No excise duty on zinc ash as it is not excisable.

PJ/Case law/2014-15/2285

Case:- SLUGS INDIA LTD. Versus COMMISSIONER OF CENTRAL EXCISE, MUMBAI-1

Citation:- 2012 (278) E.L.T. 611 (Tri. - Mumbai)

Brief facts:-The brief facts of the case are that the appellants are engaged in the manufacture of zinc oxide falling under Chapter 28 of the Central Excise Tariff Act and are also availing Cenvat credit facility under Cenvat Credit Rules, 2004. On scrutiny of the records, it was revealed that the appellants are clearing zinc ash without payment of duty. Accordingly, a show-cause notice dated 7-3-2007 demanding duty of Rs. 3,96,421/- on zinc ash for the period Feb. 2006 to January, 2007 was issued to the appellants. The show-cause notice was adjudicated by the Dy. Commissioner of Central Excise, Palghar Division vide his Order No. 19/2007 dated 31-7-2007 confirming the demand of Rs. 3,96,421/- along with interest and imposing the equal amount of penalty under Section 11AC. The appellants filed an appeal before the Commissioner (Appeals) who vide the impugned order has rejected the appeal of the appellants. Against the impugned order, the appellants are before the Tribunal.

Appellant’s contentions:-The ld. counsel appearing on behalf of the appellants submitted that the short question involved in this case is whether the zinc ash is excisable commodity leviable to duty under the CETA, 1985. He submitted that the process of manufacture of zinc ash during the course of manufacture of zinc oxide is as under :-
(i) Zinc metal, dross or metallic waste is charged into the crucibles placed inside a muffle furnace. Zinc solids are first melt into liquid. The oxidized zinc and light impurities float on the liquid bath. Such impurities are removed from bath during every charge of fresh metal. The impurities, floating on the top of the surface of liquid metal which are removed from the crucible carry along with them certain zinc metal also. These impurities are disposed of by the appellants as zinc ash.
(ii) After removal of the impurities from the liquid bath, the temperature of liquid zinc is further raised and zinc starts to boil. The vapours of zinc emerge from crucibles through a hole in the tile, which is used to cover crucibles. The aforesaid process continues. Candle like formation which takes place on the edges of hole for vapour exit, is also removed as zinc ash.
(iii) The third place for the generation of zinc ash in the process of manufacture of zinc oxide, is at the bottom of the crucibles where it contains larger amount of impurities like iron, lead and insolubles.
He submitted that the issue was finally settled by the Supreme Court and the Tribunal in various cases holding that zinc ash is not a manufacturing product and not liable to excise duty. He relied on the following decisions in support of his contention :-
(1) Indian Aluminium Co. Ltd. v. A.K. Bandyopadhyay [1980 (6)E.L.T.146 (Bom.)]
(2) C.C.E. v. Indian Aluminium Co. Ltd. [2006 (203)E.L.T.3 (S.C.)]
(3) C.C.E. v. Tata Iron & Steel Co. Ltd. [2004 (165)E.L.T.386 (S.C.) and
(4) Vishal Pipes v. C.C.E., Noida [2010 (255)E.L.T.532 (Tri.-Del.)].
He submitted that in view of these decisions, zinc ash is not an excisable commodity and the demand is not, therefore, sustainable.

Respondent’s contentions:- The ld. SDR appearing on behalf of the Revenue submitted that the appellants are procuring zinc dross from manufacturers and availing Cenvat credit on the zinc dross. As per the decisions cited by the appellants, zinc dross is also not an excisable commodity. Since the appellants are taking credit on duty paid zinc ash, there should not have any objection in paying duty on zinc ash irrespective of the value of the zinc ash being lower than the zinc dross. He defended the Order-in-Appeal passed by the Commissioner.

Reasoning of judgment:- It was found that the short question involved in this case is excisability of zinc ash arising out of zinc oxide manufactured by the appellants. The appellants are procuring zinc dross from which zinc oxide is manufactured and during the process of manufacture, zinc ash is obtained. It was found that the issue has already been settled by the Supreme Court and Tribunal. The Tribunal in the case of Vishal Pipes v. Central Excise Act, Noida relying on the decision of the Supreme Court in the case of Collector v. Tata Iron & Steel Co. Ltd. and Commissioner v. Indian Aluminium Co. Ltd. (supra) has clearly held that process of generation of zinc ash does not involve any manufacturing process and the impugned goods cannot be held to be excisable. Therefore, in view of the decision of the Tribunal cited supra, it was held that zinc ash is not an excisable goods and no duty is leviable on the same. Accordingly, the appeal was allowed.

Decision:- The appeal allowed.

Comment:- The analogy of the case is that generation of zinc ash does not involve manufacturing process. Accordingly, as the product zinc ash is not excisable, excise duty is not leviable on the same.

{Prepared by: Monika Tak}

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PJ/Case law/2014-15/2285

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