CX - Aluminium dross and skimmings are not excisable - Tribunal has reached conclusion, which, no reasonable person in position could have reached - LB order quashed, Board Circulars of 2009 & 2011 cannot survive: HC
By TIOL News Service
MUMBAI, DEC 17, 2014: THE petitioner has challenged the CESTAT Larger Bench order dated 19.08.2014 - 2014-TIOL-1762-CESTAT-MUM-LB and the Board Circulars (904/24/2009-CX.& 941/02/2011-CX) dated 28th October, 2009 and 14th February, 2011.
The backdrop -
++ Aluminium dross and skimmings that arise during the process of manufacture of various aluminium products are cleared by the appellant without payment of duty.
++ The department viewed that the above are classifiable under CETH 26204010 of the CETA, 1985 and the appellant is liable to discharge the duty liability thereon for the period after 10.05.2008 pursuant to insertion of Explanation in section 2(d) of the CEA, 1944 by the Finance Act, 2008.
++ Before the CESTAT, the appellant submitted that in an identical case covering the period post 10.05.2008, the Tribunal in the case of Bhushan Steel Ltd.- 2012-TIOL-2042-CESTAT-MUM had held that Zinc Dross is not a manufactured product and hence not liable to excise duty.
++ The AR submitted that a co-ordinate Bench in KEC International Ltd.- 2012-TIOL-2043-CESTAT-DEL considered the very same issue and held that as per the Explanation to Section 2(d) of the CEA, 1944, Zinc Dross and Ash is an excisable product and liable to excise duty.
++ Therefore, the matter was placed - 2014-TIOL-1762-CESTAT-MUM-LB before the Larger Bench and the Bench in its order dated 19.08.2014 - 2014-TIOL-1762-CESTAT-MUM-LB inter alia held -
++ Sub-heading 2620 40 deals with slag, ash or residues containing mainly aluminium, CETH 2620 4010 specially deals with aluminium dross and CETH 2620 4090 deals with other slag, ash or residues containing mainly aluminium.
++ Explanation to section 2(d) of the Central Excise Act, 1944 was inserted to overcome certain adverse judicial decisions with regard to marketability of waste products.
++ Therefore, a specific entry created for the purpose of levy of duty/tax cannot be merely wished away or brushed aside, by holding that waste and scrap are not manufactured goods.
++ Inasmuch as the goods which are capable of being bought and sold are deemed to be marketable, in view of explanation to Section 2(d), the twin tests of 'manufacture' and 'marketability' are clearly satisfied in the case of dross and skimmings.
++ Therefore, the will of the legislature has to be given effect to by adopting a harmonious interpretation. In this view of the matter, it appears to us that w.e.f. 10/05/2008, aluminium dross and skimmings are liable to excise duty.
The aforesaid LB decision is under challenge before the High Court.
The High Court in an elaborate order traced the dispute beginning from the judgment passed in the case of Indian Aluminium Co. Ltd. vs. A. K. Bandyopadhyay 1980 (6) ELT 146 (Bom.) [confirmed by the Supreme Court] andthen adverted to the decisions in Union of India vs. Ahmedabad Electricity Co. Ltd. 2003-TIOL-17-SC-CX, Commissioner of Central Excise vs. Tata Iron and Steel Co. Ltd., 2004-TIOL-25-SC-CX. Commissioner of Central Excise vs. Indian Aluminium Co. Ltd. 2006-TIOL-129-SC-CX. Grasim Industries Ltd. vs. Union of India 2011-TIOL-100-SC-CX & Commissioner of Central Excise vs. Indian Aluminium Co. Ltd. 2006-TIOL-129-SC-CX where it is held that everything which is sold is not necessarily a marketable commodity as known to commerce and which it may be worthwhile to trade in; merely selling does not mean dross and skimming are marketable commodity as even rubbish can be sold.
Thereafter, the High Court observed -
“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 Revenue could have proceeded to disregard them.”
On the Revenue not abiding by these decisions and the Tribunal not following the same, the High Court commented -
++ We find that the attempt made by the Tribunal to hold that what is marketable and satisfies the requirement stipulated in the Explanation necessarily means that they are liable for imposition of duty under section 3 is directly contrary to the binding Judgments of the Hon'ble Supreme Court on the same issue. The attempt of the Tribunal in para 6.5 in proceeding to analyse the process and concluding that nobody deliberately manufactures waste, dross and scrap is in direct conflict with the findings of the Hon'ble Supreme Court. Waste and scrap emerge as a byproduct in the course of manufacture of other products.
++ We do not see how the decision in the case of Grasim Industries Ltd. could have been brushed aside by the Tribunal.
++ The tribunal takes assistance of a Supreme Court Judgment and concludes that the ratio of any decision can be applied only if the facts are identical. True it is that the Hon'ble Supreme Court holds this way, however, what are those facts and emerging from the record of this case which would enable it to take a different view have not been spelt out by the Tribunal. Even these observations and conclusions would go to show that the Tribunal does not dispute that it is considering the same controversy and in relation to the same aluminium dross, which could be termed as either a byproduct or waste or scrap or rubbish. Once there are twin tests, then, all these observations are of no assistance to the Revenue.
Incidentally, the High Court had asked the counsel for the Revenue to take instructions from the Department as to why the Department cannot, in the light of the authoritative pronouncements, enable the Tribunal to deal with the matter afresh.
To this, the Counsel, on instructions, stated that the legal position and which has been consistently applied and followed by the Revenue is analysed in the Circular;that having already been issued, the Board finds it unable to agree to any contrary suggestion.
Observing that the judgment was not pronounced immediately so as to enable the counsel for the Revenue to take such instructions and in view of the submission made by the counsel, the High Court concluded thus -
++ Finding that the matter stands completely covered by the Judgments of the Hon'ble Supreme Court and which have been totally disregarded by the Tribunal that we are unable to sustain and uphold its conclusions. The impugned order can be safely termed as perverse and vitiated by an error of law apparent on the face of the record. The Tribunal has reached a conclusion, which, no reasonable person in the position and as an adjudicating body could have reached. Its order passed on 19th August, 2014 - 2014-TIOL-1762-CESTAT-MUM-LB and applied to the Petitioner's case is quashed and set aside.
++ All Circulars (904/24/2009-CX., Dated: October 28, 2009 & 941/02/2011-CX.,Dated: February 14, 2011) impugned in this Writ Petition and identical and brought to the notice of this Court would not therefore survive after the legal position has been set out as above.
(See 2014-TIOL-2266-HC-MUM-CX)
