No Excise Duty Payable On Waste Or Rubbish, Which Is Thrown Up In The Course Of Manufacture: CESTAT

The Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that Waste or rubbish that is thrown up in the course of manufacture cannot be said to be a product of manufacture and cannot be subject to excise duty.

The bench of Ajay Sharma (Judicial Member) and Anil G. Shakkarwar (Technical Member) has observed that Waste Pickle Liquor (WPL) is nothing but waste that emerges in the process of manufacturing steel articles or finished goods. It’s not an end product or finished product, and merely because it fetches some price in the market does not bring it out of the category of waste.

The assessee/appellant is in the manufacturing of Steel articles. To remove impurities and rust, a pickling process is carried out, which results in the generation of WPL.

The appellant entered into an agreement with M/s. Indrox Global Pvt. Ltd. (IGPL), who are into the business of recovering chemicals, etc., out of waste material, for the re-generation of hydrochloric acid from the WPL.

The appellants supplied the WPL to IGPL on payment of Rs. 1 per M.T. The IGPL, in turn, through its chemical reactor plants, generated Hydrochloric Acid (HCL) and Ferric Oxide out of the WPL and supplied the HCL back to the appellant after payment of the price as per the agreement. So far as another product, Ferric oxide, is concerned, IGPL sells it, and 50% of the proceeds are retained by them, whereas the remaining 50% are to be paid to the appellant by issuing credit notes to them.

According to the department, during the course of the investigation, it was found that IGPL had issued various credit notes to the appellant, and the same is additional consideration received in terms of Rule 6 of the Valuation Rules, 2000, which has to be included in the transaction value.

A show cause cum demand notice was issued to the appellant after invoking an extended period, demanding differential Central Excise duty along with Education Cess and Higher Education Cess with interest and penalty.

The assessee contended that WPL is not dutiable as a waste product as it does not satisfy the twin conditions of manufacture and marketability.

The tribunal held that receipts of sale proceeds of the by-product, i.e., ferric or iron oxide, that emerged as a result of the chemical reaction of a waste product WPL in IGPL’s reactor cannot be said to be the consideration for WPL as the product has to be assessed in the form in which it is cleared.

The tribunal noted that the appellant is not at all involved in the conversion of ferric or iron oxide out of the WPL, and resultantly, no demand can be sustained against the appellant on that count either.

Case Title: JSW Steel Ltd. Versus Commissioner of Central Excise

Case No.: Excise Appeal No. 1975 of 2012

Date: 11.07.2023

Counsel For Appellant: Mansi Patil

Counsel For Respondent: Xavier Mascarenhas

Click Here To Read The Order