Whether Bagasse, Aluminium/Zinc Dross etc are Excisable Goods? CBEC Clarifies
EXCISABILITY of bagasse and similar waste products arising during the course of manufacture has been under dispute for a long period of time. There are a number of Tribunal's judgments that being waste, these are not excisable products. Generally, the courts have been taking a view that the waste or refuse or residue arising during the course of manufacture cannot be treated as excisable goods even if such waste fetches some price in the market.
In Budget 2008, the definition of “excisable goods” in clause (d) of Section 2 of the Central Excise Act, 1944 was amended by adding an explanation that for the purposes of this clause, “goods” include 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.
CBEC clarifies that with this amendment in Section 2 (d), bagasse, aluminium/zinc dross and other such products termed as waste, residue or refuse which arise during the course of manufacture and are capable of being sold for consideration would be excisable goods and chargeable to payment of excise duty. It is further clarified that in case the rate of duty in respect of such products is Nil in the tariff or they are exempt from duty in terms of any exemption notification, and if Cenvat Credit has been taken on the inputs which are used for manufacture of dutiable and exempted goods, then in terms of rule 6 of Cenvat Credit Rules, 2004, the assessee is required to reverse the proportionate credit or pay 5% amount.
Field formations are advised to take suitable action for ensuring recovery of duty from the assessees in respect of these goods for the period after the budget of 2008.
Since the departmental appeal in respect of excisability of bagasse in one such case i.e. Balrampur Chinni Mills Ltd is still (reportedly – even Board is not sure!) pending in the Supreme Court, cases prior to 2008 for excisability of bagassee may remain in call book till it is decided by the Supreme Court.
But why did the CBEC wait for more than one and a half years to issue this clarification when the explanation to Section 2(d) was introduced by Section 78 of the Finance Act, 2008 effective from May 10, 2008? Now the field formations will be left with no choice but to invoke extended period for issue of show cause notices beyond the one year period. If these show cause notices fail on the ground of limitation who should take responsibility for loss of revenue to the exchequer. Instead of waiting for requests from the field formations to issue clarifications, why doesn't the CBEC issue clarifications after incorporating such ground breaking changes in the existing law? Isn't the Circular itself time barred?
CBEC CIRCULAR NO. 904/24/2009- CX., Dated: October 28, 2009