M/S. Itc Ltd. Vs. Commissioner of Customs and Central Excise, Salem - Court Judgment

SooperKanoon Citationsooperkanoon.com/1150374
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Chennai
Decided OnJan-06-2014
Case NumberE/S/40492 of 2013 & E/40695 of 2013 [Arising Out of Order-in-Appeal No.SLM-CEX-APP.70/2012-CE, dated 14.112.2012 passed by the Commissioner of Customs & Central Excise (Appeals), Salem]
JudgeTHE HONOURABLE MR. PRADIP KUMAR DAS, JUDICIAL MEMBER & THE HONOURABLE MR. MATHEW JOHN, TECHNICAL MEMBER
AppellantM/S. Itc Ltd.
RespondentCommissioner of Customs and Central Excise, Salem
Excerpt:
per mathew john, j. 1. the appellant is a manufacture of paper board. during the manufacture of paper board, sludge emerges from the effluent treatment plant (etp). the sludge is sold for a marginal consideration. sludge is exempted under notification no.77/86-ce, dated 14.02.1986. revenue was of the view that since sludge is an exempted product, the cenvat credit taken for inputs used in the manufacturing process should be reversed in terms of rule 6 of cenvat credit rules taking the value of such sludge into consideration. based on such a reasoning a demand for rs.56,207/- is confirmed for the period 10.05.2008 to 30.11.2008. 2. after hearing both sides, we find that this issue has already been decided by this tribunal and, therefore, both the stay petition and the appeal were taken up together and both the sides were heard accordingly. 3. the argument of the learned counsel for the applicant is that sludge is a waste product and amendment to section 2(d) to explain the scope of marketability? cannot result in a decision that sludge merits to be considered as excisable goods because there are other facts for deciding excisability of goods and marketing is only one issue. he argued that waste products that are sold and bought cannot become an excisable product for such reason alone as explained by the hon. apex court in various decisions like that in cce vs. oxygen equipment and engg co pvt ltd vs. cce-2002 (143) elt a82 (sc). similar view was held by the hon apex court in uoi vs. indian aluminum ltd vs. -1995 (77) elt 268 (sc).. further in the case of sludge there is no specific entry in the central excise tariff to charge excise duty on sludge. 4. his second argument is that just because part of the inputs is contained in any waste, there cannot be a demand to reverse cenvat credit proportional to the value of such waste. he relies on cbec circular no. 730/46/2003 dated 31-07-2003 on this matter. he also relies on the decision of the tribunal in the case of m/s. amaravati co-operative sugar mills ltd. vs commissioner of central excise, coimbatore vide final order no.340, 341 and 342/2002, dated 30.03.2012 that in the case of sugar mills there is no need to reverse any cenvat credit on account of press mud and sludge, which are cleared at nil rate of duty. based on the said decision, the tribunal vide final order no.40052/2013, dated 26.02.2013 allowed the appeal filed by the appellant for a different period on the same issue. his prayer is that an identical order may be passed in this appeal also. 5. the learned authorized representative for the revenue submits that after the amendment of section 2(d), by adding explanation the said section reads asunder:- œ(d) excisable goods means goods specified in the first schedule and the second schedule to the central excise tariff act, 1985 (5 of 1986)] as being subject to a duty of excise and includes salt; explanation. for the purposes of this clause, goods includes any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable. 6. sludge is being bought and sold. he submits that the very fact that sludge is exempted from excise duty shows that it is covered by central excise tariff. and therefore credit proportional to the value of sludge cleared should be reversed. his argument is that in a manufacturing process if two products are emerging and if both are sold for a consideration there is no reason to consider one as excisable and other as not excisable. 7. we have considered the submissions of both sides. we find merit in both the arguments raised by appellant. sludge emerging from effluent treatment plant in the nature of waste cannot be considered a manufactured product in view of various decisions of the hon apex court in the similar matters. further there cannot be a demand to reverse any cenvat credit for the reason that a part of the input is covered in the waste that arises. detailed reasons are given in final order no.40052/2013 dated 26.02.2013 (for the period dec 08 to sep 09 in appellants own case. so this appeal is allowed by setting aside the impugned orders of lower authorities. stay application also stands disposed of.
Judgment:

Per Mathew John, J.

1. The appellant is a manufacture of paper board. During the manufacture of paper board, sludge emerges from the Effluent Treatment Plant (ETP). The sludge is sold for a marginal consideration. Sludge is exempted under Notification No.77/86-CE, dated 14.02.1986. Revenue was of the view that since sludge is an exempted product, the Cenvat credit taken for inputs used in the manufacturing process should be reversed in terms of Rule 6 of Cenvat Credit Rules taking the value of such sludge into consideration. Based on such a reasoning a demand for Rs.56,207/- is confirmed for the period 10.05.2008 to 30.11.2008.

2. After hearing both sides, we find that this issue has already been decided by this Tribunal and, therefore, both the stay petition and the appeal were taken up together and both the sides were heard accordingly.

3. The argument of the learned Counsel for the applicant is that sludge is a waste product and amendment to Section 2(d) to explain the scope of marketability? cannot result in a decision that sludge merits to be considered as excisable goods because there are other facts for deciding excisability of goods and marketing is only one issue. He argued that waste products that are sold and bought cannot become an excisable product for such reason alone as explained by the Hon. Apex Court in various decisions like that in CCE Vs. Oxygen Equipment and Engg Co Pvt Ltd Vs. CCE-2002 (143) ELT A82 (SC). Similar view was held by the Hon Apex Court in UOI Vs. Indian Aluminum Ltd Vs. -1995 (77) ELT 268 (SC).. Further in the case of sludge there is no specific entry in the Central Excise Tariff to charge excise duty on sludge.

4. His second argument is that just because part of the inputs is contained in any waste, there cannot be a demand to reverse Cenvat credit proportional to the value of such waste. He relies on CBEC Circular No. 730/46/2003 dated 31-07-2003 on this matter. He also relies on the decision of the Tribunal in the case of M/s. Amaravati Co-operative Sugar Mills Ltd. Vs Commissioner of Central Excise, Coimbatore vide Final Order No.340, 341 and 342/2002, dated 30.03.2012 that in the case of sugar mills there is no need to reverse any Cenvat credit on account of press mud and sludge, which are cleared at nil rate of duty. Based on the said decision, the Tribunal vide Final Order No.40052/2013, dated 26.02.2013 allowed the appeal filed by the appellant for a different period on the same issue. His prayer is that an identical order may be passed in this appeal also.

5. The learned Authorized Representative for the Revenue submits that after the amendment of Section 2(d), by adding explanation the said section reads asunder:-

œ(d) excisable goods means goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986)] as being subject to a duty of excise and includes salt;

Explanation. For the purposes of this clause, goods includes any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable.

6. Sludge is being bought and sold. He submits that the very fact that sludge is exempted from excise duty shows that it is covered by Central Excise Tariff. And therefore credit proportional to the value of sludge cleared should be reversed. His argument is that in a manufacturing process if two products are emerging and if both are sold for a consideration there is no reason to consider one as excisable and other as not excisable.

7. We have considered the submissions of both sides. We find merit in both the arguments raised by appellant. Sludge emerging from effluent treatment plant in the nature of waste cannot be considered a manufactured product in view of various decisions of the Hon Apex Court in the similar matters. Further there cannot be a demand to reverse any Cenvat credit for the reason that a part of the input is covered in the waste that arises. Detailed reasons are given in Final Order No.40052/2013 dated 26.02.2013 (for the period Dec 08 to Sep 09 in appellants own case. So this appeal is allowed by setting aside the impugned orders of lower authorities. Stay application also stands disposed of.