Excisability, thy name is confusion

Last Updated: Sun, Jul 14, 2013 21:50 hrs

Live horse's duty of excise is blank. And live fish's duty is nil. Electric energy duty is blank. In this context I am writing this treatise.

Imagine, even the latest tribunal judgment is pretty much wrong on this issue . I respectfully disagree with this judgment of the CESTAT Amaravathi Co-operatives Sugar Mills versus CCE, Coimbatore, 2013(291)ELT126(Tri-Chennai), which says that "press mud and sludge are specified in the First Schedule of the Central Excise Tariff against headings 23032000 and 23033000 but they are not subject to a duty of excise, as under the rate column the duty of excise is indicated as nil. Hence till such time, no duty is specified in the First Schedule of the Central Excise Tariff, press mud and sludge cannot be considered to be excisable goods". The judgment, therefore, says that the rate of duty being nil, the goods are not excisable.

This is what according to me is precisely wrong. The correct position is that even if the rate of duty is nil, the goods can still be excisable, if they are manufactured and are marketable goods.

I am not writing about the other factual portions of the judgment regarding the admissibility of CENVAT credit but only on the theoretical issue: When the rate of duty is shown as nil in the Central Excise Tariff, are the goods excisable?

The judgment has relied on the definition of excisable goods in Section 2(d) which is as follows: "Excisable goods means goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as being subject to a duty of excise"

We have to read also the charging section 3 and subsection (a) which says that the rate prescribed in the tariff for excisable goods will be levied and collected. So the rate does not determine excisability. This means that in order to be excisable, the goods should be (i) manufactured, (ii) marketable (iii) appearing in the tariff and (iv)subject to duty of excise. All the conditions must be satisfied. Regarding (i) (ii) and (iii) there is no controversy here. Regarding (iv) that is, subject to duty of excise, the controversy is that the tribunal judgment says that since there is no rate of duty (that is the rate of duty is nil), they are not excisable. This is where I disagree. Even if the goods attract nil rate of duty they can still be excisable provided the other conditions (i), (ii) and (iii) are satisfied.

Now, regarding condition (iv), that is, subject to duty of excise, the question is nil duty is a rate of duty or not. It is clear that the tribunal judgment has thought it fit to hold that nil duty is not a rate of duty. That is not correct. Nil duty is also a rate of duty as has been held in the following judgments:

1. T N Handloom Weavers versus ACCE [1978(2) ELT (J 57) (Mad)]

2. Karnataka Cement Pipe Factory versus Supcenex [1986 (23)ELT313 (Kar)]

3. Wallace Flour Mills 1989 (44) ELT598(SC)

4. CCE, Hyderabad, versus Vazir Sultan Tobacco Co - 1996 (83) ELT3 (SC)

"The Supreme Court in this case has held that though by virtue of an exemption notification, the rate of duty was nil, this does not mean that they were not excisable goods. They were excisable goods. Nil rate of duty is also a rate of duty"

There is another very important consideration namely that in the tariff we find that the rate of duty is nil in many cases, which are actually manufactured, marketable and excisable.

Examples, 27160000 electrical energy, 09011200 decaffeinated coffee, 19051000 crispbred, 19052000 gingerbread, 19054000 rusks, toasted bread and similar toasted products, 19059030 extruded or expanded products, savoury or salted, 19059040 papad, 19059090 other, 53071090 yarn of jute or of other textile bast fibres of heading 5303.

There is also no way to legally distinguish between where the tariff rate is nil and where the exempted rate is nil.

Conclusion : If we take customs and excise tariffs together, then the rates of duty are variously written as nil, blank and free. In effect, all of them mean nil. Some are excisable and some are non-excisable. Animals like cats and dogs are in the excise tariff. The CBEC should form a task force to resolve this confusion.


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