Case: Union Of India Vs. Ahmedabad Electricity Co.Ltd.

been gone into by the authorities concerned and therefore it is too late for us to go into all this. 35. Applying the tests laid down in these judgments, it is not possible to say that cinder satisfies the requirement of being manufactured in India. 36. From the above discussion it is clear that 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 skillful manipulation. Excise duty is an incidence of manufacture and, therefore, it is essential that the product sought 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. 37. The onus to show that particular goods on which excise duty is sought to be levied have gone through the process of manufacture in India is on the revenue. They have done nothing to discharge this onus. For this reason alone they must fail. 38. The Department has been consistently taking a stand that cinder is not excisable as it does not involve any manufacturing activity. The Department issued a clarification vide Circular No. B. 352/75-TRU (pt) dated 6th June 1975. According to it coal ash left out in burning of coal would not attract duty under item 68 for the reason that in the burning of coal as fuel, resulting in coal ash as a waste product no manufacturing process is involved. With the introduction of the new tariff in 1986 and specific entry for ash being included in the Tariff Chapter 26, the issue again revived. Notification No. 76/86 dated 10th February, 1986 exempted cinder from levy of excise duty. The whole thing was sought to be overturned after the annual budget for the year 1996-97. The Tariff Act, 1975 was amended by virtue of the Tariff Act, 1985. The exemption was withdrawn by virtue of notification No.11/96 dated 23rd July, 1996 in view of the annual budget for the year 1996-97. The Commissioner of Central Excise vide Trade Notice No. 35 of 1998 dated 21st August, 1998 clarified that coal ash (cinder) is specified in the Schedule to the Tariff Act and read with Section 2(d) of the Central Excise Act was subject to levy of excised duty. This sudden turn is not only unjustified but also is contrary to law. 39. Why we say it is contrary to law is because the department clarified in June, 1975 that cinder is not exigible to excise duty as in its emergence no manufacturing process is involved. How can suddenly cinder become exigible to excise duty? The procedures which lead to emergence of cinder have remained the same as they were in 1975. It is was not the result of manufacturing process in 1975, it is not so even now. This aspect was not taken into consideration at all. Interestingly in the Circular No. 386/19/98-CX dated 7th April, 1998 the Central Board of Excise and Customs while declaring coal ash (cinder) as subject to levy of excise duty, states that the commodity also satisfied the tests of marketability and has a distinct commercial identity known to trade". There is no reference to the essential test of being manufactured in India. It is for falling this test that the item was excluded from levy of excise duty earlier in 1975 How can you ignore it now? 40. In view of our finding that cinder cannot be subjected to levy of excise duty because it is not an item of goods which has been subjected to process of manufacture, it is not necessary for us to go into any other point. We may only note that courts have evolved another test of marketability i.e. to be exigible to excise duty goods must be marketable. It is not disputed that cinder is being sold by the accessees. But can it be said to be marketable goods in the sense word marketable is used? We doubt it. However, this need not detain us since cinder does not satisfy the test of being manufactured in India. Even if it is saleable, it does not make any difference. The result is that the contention of the Revenue that cinder is liable to payment of excise duty is hereby rejected. Point 3 41. The objection is that the High Court should not have entertained a petition under Article 226 of the Constitution of India in the facts and circumstances of the case. At the outset we may note that was have only one Civil Appeal in the case of Ahmedabad Electricity Company (C.A. No. 2168-69/2001) which is arising from proceedings before the High Court under Article 226. The remaining matters in the bunch are statutory appeals under Section 35L of Central Excise Act. Therefore, this court has to go into the matter on merits. Moreover, in the Ahmedabad Electricity Companys case challenge by way of Writ Petition under Article 226 was to a Circular dated 7th April, 1998 issued by the Central Board of Excise and Customs and the consequential Trade Notice No. 36/98 dated 22nd May, 1998 issued by the office of the Commissioner of Central Excise and Customs, Ahmedabad by which it was clarified that coal-ash (cinder)" is an excisable commodity classifiable under sub-heading No. 26.21 of the Central Excise Tariff Act, 1985. In the first place no objection regarding maintainability of the Writ Petition seems to have been taken before the High Court. Even if such an objection was raised, the same would have been a futile attempt. In the facts of the case the High Court would have been justified in rejecting such an objection. The impugned circular could not have been challenged before the departmental authorities as they would have felt bound by it. We find no merit in the objection. The same is rejected.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]. 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 vs. Union of India and others (1995) 5 SCC 338  and Moti Laminates Pvt. Ltd. and others vs. Collector of Central Excise, Ahmedabad (1995) 3 SCC 23 ). Therefore both an authority and on principle, for being exigible to excise duty, excisable goods must satisfy the test of being produced or manufactured in India. The argument to the contrary is rejected.In the case in hand also coal which leads to production of cinder is not used as a raw material for the end product. It is being used only for ancillary purpose that is as a fuel. Therefore, irrespective of the fact whether any manufacture is involved in production of cinder it should be held to be out of the tax net for the reason that it is not a raw material for the endis clear that 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 skillful manipulation. Excise duty is an incidence of manufacture and, therefore, it is essential that the product sought 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.In view of our finding that cinder cannot be subjected to levy of excise duty because it is not an item of goods which has been subjected to process of manufacture, it is not necessary for us to go into any other point. We may only note that courts have evolved another test of marketability i.e. to be exigible to excise duty goods must be marketable. It is not disputed that cinder is being sold by the accessees. But can it be said to be marketable goods in the sense word marketable is used? We doubt it. However, this need not detain us since cinder does not satisfy the test of being manufactured in India. Even if it is saleable, it does not make any difference. The result is that the contention of the Revenue that cinder is liable to payment of excise duty is hereby rejected.The objection is that the High Court should not have entertained a petition under Article 226 of the Constitution of India in the facts and circumstances of the case. At the outset we may note that was have only one Civil Appeal in the case of Ahmedabad Electricity Company (C.A. No. 2168-69/2001) which is arising from proceedings before the High Court under Article 226. The remaining matters in the bunch are statutory appeals under Section 35L of Central Excise Act. Therefore, this court has to go into the matter on merits. Moreover, in the Ahmedabad Electricity Companys case challenge by way of Writ Petition under Article 226 was to a Circular dated 7th April, 1998 issued by the Central Board of Excise and Customs and the consequential Trade Notice No. 36/98 dated 22nd May, 1998 issued by the office of the Commissioner of Central Excise and Customs, Ahmedabad by which it was clarified that coal-ash (cinder)" is an excisable commodity classifiable under sub-heading No. 26.21 of the Central Excise Tariff Act, 1985. In the first place no objection regarding maintainability of the Writ Petition seems to have been taken before the High Court. Even if such an objection was raised, the same would have been a futile attempt. In the facts of the case the High Court would have been justified in rejecting such an objection. The impugned circular could not have been challenged before the departmental authorities as they would have felt bound by it. We find no merit in the objection. The same is