Flying Ash -Mere Mention in Tariff is not enough to levy Excise Duty - Madras High Court quashes demand at SCN Stage
THE Excisability/dutiabilty of Fly Ash is a matter of debate/dispute for some years now.
History: Fly ash falling under chapter sub heading 26219000 was exempted till 28.02.2011, when a 1% duty was imposed by Notification No. 01/2011-CE dated 01.03.2011. The duty was increased from 1% to 2% vide notification No.16/2012 CE with effect from 17.03.2012 - without CENVAT Credit. There was also a duty of 5% and 6% with CENVAT Credit.
There was one school of thought that fly ash was not excisable at all and there was no need to exempt it. The 2011 Budget exercise of imposing 1% excise duty is therefore illegal.
Writing in our Guest Column on 05.05.2011 - Excisability and exemption, Advocate V. Ravindran observed,
The fundamental doubt that now arises in the minds of people concerned is whether the Government is trying to re-introduce and fasten duty liability on fly ash, which were declared to be not excisable.
Considering the fact the Ministry of Forest & Environment is taking so much of an effort in the area of pollution control in general and in particular in devising ways and means to dispose of fly-ash by thermal power stations across the country, the Finance Ministry would do well in consolidating the effort and not create conflict of interests through the attempted levy of excise duty.
Earlier the Board clarifies the matter, better would be results. Otherwise this would lead to a collision course between legislature and judiciary, besides igniting spate of litigations .
We carried an article by Advocate Joseph Prabakar on 09 05 2011 - Fly Ash generated in Thermal Power Plant - Applicability of Excise Duty. He observed,
‘Fly Ash' is generated in the course of manufacture or production of ‘Electrical energy' and apparently, it may seem that Fly Ash may be liable to Excise Duty.
However, it is important to note that vide Central Excise Notification No 89/95 dated May 18, 1995, the Government had exempted waste and scrap arising out of manufacture of exempted products from payment of Excise Duty.
‘Fly Ash' arising in the course of generation of electricity in a Thermal Power Plant would continue to be exempt from payment of Excise Duty under Notification No 89/95 dated May 18, 1995, notwithstanding the fact that the Government had notified ‘Fly Ash' under Notification No's. 1 and 2 of 2011 dated March 1, 2011.
We carried an article by Anu Nair on 13.05.2011 - The Coal Ash and Fly Ash Debate, where she took the stand:
But naturally, ‘Fly Ash' becomes chargeable to duty on account of withdrawal of exemption notification and as mentioned, it attracts 5% rate of duty in terms of notification no. 2/2011-CE, Sr. no. 14 of the same .
CA Sunil Kejriwal in his article on Fly Ash Excisability - 23.06.2014 noted,
However, excise duty still may not be leviable on fly ash for the reason that the same is not an outcome of any manufacturing process as held by the Hon'ble Apex Court in the case of Ahmedabad Electricity Co. Ltd. (supra) and the issuance of Notification No. 1/2011 and Notification No. 2/2011 may not be of any help to the department for fetching additional revenue.
With the issuance of the above notifications, the CBEC is once again required to clarify the position of law with respect to exigibility of fly ash which was settled by the Hon'ble Apex Court after a long litigation. The same would also facilitate non-cumbersome removal of polluting fly ash which the Ministry of Environment and Forests has been continuously striving for.
In 2014-TIOL-1088-CESTAT-MUM, the Mumbai Bench of the CESTAT observed, The issue is whether fly ash is a manufactured item or not. Merely because fly ash is marketed, it cannot be concluded that fly ash is “manufactured goods”. Inasmuch as the item was held to be non-excisable by the lower appellate authority relying on the decision of the Hon'ble Apex Court in the case of UOI Vs. Ahmedabad Electricity Co. - , the Revenue has not made out a case for grant of stay of the order. Accordingly, stay petition filed by the Revenue is dismissed.