In a recent case, the Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) quashed the excise duty on Ashok Leyland Ltd as black sand not a by-product just a waste.
M/s. Ashok Leyland Ltd, the appellant assessee is in the business of manufacturing castings of iron and aluminium falling under Chapters 73 and 76 of the First Schedule to the Central Excise Tariff Act, 1985 (‘CETA’ for short).
The department found that the appellant had cleared ‘Black Sand’ without payment of Central Excise Duty. The department issued two show-cause notices for two periods. ‘Black Sand’ finds place in Schedule to the CETA under sub-heading 26190090, and hence the same is an excisable good. The duty was proposed to be demanded, along with applicable interest and penalties.
The adjudicating authority, after considering the arguments of the appellant, confirmed the demands proposed in both SCNs. The first appellate authority in the order refered to the definition of ‘manufacture’ as appearing in the Explanation to Section 2(d) of the Central Excise Act, 1944.
As per the report, black sand is used in various applications like asphalt concreting, compost additive concrete, the manufacture of Portland cement, mineral wool products, etc., and finally refers to its marketability. The term ‘marketable’ would mean that goods are ready and fit for sale, and in this context, he refers to the admission of the appellant that the black sand that had emerged was sold to a buyer. The first appellate authority held that black sand is the result of a process and is a distinct product having a distinct name, character, and use, and, therefore, the same becomes dutiable.
The assessee contended that the black sand, which is the residue, is nothing but the natural sand, which has become black when used in the manufacture of castings and hence is not a manufactured product, is not even a by-product, nor is it an intermediary product to be subjected to Central Excise Duty liability.
The two-member bench of P. Dinesha (Judicial Member) and M. Ajit Kumar (Technical Member) held that black sand is not generated from the manufacture of iron or steel, but rather sand that is used ‘remains’ as sand only but in black colour upon being burned; it is only the ‘remains’ of natural sand after losing its ‘natural’ colour.
While allowing the appeal, the tribunal held that both authorities have only proceeded on the basis that the black sand so generated was sold thereafter for a price, and therefore, the same is liable to duty, is totally unjustified.
The authorities have failed to understand that the appellant had to remove the black sand from their factory since the same was occupying the operating space.
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