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CASE NO.: Appeal (civil)  2168-2169 of 2001

PETITIONER: Union of India                                           

RESPONDENT: Ahmedabad Electricity Co. Ltd. & Ors.                

DATE OF JUDGMENT: 29/10/2003

BENCH: Ruma Pal & Arun Kumar  

JUDGMENT: J   U   D   G   M   E   N   T WITH

CIVIL APPEALS NOS. 7792-7795/2001, 626-627/2002,  2013/2002, 3194/2002, 4183-4188/2002, 4724/2002, 8642- 8644/2002, 8649/2002, 87-89/2003, 4051/2003, 4490-4493/2003

ARUN KUMAR, J.

       The question which arises for consideration in this  bunch of appeals is regarding exigibility of ’cinder’ to excise duty.   The respondents  in all the appeals use coal as  fuel for  producing steam to run the machines used in their factories to  manufacture the end product.  Coal is burnt in the boilers or  furnaces for producing steam.  Normally coal when it is burnt in  boilers is reduced to ash. Some part of coal does not get fully  burnt because of its low combustible quality.  This unburnt or half  burnt portion of coal is left out in the boilers.  It is called ’cinder’.  Though the respondents  are engaged in manufacturing different  end products,  one thing is common between them  and that is  that they all use coal as a fuel.           The First Schedule to the Central Excise Tariff Act contains  various entries which  is a list of excisable goods.  The list also  gives rates of duty leviable on the respective items.  ’Cinder’ is  not mentioned in any of the entries to the First Schedule.  Chapter 26 of the Schedule contains an entry at Serial No. 26.21  which is as under:         "Other slag and ash, including seaweed ash (kelp)---8%"            The Revenue seeks to cover ’cinder’ under the said entry  to make it subject to  levy of excise duty.  The respondents     have resisted this claim of the Revenue.  This has led to the  present litigation.  The learned Additional Solicitor General  appearing for the Union of India, i.e.  the Central Excise  Department,  raised  following points in support of the stand of  the Department that "cinder" is liable to be subjected to levy of  excise duty: (1)     In view of the Entry No. 26.21 in the Central Excise  Tariff Act, ’cinder’ is per se exigible to excise duty as it  is covered under an entry in the First Schedule to the  Tariff Act.  According to him, the fact that an item finds  mention in the Schedule to the Tariff Act per se  becomes excisable.  The said Schedule contains a list  of excisable goods and all items in the Schedule are  liable to payment of excise duty. (2)     Section 3 of the Central Excise and Salt Act is the  charging Section from which the twin test of excisable

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goods being manufactured in India  and capable of  being marketable emerge. According to the learned  ASG both the tests are satisfied in the present case.  It  is argued that ’cinder’ is a by-product of coal which  emerges in the course of manufacture of the end  product.  ’Cinder’ is sold by the various assessees from  their factories.  Therefore, it is marketable.  Thus both  the tests are satisfied. (3)     The question involved in the present appeals is more a  question of fact which the High Court should not have  entertained in a petition under Article 226 of the  Constitution of India.         Apart from the above points urged on behalf of the  Revenue, some points emerge from the contentions raised  by the learned counsel appearing for the assessees.  They  are :   In the statutory appeals filed by the Revenue against the  judgment of the Customs Excise & Gold  (Control) Appellate  Tribunal in the case of Tata Iron and Steel Company  (C.A.No.4051/2003), it has been argued that the show cause  notice issued by the departmental authorities was beyond  time.  Section 11A of the Central Excise Act which allows an  extended period of limitation for issue of Show Cause Notice   could not be invoked in the facts of the case because all  necessary facts were being disclosed regularly by the  Company to the Revenue authorities and there was no  concealment or suppression or misrepresentation.  Therefore,  the show cause notice being highly belated  was liable to be  quashed. Another point raised in the Tata Iron Company’s case is  that  ’cinder’  is a waste emerging from coal and the Company was  spending much more on its removal from the site as compared  to what it was getting from its sale.  This point has been raised in  some other cases also. This is a point which would arise on the  facts of particular cases.  Proper pleadings have to be there.   The Tribunal being the fact finding body ought to have adverted  to it.  Unfortunately, this aspect has not received any attention  before the Tribunal.  

WHAT IS CINDER :            Cinder is obtained as a result of burning coal in the boilers and  furnaces in factories.  When coal is fully burnt it is reduced to ash.   When it is not fully burnt,  it leaves pieces behind.  Such pieces  of  unburnt or partly burnt coal are called cinder. Cinder loses its  capacity to produce flame.  That is why it is of no use in the boiler  and is left out.  Since it is left with some combustible value, it is  described as inferior quality coal.            Mc Graw â\200\223 Hill Dictionary of Scientific and Technical terms  describes cinders as :         "Incombustible residue from a burning process;         in particular, small pieces of clinker from the burning of         soft coal."            According to the New Webster’s Dictionary of the English  Language one of the meanings of cinder is "a burned-out- or partially  burned piece of coal, wood or other substance."  

An important distinguishing factor is  that coal is used in   factories as fuel and not as raw material for purposes of  manufacturing the end product.  The learned ASG appearing for the  Union of India submitted that cinder is a by-product of coal.  Even if  cinder is a by-product of coal,  it is not a by-product of the raw  material used in a factory for manufacturing the end product. It is a  by-product of an item of fuel.

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Point I         Whether inclusion of an item in the entries to the First Schedule  to the Tariff  Act per se makes the item exigible to excise duty? This point needs a reference to relevant statutory provisions.  Material portion of Section 3 of the Central Excise Act, 1944  is  reproduced as under : " Section 3  : Duties specified in the First  Schedule to be levied  (1) There shall be levied and collected in such  manner as may be prescribed, duties of excise on all  excisable goods other than salt which are produced  or manufactured in India and a duty on salt  manufactured in, or imported by land into, any part  of India as, and at the rates, set forth in the First  Schedule."  

The following key words occurring in this provision have been  defined in the Act as under :

" Section 2

(a)â\200¦â\200¦â\200¦..

(b)â\200¦â\200¦â\200¦.

©â\200¦â\200¦â\200¦â\200¦

(d) "excisable goods" means goods specified  in the First Schedule as being subject to a duty of  excise and includes salt;

(e)â\200¦â\200¦â\200¦.

(f)     "manufacture" includes any process  incidental or ancillary to the completion of a  manufactured product;â\200¦â\200¦..

The learned Additional Solicitor General appearing for the  Union argued that Section 3 of the Act is the charging Section.  It  provides that excise duty is to be levied on all excisable goods.  Excisable goods are listed  in the First Schedule to the Tariff Act.   According to him, Section 3 read with Section 2(d) makes it clear that  an item which is listed in the First Schedule to the Tariff Act is   exigible to excise duty.  It is further submitted that in view of entry  No. 26.21 in the First Schedule ’cinder’ is liable to levy of excise duty.   According to him, cinder is nothing but ash.  From this argument, it  follows that cinder is being equated to ash  in order to bring it within    Entry  No. 26.21 to the First Schedule.  As seen earlier, cinder is not  ash - it is something between coal and coal ash.   

For the sake of deciding this issue, we will assume that cinder  is ash and, therefore, is liable to be covered under entry 26.21.  The  real question to be considered is whether all items listed in the First  Schedule to the Tariff Act, per se become subject to levy of excise  duty.  According  to the learned counsel for the Revenue, all  excisable goods listed in the first Schedule are subject to  the liability  to pay excise duty in view of Section 3 of the Act.  Excisable goods  as per Section 2(d) are those which are specified  in the First  Schedule to the Tariff Act.  ’Ash’ being found mentioned in Entry  26.21 in the First Schedule, it per se becomes liable to payment of  excise duty.  In support of his argument, the learned counsel relied  on M/s. Khandelwal Metal and Engineering Works and Another   vs. Union of India and others [(1985) 3 SCC 620].  This was a case

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of levy of additional customs duty under Section 3(1) of the Customs  Tariff Act, 1975.  This duty is leviable in addition to the customs duty  under Section 12 of the Customs Act.  The additional customs duty is  leviable on items imported into India if like articles if produced or  manufactured in India are liable to payment of excise duty.  The  argument on behalf of the assessee was that  brass scrap imported   by it was not subject to levy of the additional customs duty which is in  the nature of counter veiling duty.  It cannot be levied on brass scrap  because  such scrap is not manufactured in India.  This contention of  the assessee was rejected on the ground that brass scrap was being  produced in India. The argument on behalf of Revenue was that  waste and scrap is mentioned in  Entry 26A of the First Schedule to  the Tariff Act and is therefore exigible to excise duty.  Since reliance  was placed on the argument that waste and scrap being found in   relevant entry in the First Schedule to the Tariff Act and therefore  were exigible to customs duty, this authority was pressed into service  in support of   the argument that presence of an item in an Entry to  the First Schedule to the Act makes it per se subject to levy of excise  duty.  In our view, this authority is of no help to the appellants.  This  was basically a case of levy of additional customs duty, for which  different considerations apply.       

He also relied on the following observations contained in  Associated Cement Company Ltd. vs. Commissioner of  Customs [(2001) 4 SCC 593] :

"  81.  Under the Central Excise Act, 1944 in the  definition of the words ’excisable goods’ under  Section 2 (d), the very specification or inclusion of  goods in the First and Second Schedules of the  Central Excise Tariff Act would make them  excisable goods subject to duty."

       These observations were made in the context of  provisions of the Customs Act, 1962.  The charging Section in that  Act is Section 12 which refers to ’dutiable goods’.  The expression  ’dutiable goods’ has been defined in Section 2 (14) of the Act as  goods which are chargeable to duty and on which duty has not been  paid.  In the present case however, we are considering the  expression ’excisable goods’ in the light of provisions contained in  Section 3 of the Central Excise Act, 1944.  Section 3 qualifies to  expression ’excisable goods’ by laying down the further requirement  that such goods should be produced or manufactured in India.  Such  a requirement is not there in the Customs Act.  Therefore, the above  observations have no bearing on the issue involved in the present  case.

We are unable to accept the proposition advanced by the  learned Additional Solicitor General.  A close look at Section 3 of the  Central Excise Act  shows that the words ’excisable goods’ have  been qualified by the words "which are produced or manufactured in  India".  Therefore, simply because goods find mention in one of the  entries of the First Schedule does not mean that they become liable  for payment of excise duty.  Goods have to  satisfy the test of being  produced or manufactured in India.  It is settled law that excise duty  is a duty levied on manufacture of goods.  Unless goods are  manufactured in India, they cannot be subjected to payment of  excise duty.  There is  no merit in the argument that simply because  a particular item  is mentioned in the First Schedule, it becomes  exigible to excise duty. [See Hyderabad Industries Ltd. and another  vs. Union of India and others (1995) 5 SCC 338 and Moti Laminates  Pvt. Ltd. and others vs. Collector of Central Excise, Ahmedabad  (1995) 3 SCC 23 ].   Therefore both on authority and on principle, for  being exigible to excise duty, excisable goods must satisfy the test of

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being produced or manufactured in India. The argument to the  contrary is rejected.

Point 2 Does the item in question satisfy the tests of being  "manufactured in India" and "marketability" ? While discussing the earlier issue, we have already  emphasised the requirement of goods being manufactured in India  being satisfied before excise duty can be levied on goods.  This  requirement is a sine qua non for levy of excise duty.  Excise duty in  fact is an incidence of manufacture.

What is the meaning of ’manufacture’ in the context of excise  law ? We have already quoted the definition of the word  "manufacture" as contained in Section 2(f) of the Act.  According to  this definition, manufacture includes any process incidental or  ancillary to the completion of a manufactured product.  The word  ’manufacture’ used as a verb is generally understood to mean as  bringing into existence a new substance.  It does not mean merely to  produce some change in a substance.  To quote from a passage in  the Permanent Edition of Words and Phrases Vol.XXVI "manufacture  implies a change, but every change is not manufacture and yet every  change of an article is the result of treatment, labour and  manipulation.  But something more is necessary and there must be  transformation: a new and different article must emerge having a  distinctive name, character or use".    ’Manufacture’ may involve  various processes.  The aim of any manufacturing activity is to  achieve an end product. Depending on the nature of manufacturing  activity involved, processes may be several or one.  The natural  meaning of the word ’process’ is a mode of treatment of some  material in order to produce a good result.  Every process which is  incidental or ancillary to the completion of manufactured product is  included within the meaning of manufacture.  The word ’process’ has  not been defined in the Act.  In its ordinary meaning ’process’ is a  mode of treatment of certain material in order to give a desired shape  to the material.  It is an activity performed on a given material in  order to transform it into something.

The word "manufacture" has been defined in various  judgments of this court.  In South Bihar Sugar Mills vs. Union of  India [ AIR 1968 SC 922 ], this  court observed:

"The Act charges duty on manufacture of  goods.  The word "manufacture implies a change  every change in the raw material is not manufacture.   There must be such a transformation that a new and  different article must emerge having a distinctive  name, character or use."

In M/s. Hindustan, Polymers vs. Collector of Central Excise  [ (1989) 4 SCC 323] this court observed : "Excise Duty is a duty on the act of  manufacture.  Manufacture under the excise law, is  the process or activity which brings into being  articles which are known in the market as goods and  to be goods these must be different, identifiable and  distinct articles known to the market as such.  It is  then and then only that manufacture takes place  attracting duty.  In order to  be goods, it was  essential that as a result of the activity, goods must  come into existence.  For articles to be goods, these  must be known in the market as such and these  must be capable of being sold or are being sold in  the market as such.  In order, therefore, to be  manufacture, there must be activity which brings

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transformation to the article in such a manner that  different and distinct article comes into being which  is known as such in the market."    

According to M/s. Ujagar Prints and others (II) vs. UOI and  others [ (1989) 3 SCC 488] the test to ascertain that there is  manufacture is whether the change or the series of changes brought  about by the application of processes take the commodity to the  point where, commercially it can no longer be regarded as the  original commodity but is, instead, recognised as a distinct and new  article that has emerged as a result of the processes."   

In Collector of Central Excise, Bombay-II vs. M/s. Kiran  Spinning Mills [(1988) 2 SCC 348], the assessee used to cut  running length fibre into short length fibre.  In this process it brought  a change in the substance but did not bring into existence a new  substance.  The character and use of the substance remained the  same.  It was held that no manufacturing activity was involved and  therefore there was no further liability to excise duty.  It was  emphasized that the taxable event under the Excise Law is  "manufacture".  Since there was no manufacture in this case there  was no liability to pay excise duty. On the same lines there is a recent decision of this court in  Collector of Central Excise vs. TechnoWeld Industries [2003  (155) ELT 209].  The process in this case was drawing  wires from  wire rods that is from bigger guage wire rods smaller guage wire rods  were drawn.  The goods continued to be described as wire rods.  It  was held that no manufacture as such was involved and therefore  there was no liability to pay excise duty.  It was reiterated that a  product becomes excisable only if there is manufacture. In Collector of Central Excise, Jaipur vs. Rajasthan State  Chemical Works, Deedwana, Rajasthan and others [ (1991) 4  SCC 473], this court  adverted to the meaning of process as well as  manufacture.  The following passages occurring in the judgment  are  useful for present purpose:   

"12.   Manufacture implies a change but every  change is not manufacture, yet every change of an  article is the result of treatment, labour and  manipulation. Naturally, manufacture is the end  result of one or more processes through which the  original commodities are made to pass. The nature  and extent of processing may vary from one class to  another.  There may be several stages of  processing, a different kind of processing at each  stage. With each process suffered the original  commodity experiences a change.  Whenever a  commodity undergoes a change as a result of some  operation performed on it or in regard to it, such  operation would amount of processing of the  commodity.  But it is only when the change or a  series of changes takes the commodity to the point  where commercially it can no longer be regarded as  the original commodity but instead is recognised as  a new and distinct article that a manufacture can be  said to take place.

13.  Manufacture thus involves series of  processes.  Process in manufacture or in relation to  manufacture implies not only the production but the  various stages through which the raw material is  subjected to change by different operations.  It is the  cumulative effect of the various processes to which  the raw material is subjected (sic that the)  

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manufactured product emerges.  Therefore, each  steps towards such production would be a process  in relation to the manufacture.  Where any particular  process is so integrally connected with the ultimate  production of goods that but for that process  manufacture of processing of goods would be  impossible or commercially inexpedient, that process  is one in relation to the manufacture.

14.  That natural meaning of the word ’process’  is a mode of treatment of certain materials in order  to produce a good result, a species of activity  performed on the subject matter in order to  transform or reduce it to a certain stage.  According  to Oxford Dictionary one of the meanings of the word  ’process’ is a "continuous and regular action or  succession of actions taking place or carried on in a  definite manner and leading to the accomplishment  of some result".  The activity contemplated by the  definition is perfectly general requiring only the  continuous or quick succession.  It is not one of the  requisites that the activity should involve some  operation on some material in order to (sic effect) its  conversion to some particular stage.  There is  nothing in the natural meaning of the word ’process’  to exclude its application to handling.  There may be  a process which consists only in handling and there  may be a process which consists only in handling  and there may be a process which involves no  handling or not merely handling but use or also use.   It may be a process involving the handling of the  material and it need not be a process involving the  use of material.  The activity may be subordinate but  one in relation to the further process of  manufacture."     

Deputy Commissioner of Sales Tax (Law), Board of  Revenue (Taxes), Ernakulam vs. M/s. Thomas Stephen & Co.  Ltd., Quilon [(1988) 2 SCC 264] is a case under the Kerala General  Sales Tax Act, 1963.  The assessee used to purchase cashew shells  for use as fuel in the kiln in  the factory.  Under the Act levy of tax  was on consumption of goods in the manufacture of other goods for  sale or otherwise.  The difference between use of goods in  manufacture as raw material and use for other ancillary purposes  was brought out.  Goods used for ancillary purposes like fuel in the  process of manufacture were held not to be exigible to tax. Since  cashew shells were used only as fuel and they did not get  transformed into the end product they were held to be not exigible to  tax. Cashew shells were used in aid of manufacture of goods and as  such  they did not attract levy of tax.  

 In the case in hand also coal which leads to production of  cinder is not used as a raw material for the end product.  It is being  used only for ancillary purpose that is as a fuel.  Therefore,  irrespective of the fact whether any manufacture is involved in  production of cinder it should be held to be out of the tax net for the  reason that it is not a raw material for the end product.  In producing ’cinder’, there is no manufacturing process  involved.  Coal is simply burnt as  fuel to produce steam.  Coal is not  tampered with, manipulated or transformed into the end product.  For  purposes of manufacture the raw material should ultimately get a  new identity by virtue of the manufacturing process either on its own  or in conjunction or combination with other raw materials. Since coal

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is not a raw material for the end product  in all the cases before us,  the question of getting a new identity as an end product due to  manufacturing process does not arise.

In Collector of Central Excise, New Delhi vs. M/s. Ballarpur  Industries Ltd. [ (1989) 4 SCC 566], the raw material in the course  of chemical reactions got burnt up and lost its apparent identity.  To  be more precise, the input of sodium sulphate in the manufacture of  paper would not cease to be of raw material by reason alone of the  fact that in the course of the chemical reactions, this ingredient is  consumed and burnt up.  All the same it remained a raw material.  It  was held that the relevant test is not the absence of the raw material  in the end product, but the dependence of the end product  for its  essential presence at the delivery end of process.  What follows from  this is that the raw material which we are concerned about is the raw  material which is linked  with emergence of the end product.  It has to  be present in the end product whether visibly or invisibly.  Use of an  item as fuel cannot be called part of the manufacturing activity in  relation to production of the end product.  Therefore, cinder cannot  be said to be a by-product of the final product.  At best it is a by- product of coal which is used as fuel.  

Can burning of coal be called manufacturing?  The locomotive  steam engines used to run on coal.  Coal was being constantly burnt  in the boiler of the engine.  The constant burning of coal produced  cinder. Could it be said that the engine driver was manufacturing  cinder ? Is any manufacturing activity involved ?  Burning of coal for  purposes of producing steam cannot be said to be a manufacturing  activity.  Therefore, neither ash nor cinder can be said to be products  of a manufacturing process.  From burning  coal when you get either  cinder or ash, it cannot be said that a new product had emerged.  Cinder remains coal.   In fact, the Department has itself described it  as unburnt part of coal in the grounds of appeal in C.A.No.2168-2169  of 2001 in the Ahmedabad Electricity Supply Company Case.    ’Cinder’ is not a new product.  After correctly describing cinder as  unburnt part of coal, the Revenue cannot equate it to ash simply to  somehow  bring it within Entry 26.21 of the Tariff Act.

In the First Schedule to the tariff, cinder does not find any place  anywhere.  It appears that it is because of this that the Revenue had  to fall back upon entry 26.21 in the First Schedule in order to cover  cinder within the excise net. The new tariff that is Tariff Act, 1985  does not have a residuary entry like entry 68 in the old tariff.  Instead  the new tariff has interpretative notes. Whenever some by-product of  a product is sought to be included for taxability it has been so said in  the interpretative notes.  However, regarding coal there is no  interpretative note nor there is anything about cinder.  When cinder is  derived from coal  it could have at best been treated as coal for  purposes of entries in the First Schedule to the Tariff  Act.  But that  would not suit the department because coal is exempt from excise  duty.  The department now describes cinder as "coal ash".  But coal  ash also fails the test of being manufactured in India.  It cannot be  subjected to levy of excise duty.

The learned counsel appearing for the assessee brought to  our notice several judgments of the CEGAT holding that cinder was  not exigible to payment of excise duty.  Against some of the  judgments statutory appeals filed before this Court were dismissed.   In Commissioner of Central Excise, Calcutta Vs. Papyrus Papers  [33 ELT 97] it was held by CEGAT that cinder obtained by burning  coal in boiler does not constitute manufacture of excisable  commodity even if sold for a price. In   Collector of Central Excise  Vs. Kesoram Rayons  the CEGAT held that cinder obtained on  burning coal in the boiler as a fuel is not exigible to excise duty.  Civil  appeal filed by the Collector of Central Excise, Calcutta against the

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said judgment was dismissed by this Court.  H.M.M. Ltd. Vs.  Collector of Central Excise [ (1989) Vol.40 ELT 422] is another  judgment of  the CEGAT holding cinder to be coal waste.  Merely  because it could fetch some price on sale it is not exigible to excise  duty.  Appeal against this judgment was also dismissed by this Court.   Same is the situation about decisions of the CEGAT in CCE Vs.  Mafatlal Fine Spinning [92 ELT A-145] and CCE Vs. Swadeshi  Cotton Mills [82 ELT A-160].  Both these cases are regarding cinder  being held to be not  exigible to excise duty and appeals against  orders of the CEGAT in these cases  were dismissed by this Court.   The Bombay High Court noting this consistent view of the CEGAT  regarding non-exigibility of cinder to tax held in Century Rayon Vs.  Union of India [2002(142) ELT 319] that cinder produced from use  of coal as fuel could not be treated as excisable commodity.  Against  this decision of the High Court, Special Leave Petition was dismissed  by this Court.         Recently this Court had occasion to deal with a case of excise  duty sought to be levied on ’spent earth’.  This was in  Commissioner of Central Excise, Chandigarh Vs. Markfed  Vanaspati and Allied Industries [2003 (153) ELT 491].   Excise  duty was being paid on "earth".  ’Spent earth’ is a residue resulting  from treatment of fatty substances.  The ’spent earth’ remained  ’earth’ even after processing though its capacity to absorb was  reduced.  It was  held that no  excise duty was leviable on ’spent  earth’.  The facts in this case are quite similar to the facts of the case  in hand.  In Markfed Case ’earth’ was reduced to ’spent earth’ with a  reduced potency to absorb.  In the case in hand coal was reduced to  inferior quality  coal which was no longer of use in the furnaces in the  factories, therefore, it could reasonably be said that ’cinder’ i.e. coal  of reduced quality still was coal and not exigible to excise duty.            In Modi Rubber Ltd., Modi Nagar, U.P. and anr.  Vs. Union  of India and others  [ (1987) 29 ELT 502 Delhi ] it was held that  waste/scrap obtained not by any process of manufacture but in the  course of manufacturing the end product was not exigible to excise  duty.  This was a case of manufacture of tyres, tubes etc.  In the  course of manufacturing process to produce the end product i.e.  tyres, tubes, flaps etc. waste was obtained in the shape of cuttings.   It was held that this was not exigible to tax even though the waste  may have some saleable value.  The essential reason for this was  that there was no transformation in the case of waste/scrap to a new  and different article.  No new substance having a distinct name,  character and use was brought about.  Manufacturing process  involved treatment, labour or manipulation by the manufacturer  resulting in a new and different article.  It requires a deliberate skillful  manipulation of the inputs or the raw materials.  This was not so in  case of scrap.

It is worth mentioning that in  UOI and ors. Vs. Indian  Aluminium Co. Ltd. and Anr. [ 1995 Suppl. (2) SCC 465], it was  held that waste or rubbish which is thrown up in the course of  manufacture could not be said to be a produce of manufacture  exigible to excise duty.  In this case the assessees manufactured  aluminium products out of the aluminium ingots.  In the process of  manufacture dross and skimmings arise and accumulate in the  furnace in the shape of ashes as a result of oxidization of metal.   Aluminium dross contain an amount of metal from which they come  but they lack not only metal body but also metal strength, formability  and character.  Such dross and skimmings are distinct from scrap  which is a metal of good quality.  Dross and skimmings though  obtained during process of manufacture were held to be not exigible  to excise duty at the relevant time.  Since the dross and skimmings  were sold in the market it was argued that they were a marketable   commodity and should be subject to levy of excise duty.  The court  observed that these were nothing but waste or rubbish which is

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thrown up in the course of manufacture.  This judgment also answers  the argument of the learned counsel for the appellant based on   Khandelwal Metal’s case (Supra) wherein brass scrap produced  during manufacturing of brass goods were considered to be liable to  excise.  In the present case cinder though sold for  small price  cannot be said to be a marketable  commodity in the sense the word  "marketable" is understood.  Due to sheer necessity cinder has to be  removed from the place where it occurs  because unless removed it  will keep on accumulating which in turn lead to loss pf precious   space.  Facts noted  in TISCO’s case by the lower authorities show  that TISCO had been paying substantial amounts for removing   cinder to a dumping ground.  From the dumping ground it was picked  up by parties to whom it was sold. As per the averment, TISCO is  spending many times more on removing cinder than what it realizes  from its sale.  These are matters of fact which have not been gone  into  by the authorities concerned and therefore it is too late for us to  go into all this.  

Applying the tests laid down in these judgments, it is not  possible to say that cinder satisfies the requirement of being  manufactured in India.   

       From the above discussion it is clear that to be subjected to  levy of excise duty ’excisable goods’ must be produced or  manufactured in India.  For being produced and manufactured in  India the raw material should have gone through the process of  transformation into a new product by skilful manipulation.  Excise  duty is an incidence of manufacture and, therefore, it is essential that  the product sought to be subjected to excise duty should have gone  through the process of manufacture.  Cinder cannot be said to have  gone through any process of manufacture, therefore, it cannot be  subjected to levy of excise duty.   

       The onus to show that particular goods on which excise duty is  sought to be levied have gone through the process of manufacture in  India is on the revenue.  They have done nothing to discharge this  onus.  For this reason alone they must fail.

       The Department has been consistently taking a stand that  cinder is not excisable as it does not involve any manufacturing  activity.  The Department issued a clarification vide Circular No.  B.352/75-TRU(pt) dated 6th June, 1975.  According to it  coal ash left  out in burning of coal would not attract duty under item 68 for the  reason that in the burning of coal as fuel, resulting in coal ash as a  waste product no manufacturing process is involved.  With the  introduction of the new tariff in 1986 and specific entry for ash being  included in the Tariff Chapter 26, the issue again revived.   Notification No.76/86 dated 10th February, 1986 exempted cinder  from levy of excise duty.  The whole thing was sought to be  overturned after the annual budget for the year 1996-97.  The Tariff  Act, 1975 was amended by virtue of the Tariff Act, 1985.  The  exemption was withdrawn by virtue of notification No. 11/96 dated  23rd July, 1996 in view of the annual budget for the year 1996-97.     The Commissioner of Central Excise vide Trade Notice No. 35 of  1998 dated 21st August, 1998 clarified that coal ash (cinder) is  specified in the Schedule to the Tariff Act and read with Section 2(d)  of the Central Excise Act was subject to levy of excise duty.  This  sudden turn is not only unjustified but also is contrary to law.     

       Why we say it is contrary to law  is because the department  clarified in June, 1975 that cinder is not exigible to excise duty as in  its emergence no manufacturing process is involved.  How can  suddenly cinder become exigible to excise duty ?  The procedures  which lead to emergence of cinder have remained the same as they

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were in 1975.  If it was not the result of manufacturing process in  1975, it is not so even now.  This aspect was not taken into  consideration at all.  Interestingly in the Circular No.386/19/98-CX  dated 7th April, 1998 the Central Board of Excise and Customs while  declaring coal ash (cinder) as subject to levy of excise duty, states  that "the commodity also satisfied the tests of marketability and has a  distinct commercial identity known to trade."  There is no reference to  the essential test of being manufactured in India.  It is for failing this  test that the item was excluded from levy of excise duty earlier in  1975  How can you ignore it now ?

       In view of our finding that cinder cannot be subjected to levy of  excise duty because it is not an item of goods which has been  subjected to process of manufacture, it is not necessary for us to go  into any other point.  We may only note that courts have evolved  another test of marketability i.e., to be exigible  to excise duty goods  must be marketable.  It is not disputed that cinder is being sold by  the assessees.  But  can it be said to be marketable goods in the  sense word marketable is used ? We doubt it.  However, this need  not detain us since cinder does not satisfy the test of being  manufactured in India.  Even if it is saleable, it does not make any  difference.  The result is that the contention of the Revenue that  cinder is liable to payment of excise duty is hereby rejected.  

Point 3         The objection is that the High Court should not have  entertained  a petition under Article 226 of the Constitution of India in  the facts and circumstances of the case.  At the outset we may note  that we have only one Civil Appeal in the case of Ahmedabad   Electricity Company ( C.A.No. 2168-69/2001) which is arising from  proceedings before the High Court under Article 226.  The remaining  matters in the bunch are statutory appeals under Section 35L of  Central Excise Act.  Therefore, this court has to go into the matter on  merits.  Moreover, in the Ahmedabad Electricity Company’s case  challenge by way of Writ Petition under Article 226 was to a Circular  dated 7th April, 1998 issued by the Central Board of Excise and  Customs and the consequential Trade Notice No.36/98 dated 22nd  May, 1998 issued by the office of the Commissioner of Central  Excise and Customs, Ahmedabad by which it was clarified that "coal- ash (cinder)" is an excisable commodity classifiable under sub- heading No. 26.21 of the Central Excise Tariff Act, 1985.  In the first  place no objection regarding maintainability of the Writ Petition  seems to have been taken before the High Court.  Even if such an  objection was raised, the same would have been a futile attempt.  In  the facts of the case the High Court would have been justified in  rejecting such an objection.  The impugned circular could not have  been challenged before the departmental authorities as they would  have felt bound by it.  We find no merit in the objection.  The same is  rejected.          All the appeals filed by the Revenue stand dismissed with no  order as to costs.