presentation on dutiability of waste and scrap

8/10/2019 Presentation on Dutiability of Waste and Scrap

1/23

Taxability of Waste and Scrap

Effect of Deemed MarketabilityConcept and Cases

(C) PINNACLEACADEMY


2/23

CCE V. Indian Aluminum

Company Ltd. 2006 (SC)Whether zinc dross and fluxskimming are excisable articles?

(C) PINNACLEACADEMY


3/23

Facts of the Case

Zinc Dross Flux Skimming

The assessee herein manufactures aluminium sheets, the rawmaterial wherefor is aluminium oxide. In the melting furnace,

the top layer of the molten metal is exposed to atmosphere andgets oxidized.As a result of oxidation, a thin layer/film is formed which isremoved by skimming. The second layer so removed is calleddross. Indisputably, the percentage of metal in dross will vary

and there would be some quantity of aluminium metal therein.

(C) PINNACLEACADEMY


4/23

Decision of Supreme Court:

Merely selling does not mean dross andskimming are a marketable commodity as evenrubbish can be sold.

The product may be traded but there should bean established market for the said product.

Hence, zinc dross and skimming arising asrefuse during galvanisation process are notexcisable goods

(C) PINNACLEACADEMY


5/23

Hindalco Industries Ltd. V. UOI2009 (HC - Allahabad)Whether aluminium drossand skimming's have become

excisable in view of theinsertion of Explanation tosection 2(d) of CE Act, 1944?

(C) PINNACLEACADEMY


6/23

Decision of HC The High Court elucidated that, the insertion of

the explanation under section 2(d) providing fordefinition of goods to include any article,material or substance which is capable of being

bought and sold for a consideration, and to treatsuch goods as marketable, would make thealuminium dross and skimming liable to exciseduty.

If the goods are marketable or are deemed tobe marketable, as on now by the explanationadded to section 2(d), such goods included in theTariff would attract excise duty.

(C) PINNACLEACADEMY


7/23

Waste and Scrap Is it Dutiable?

Taxability of Waste andscrap (4 Ms has to be

satisfied)

If Marketable

Waste and Scrap is

dutiable

If Not Marketable

If it is Deemed tobe Marketable (i.e.

Sold for aConsideration)

Waste and Scrap isDutiable

If it is not deemed

to be marketable

Waste and Scrap isNot Dutiable.

(C) PINNACLEACADEMY


8/23

When Deemed marketability do not

apply? Deemed marketability implies that goods are

marketable if they are sold for consideration.

If the intermediate goods are captivelyconsumed, it cannot be sold as such forconsideration and hence, deemed marketabilitydoes not apply.

In case of captive consumption onlymarketability [Not deemed marketability] testshould be applied to make intermediate product

dutiable

(C) PINNACLEACADEMY


9/23

Nicholas Piramal India Ltd. v.CCEx., Mumbai 2010 (S.C.)Does a product with short shelf lifesatisfy the test of marketability?

(C) PINNACLEACADEMY


10/23

Vitamin A Acetate Crude

VitaminAPalmitate

Vitamin A inmarketable

Form

IntermediateProducts in themanufacture of

Vitamin A

Covered underheading 29.36 ofthe CETA, 1985

(C) PINNACLEACADEMY


11/23

Vitamin A Acetate Crude

VitaminAPalmita

te

Vitamin A inmarketable

Form

IntermediateProducts in themanufacture of

Vitamin AWhich has a

shelf life of 2 to3 days

Also used inmanufacture of animalfeed supplements with

the brand name`Rovimix' (now called

`Endomie') and

`Rovibe' (now called`Endobee').

(C) PINNACLEACADEMY


12/23

Substantial question of law involved??

Why the said intermediate goods are dutiable?

Whether the intermediate goods aremarketable?

Can the concept of deemed marketability appliedhere?

Whether a short shelf life is considered as noshelf life?

(C) PINNACLEACADEMY


13/23

SC decision Short shelf-life could not be equated with no

shelf-life and would not mean that it could not bemarketed.

A shelf-life of 2 to 3 days was sufficiently longenough for a product to be commercially

marketed. Shelf-life of a product would not be a relevant

factor to test the marketability of a productunless it was shown that the product had

absolutely no shelf-life or the shelf-life of theproduct was such that it was not capable of beingbrought or sold during that shelf-life.

Hence, product with the shelf life of 2 to 3 days

was marketable and hence, excisable.

(C) PINNACLEACADEMY


14/23

CCE V. Umesh Pencil Processors

P. Ltd. (2011) (SC)Whether Mixure of graphite andclay not bought or sold in the

market is liable to duty?

(C) PINNACLEACADEMY


15/23

Facts of the case:

Raw Graphite

Mixture of graphite and

clay

Raw Material

Intermediateproduct

(C) PINNACLEACADEMY


16/23

Facts of the Case

Mixture of graphite andclay

Intermediateproduct

Pencils

Pencil leads

Exempted

(C) PINNACLEACADEMY


17/23

Facts of the Case: The mixture of graphite and clay is not

marketable and department has agreed this

contention made by assessee. But, department raised a demand on the

assessee stating that the said activity amounts tomanufacture.

The department also contended that as assesseewas availing the exemption, the exemption oncewithdrawn, the said goods are liable to exciseduty.

(C) PINNACLEACADEMY


18/23

Decision of Supreme Court: It was found by the department itself that the

mixture was not and could not be bought or soldin the market. The mixture had short shelf life.

The burden to prove that the goods aremarketable is on the department, which was notdischarged. Hence, goods were not marketableand therefore not liable to duty.

In deciding marketability of a product, merespecification in the Dictionary, Excise Tariff andDrawback schedule is of no consequence. Thefact that assessee was availing the exemptiondoesn't prove the goods were marketable.

(C) PINNACLEACADEMY


19/23

(C) PINNACLEACADEMY


20/23

Grasim IndustriesLtd. v. UOI 2011

(S.C.)Whether waste and scrap

arising out of repairs issaid to be waste and scrap

arising out of manufacture

and hence excisable ?

(C) PINNACLE ACADEMY


21/23

Grasim IndustriesLtd.

Engaged inmanufacture of

White Cement

Roller used in

manufacture

Shafts

Iron Scrap

Mild Steel

(C) PINNACLEACADEMY


22/23

Departments Contention

The said scrap or waste generated is goodsunder excise

They are mentioned in CETA and henceExcisable goods

The process of generation of scrap and waste

amounts to manufacture under sec. 2(f)[Assessee is in conflict with this point]

Hence, Excise duty is payable on said waste orscrap removed.



23/23

SC Decision

Manufacture in terms of section 2(f) includes anyprocess incidental or ancillary to the completion of themanufactured product

This any process can be a process in manufacture orprocess in relation to manufacture of the end product,which involves bringing some kind of change to the rawmaterial at various stages by different operations.

In the present case, it is clear that the process of repairand maintenance, has no contribution or effect on the

process of manufacturing of the cement . Hence, it is held that the generation of metal scrap orwaste during the repair of the worn outmachineries/parts of cement manufacturing plant doesnot amount to manufacture.


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