence of manufacture and, therefore, it is essential that the product sought to be subjected to excise duty should have gone through the process of manufacture. Cinder cannot be said to have gone through any process of manufacture, therefore, it cannot be subjected to levy of excise duty. - Merely because the goods satisfying the test ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as byproducts, which are chargeable to Central Excise duties under subheading 26204010 of the Central Excise Tariff Act, 1985. The Petitioner sells these on regular basis. The Department terms them as byproducts. The Department claims that section 3 of the Central Excise Act, 1944 levies Central Excise duty on all excisable goods, which are produced or manufactured in India and at the rate setfourth in the First and Second Schedules of the Central Excise Tariff Act, 1985. They rely upon the definition of the term excisable goods appearing in section 2(d) of the said Act. They also rely upon an Explanation which was added to clause (d) of section 2 of the Central Excise Act, 1944 by Finance Act, 2008. 6. An order was passed against the Petitioner by the Commissioner, Central Excise (Appeals) and this order was challenged before the Customs, Excise and Service Appellate Tribunal (CESTAT). There were conflicting decisions according to the Revenue/Department of two Benches of the Tribunal and which required placing of the matter before the larger Bench. The conflicting views are stated to be on the question, whether aluminium dross and skimmings or similar nonPage ferrous metal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g bought and sold in the market. However, the majority followed the decision of this Court and held that the aluminium dross and skimming are not a result of manufacture and hence not goods, being not a new commodity. Therefore, that is not liable to Excise duty. 8. An appeal was filed by the Revenue to the Hon'ble Supreme Court and in the decision reported in 1999 (111) ELT A200 (SC), the Revenue's Appeal came to be dismissed. Further, during the course of dealing with the issue of excisability of cinder, i.e. ash obtained by burning of coal, to excise duty, once again the Hon'ble Supreme Court in the decision in the case of Union of India vs. Ahmedabad Electricity Co. Ltd. reported in 2003 (158) ELT 3 (SC) took the same view. Mr. Sridharan also placed reliance upon the Judgment of the Hon'ble Supreme Court in the case of Commissioner of Central Excise vs. Tata Iron and Steel Co. Ltd., reported in 2004 (165) ELT 386 (SC) . Mr. Sridharan therefore submits that all these decisions consistently took the same view and which is finally to be found in the case of Commissioner of Central Excise vs. Indian Aluminium Co. Ltd. reported in 2006 (203) ELT 3(SC). Merely beca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be justified because now the legal position has undergone a complete change. Mr. Sethna heavily relies upon the affidavit in reply filed in this Writ Petition to urge that the explanation has been inserted with a specific purpose. Mr.Sethna submits that the observations of the Hon'ble Supreme Court in the case of Union of India vs. Indian Aluminium reported in 1995 (77) ELT 268 (SC) are nullified with the change in law. With the amendment in section 2(d) of the Central Excise Act, 1944, the produce aluminium dross and skimming are deemed to be marketable. They are capable of being sold and for a consideration. They are therefore excisable goods. So long as they are falling within this definition, then, no assistance can be derived by the definition of the term 'manufacture'. However, even with the aid of this definition, it is apparent that manufacturing process includes all incidental or ancillary steps and resulting in manufacture of byproducts which are goods. The process of formation of dross due to oxidation process is integral part of the entire manufacturing activity undertaken by the Petitioner. Without the extraction of dross, without the process of skimming, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion having been either amended or an Explanation inserted thereto would result in any change in the legal position . 13. We do not wish to once again burden this Judgment with the manufacturing activities undertaken by parties like the Petitioner, who was Appellant before the Tribunal. The Tribunal has extensively referred to them. The only argument was whether dross and skimming are not manufactured goods. In the first decision, which was rendered by a Single Judge of this Court, in the case of Indian Aluminium vs. A. K. Bandyopadhyay (supra), the Single Judge considered this controversy and proceeded to decide it. After noting the rival contentions and the material placed, the Single Judge held as under: 22. It is difficult to come to the conclusion that dross and skimming are goods and the contention to the contrary urged on behalf of the Petitioner is not entirely devoid of substance. As stated earlier, dross is nothing but scum thrown off from metals in something; refuse, rubbish or worthless impure metal and skimming is that which is removed or obtained from the surface by skimming These are nothing but ashes resulting in the process of the manufacture of alum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f fetching some sale price. for that matter any rubbish can be sold. But that is not the criterion. It cannot be said that dross and skimmings are the result of treatment, labour or manipulation whereby the end product is dross and skimmings. They are merely the scum thrown out in the process of manufacture of aluminium sheets. Therefore it cannot be said that dross and skimmings are transformation resulting in a new and different article with a distinctive name, character or use or that they ordinarily come to the market to be bought and sold and are known to the market. The article or goods manufactured from the aluminium ingots was not dross and skimmings but the aluminium sheets. It was the aluminium sheets therefore that were the endproduct or the finished product and not the dross and skimmings which were merely the refuse or scum or rubbish thrown out in the course of the manufacture of the finished product, namely, the aluminium sheets. As stated earlier, in the affidavitinreply, there has throughout been a repeated emphasis that the dross and skimmings are a byproduct and that the aluminium ingots were used by the company in the manufacture of dross and skimmings. To illus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to the following effect: 56A(2): Provided that no credit of duty shall be allowed in respect of any material or component parts used in the manufacture of finished excisable goods- (1) If such finished excisable goods produced by the manufacturer are exempted from the whole of the duty of excise leviable thereon or are chargeable to nil rate of duty.... In other words, the contention of the department appears to be: (1) that aluminium dross and skimmings are finished excisable goods produced by the assessee which are exempted from the whole of the duty of excise leviable thereon or are chargeable to nil rate of duty, and (2) A proportionate credit should not be allowed to the assessees in respect of the excise duty paid on that portion of aluminium ingots which result in the manufacture of aluminium dross and skimmings. This argument proceeds on the assumption that aluminium dross and skimmings are finished excisable goods. If one looks at the definition of excisable goods, it is clear that aluminium dross and skimmings were not in the First Schedule to the Central Excises and Salt Act, 1944 at the relevant time and are not excisable goods, finished or otherwise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivision Bench. It confirmed the view taken in 1980 (6) ELT 146 (Bom.). 16. Once again this issue came before the Hon'ble Supreme Court in the context of zinc dross and flux skimming. That arose from a Judgment and order of the Customs, Excise and Service Tax Appellate Tribunal, New Delhi, dated 25th June, 2004. After discussing the rival contentions and referring to the legal position and the Judgments brought to its notice including which it rendered previously, the Hon'ble Supreme Court dismissed the Appeal of the Revenue. Prior thereto, what we find is that the matter was taken to the Supreme Court and from a decision which was rendered by the Collector of CEGAT dated 18th June, 1987 in the case of Indian Aluminium Co. Ltd. and Anr. vs. Collector of Central Excise, Bangalore reported in 1987 (31) ELT 158 (Tribunal). The Supreme Court, following its earlier Judgment in the case of Union of India vs. Indian Aluminium 1995 (77) ELT 268 (SC), dismissed the Department's/Revenue's Appeal. 17. Then, the matter was carried once again to the Supreme Court [2003 (158) ELT 3 (SC)], and this time, the argument was in relation to cinder, which is unburnt or partly burnt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent considerations apply. .. 13 We are unable to accept the proposition advanced by the learned Additional Solicitor General. A close look at Section 3 of the Central Excise Act shows that the words 'excisable goods' have been qualified by the words which are produced or manufactured in India . Therefore, simply because goods find mention in one of the entries of the First Schedule does not mean that they become liable for payment of excise duty. Goods have to satisfy the test of being produced or manufactured in India. It is settled law that excise duty is a duty levied on manufacture of goods. Unless goods are manufactured in India, they cannot be subjected to payment of excise duty. There is no merit in the argument that simply because a particular item is mentioned in the First Schedule, it becomes exigible to excise duty. [see Hyderabad Industries Ltd. and Another v. Union of India and Ors (1995) 3 SCC 338 and Moti Laminates Pvt. Ltd. and Others v. Collector of Central Excise, Ahmedabad (1995 3 SCC 23]. Therefore both on authority and on principle, for being exigible to excise duty, excisable goods must satisfy the test of being produced or manufactured in Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tata Iron and Steel Co. Ltd. (supra). There, again the Hon'ble Supreme Court was required to examine the issue as to whether zinc dross, flux skimming and zinc scallings arising as byproduct during galvanization of steel sheets are excisable goods. In that regard, paras 9, 10, 14 and 16 of this decision are relevant. They read as under: 9. According to the Department, prior to 1-3-1988 as per Chapter Note 3 of Chapter 26 ash and residue other than dross and ash of zinc containing metals or metallic compounds applies only to the ash and residue of a kind used in industry either for the extraction of metal or as a basis for the manufacture of chemical compound of metal. This chapter note was subsequently amended w.e.f. 1-3-1988 by omitting the words other than dross and ash of zinc containing metals of metallic compounds . Thus, prior to 1-3-1988 the said dross and ash of zinc containing metals or metallic compound were classifiable under 7902 and subsequent to 1-3-1988 the said product got classified under subheading 26.20. 10. Here also a show cause notice was issued and the Assistant Commissioner rejected the refund claim holding that the ash cleared by the noticee (as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thereafter, the Hon'ble Supreme Court was required to consider this issue and as already referred by us in the case of Commissioner of Central Excise vs. Indian Aluminium Co. Ltd. reported in 2006 (203) ELT 3(SC). Finally, in the case of Grasim Industries Ltd. (supra), the Hon'ble Supreme Court referred to all the amendments including the insertion of the Explanation and on noticing the issue before it, proceeded to hold as under: 7. We have heard the learned counsel for the parties. In the present case, the assessee had undertook repair and maintenance work of his worn out old machinery or parts of the cement manufacturing plant for the period between 1995 to 1999. The assessee repaired machinery or capital goods such as damaged roller, shafts and coupling by using welding electrodes, mild steel, cutting tools, M. S. Angles, M. S. Channels, M. S. Beams etc. In this process of repair and maintenance, M. S. Scrap and Iron Scrap were generated in the workshop. It is not in dispute that these M. S. Scrap and Iron Scrap were excisable goods under Section 2(d) of the Act falling under the Chapter Heading 72.04 in the Schedule to the Tariff Act read with Note 8(a) to Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... test of being produced or manufactured in India. It is settled law that excise duty is a duty levied on manufacture of goods. Unless goods are manufactured in India, they cannot be subjected to payment of excise duty. Simply because a particular item is mentioned in the First Schedule, it cannot become exigible to excise duty. [See Hyderabad Industries Ltd. v. Union of India, (1995) 5 SC 338 = 1995 (78) E. L. T. 641 (SC), Moti Laminates (P) Ltd. v. CCE (1995) 3 SCC 23 = 1995 (76) E.L.T. 241 (SC), CCE v. Wimco Ltd. (2007) 8 SCC 412 = 2007 (217) E.L.T. 3 (S.C.)]. Therefore, both on authority and on principle, for being excisable to excise duty, goods must satisfy the test of being produced or manufactured in India. In our opinion, he charging Section 3 of the Act comes into play only when the goods are excisable goods under Section 2(d) of the Act falling under any of the tariff entry in the Schedule to the Tariff Act and are manufactured goods in the terms of Section 2(f) of the Act. Therefore, the conditions contemplated under Section 2(d) and Section 2(f) has to be satisfied conjunctively in order to entail imposition of excise duty under section 3 of the Act. The manufacture in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yproduct of the repairing process which uses welding electrodes, mild steel, cutting tools, M. S. Angles, M. S. Channels, M.S. Beams etc. 21. We do not see how, in the light of these authoritative pronouncements of the Hon'ble Supreme Court, can the Tribunal take a different view. When the Hon'ble Supreme Court holds and as in Grasim Industries Ltd. (supra) that the conditions contemplated under Section 2(d) and Section 2(f) have to be satisfied conjunctively in order to entail imposition of excise duty under section 3 of the Act, then, we cannot agree with the Tribunal. The larger Bench decision does not take into account the fact that the authoritative pronouncement by the Supreme Court and repeatedly rendered is binding on it. That is law declared under Articles 141 of the Constitution of India. That it is rendered in the case of identical issues, controversy and the Assessee makes these Judgments of the Supreme Court all the more binding. Their binding effect is not lost merely because the Tribunal has another occasion to consider the issue or another shade of the same controversy. So long as there are Supreme Court Judgments in the field, we do not see how the Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n tests, then, all these observations are of no assistance to the Revenue. The reliance placed by Mr.Sethna on a Judgment in the case of this very Assessee rendered by the Allahabad High Court 2009 (243) ELT 481 (All) is entirely misplaced. There the argument was that the Writ Petition has been admitted and therefore a interim order be passed so as to restrain the Department/Revenue from taking any coercive action against the Petitioner Hindalco Industries Ltd. including seizure and clearance of aluminium dross and skimming etc. in terms of the impugned orders. All the observations made prima facie do not take note of the decisions of the Hon'ble Supreme Court. It only takes note of one of the decision. In the light of the conclusions reached by us and finding that there are authoritative pronouncements of the Hon'ble Supreme Court rendered after the Division Bench of Allahabad High Court, that we are unable to agree with Mr. Sethna. 24. We had called upon Mr. Sethna to take instructions from the Department as to why the Department cannot, in the light of these authoritative pronouncements, enable the Tribunal to deal with the matter afresh. However, Mr. Sethna, on instr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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