Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Amol Decalite Limited on 11 August, 1998
Equivalent citations: 1999(105)ELT222(TRI-DEL)
ORDER V.K. Agarwal, Member (T)
1. In these two appeals filed by the Revenue, the issue involved is whether waste product known as Bag House fine, obtained during the process of manufacturing filter aid powder is an excisable product.
2. M/s. Amol Decalite Ltd. manufacture Filter aid powder, classifiable under Heading 28.51 of the Central Excise Tariff Act, from Perlite Ore by heating it in a furnace. The final product is graded according to the particle size and is assigned a grade number. The waste in the form of very fine powder, known as bag-house fine, which is not usable as filter aid powder, was graded by the Respondents as 414 and 424. The Assistant Commissioner confirmed the demand of excise duty under order dated 29-1-1991 holding that the filter aid powder of grade 414 and 424 is a fully manufactured product and is capable of being sold in the market and needs to be classified as "filter aid powder". The Assistant Collector, in a subsequent order dated 26-2-1992, however, held that waste of filter aid powder is nothing but a chemical classifiable under subheading 3802.00 of the Schedule to the Central Excise Tariff Act. He also observed that simply because it fetches no good price because of its quality, it should not be excluded from the scope of levy of excise duty. He, therefore, classified the impugned product under sub-heading 3802.00 instead of subheading 2851 of the Central Excise Tariff Act. On appeal, the Commissioner (Appeals), under both the impugned order dated 31-12-1992 set aside the orders passed by the Assistant Commissioner observing that bag-house fine is a very finely graded powder which is nothing but a waste and has hardly any market and a very substantial quantity had accumulated in the manufacturing premises; that such a waste of grade 414 and 424 does not find any application as filter aid powder in the industry as reported by the Chemical Examiner in his test result. The Commissioner (Appeals), thus did not find justification to treat the impugned product as an excisable commodity, chargeable to any duty.
3. Shri Satnam Singh, Id. DR submitted that the impugned product, graded by the Respondents as 414 and 424 arose as a by-product and hence is a manufactured product under Section 2(f) of the Central Excise Act. Reliance was placed on the decision of the Supreme Court in the case of Khandelwal Metal and Engineering Works v. Union of India 1985 (20) E.L.T. 222 (S.C.) in which it was held that the sub standard which are produced during the process of manufacture may have to be disposed of as "reject" or as "scrap". He also submitted that the bag-house fines is sold in the market and under Section 2(h) of the Act, the impugned product is the goods which is sold in the ordinary course of trade or business for cash or other valuable consideration. Reference was also made to the decision in the case of Hindustan Scientific Gears and Fancy Glass Works 1985 (21) E.L.T. 195 in which Tribunal held that "Bhagar" i.e. broken glass could be considered as a manufactured item and as goods.
4. Shri Devan Parika, Id. Advocate submitted that the impugned product is not usable as filter aid powder; that they tried to sell the product in market but they could not sell the same which is evident from the fact that out of 1491 M.Ts. of such waste generated during the course of four years, they could only sell a small quantity of 310 M.Ts.; that they had graded the waste as 414 and 424 just to explore the possibility of marketing it as filter in paint industry; that it is well settled law that even if waste fetches some price, it is not excisable; that the product should have regular market. He also contended that there should be an entry in the Tariff for waste before duty can be charged. In support of his contentions he relied upon the following decisions :
(i) Gujarat State Fertiliser Co. Ltd. v. C.C.E., Vddodara - 1997 (90) E.L.T. 149 (T). In this decision the Appellate Tribunal held that waste liquor obtained as by product in the process of manufacture of caprolactum are not goods for purpose of levy of Central Excise duty relying upon the decision of the Supreme Court in the case of Indian Aluminium Co. 1995 (77) E.L.T. 268 in which Supreme Court held that aluminium dross and skimmings may be sold; but this does not make them a marketable commodity; that everything which is sold is not necessarily a marketable commodity as known to commerce.
(ii) Britannia Industries Ltd. v. C.C.C., Bombay -1997 (73) E.L.T. 719 (T), the Tribunal held that in the case of waste generated during the manufacture of Biscuits which is being sold as distress sale, it cannot be held that the goods had a ready market and that they had regular sales and that they were marketable.
(iii) Balaji Enterprises v. C.C.C., Madras - 1997 (92) E.L.T. 3 in which Supreme Court observed that whenever things like "Waste and Scrap", under any head, have been sought to be taxed in the Central Excise Act, specific entries have been made for the purpose and held that prior to amendment of Item 27 of the erstwhile Central Excise Tariff with effect from 1-3-1981 when waste and scrap of aluminium was included in sub-heading (aa), the aluminium "Waste and Scrap" was not liable to tax.
(iv) Finolax Cables Ltd. v. C.C.E., Pune - 1998 (86) E.L.T. 418, the Tribunal held that waste or scrap will not be dutiable under specifically covered by the entry in the tariff schedule relying upon the decision of the Delhi High Court in Modi Rubber case 1987 (29) E.L.T. 502 (Del.).
The Id. Advocate mentioned that the Supreme Court dismissed the Civil Appeal filed by the Department as reported in 1996 (87) E.L.T. (A131) C.C.E. v. Somany Pilkingtons Pvt. Ltd. 1992 (59) E.L.T. 451 (Tribunal). The Appellate Tribunal has held that broken glazed tiles are distinct from glazed tiles and cannot be treated as glazed tiles; that no specific entry has been provided for broken glazed tiles; that even if they fetch small value; that in the absence of any specific heading for broken glazed tiles as waste material, it would not be appropriate to equate them with glazed tiles or to take them to the residuary entry of Item 68.
The Id. Advocate also submitted that the Khandelwal case there was a specific entry for brass scrap which is not so in the present matter.
5. We have considered the submissions of both the sides. According to Section 2(d) of (Central Excise Act, excisable goods means goods specified in the schedule to the Central Excise Tariff Act as being subject to a duty of excise. We observe that the impugned products in the form of very fine powder is obtained during the process of manufacturing of filter aid powder and this fine powder cannot be used as filter aid powder. It cannot be treated as filter aid powder under Heading 28.51 of the Central Excise Tariff. There is no separate heading or sub-heading in the Central Excise Tariff Act which classifies the waste product and as held by Delhi High Court in Modi Rubber Case (supra) and Tribunal in Finolex case and Somany Pilkington's case, referred to above, in the absence of any specific entry, the waste product cannot be charged to duty. As per definition in Section 2(d) of the Act, the excisable goods means goods specified, in the schedule to the Central Excise Tariff Act and once there is no mention of the goods in the Schedule, the product cannot be considered to be an excisable goods leviable to Central Excise Duty under Section 3 of the Central Excise Act. We also find that the Revenue in its appeal has not adduced any ground as to why the impugned product may be classified under subheading No. 3802.00. On the other hand, Commissioner (Appeals) has clearly observed in order dated 31-12-1992 that no material evidence had been produced to discard the chemical Examiner's test report, according to which the impugned product is waste. Even in the appeal before us, no material has been adduced to contradict the test report of the Chemical examiner. We also find that there is no regular market for the impugned product. It has been well settled principle of law that duty is attracted not because an article is covered in any of the items or it falls in residuary category but it must further have been manufactured or produced and it is capable of being brought and sold. The Tribunal in Gujarat State Fertilizer Co. Ltd. (supra) held that even if there were sales on a few occasion the goods are not excisable goods. Everything which is sold is not necessarily a marketable commodity as known to commerce and which it may be worthwhile to trade in as held by the Apex Court in U.O.I. v. Indian Aluminium Company 1995 (77) E.L.T. 268. We also find that Commissioner (Appeals) gave a categorical finding in the impugned order that the waste product, graded by the Appellants as Grades 414 & 424, had hardly any market and the products do not find any application as filter aid powder. In view of these facts and circumstances, following the ratio of the decisions relied upon by the Respondents, we do not find any infirmity in the impugned orders and accordingly reject both the appeals filed by the Revenue.