Customs, Excise and Gold Tribunal - Bangalore
The Commissioner Of Central Excise vs Aurobindo Pharma Ltd. (Unit-I) [Apl] ... on 10 March, 2006
Equivalent citations: 2006(107)ECC566, 2006ECR566(TRI.-BANGALORE), 2006(200)ELT236(TRI-BANG)
ORDER S.L. Peeran, Member (J)
1. All these Revenue appeals raises a common question of law and facts and hence, they are taken up together for disposal as per law. The assessees have been charged for having cleared spent methane clandestinely by under-valuing the same and hence, the demands have been raised. The order in original confirmed the demands on the allegation that the assessee was purifying the spent solvents in the distillation column/distillation reactors and were reusing in the manufacturing process by adding fresh solvent for compensating the solvents consumed in the process of manufacture and also to maintain the required percentage level. Sometimes, these spent/distilled solvents which are over and above their requirement for manufacture, were sold to different customers. As they had not paid duty, they were charged for clandestine removal and demands confirmed.
2. The Commissioner in her Order-in-Appeal No. 78 and 79/03 in the case of M/s. Vorin Laboratories Ltd., Hyderabad has given a detailed reason to hold that the spent solvents were not dutiable and they are not goods. The detailed order passed in Order-in-Appeal No. 99/05 dated 28.6.2005 in the case of CCE v. Herren Drugs & Pharmaceutical Ltd. in para 5 onwards are reproduced.
5. I have gone through the case records and written submissions made by the appellants and observed the Hon'ble Tribunal in the case of Collector of Central Excise & Customs, Pune v. Industrial Oxygen Company Ltd. held that "Lime sludge - Durability - Lime sludge arising during manufacture of Acetylene Gas from Calcium Carbide - Fact that it does fetch some price, by itself will not suffice as a criterion to bring sludge in the net of excise - No evidence that material is treated as commodity in the normal course - Section 2 (d) and 3 of the Central Excise Act, 1944." And also the appellant relied upon judgment of Hon'ble CEGAT Court No. IV, New Delhi in the case of Collector of C. Ex., Bombay v. Britannia Industries Ltd. held that "Waste and scrap generated during the manufacture of biscuits such as dry waste and wet waste consisting of spilled raw materials under-baked and over-baked biscuits are not excisable goods - Merely because waste and scrap are capable of fetching some sale price is no criteria to treat it a manufactured product - Waste and scrap not treatable as regularly sold when sale price is determined at the whims of the buyers because there is no ready market for regular sale, thus sales are distress sales - Section 2(d) and 3 of the Central Excise Act, 1944 - Tariff Item 68 of the erstwhile Central Excise Tariff. And another case in the case of National Fertilizers Ltd. v. Commissioner of Central Excise, Chandigarh held that "Gauzes - worn out/saturated gauzes scrapped after prolonged use in the manufacture of Nitric Acid not dutiable as waste and scrap of the metal it is made of even if it may satisfy the definition of waste and scrap given in Note 8 to Section XV of the Central Excise Tariff Act, 1985 - Sub heading 7101.80 ibid."
In the case of CCE, Chandigarh v. Markfed Vanaspati and Allied Industries reported in 2003 (153) ELT 491 (SC) held that "the law still remains that the burden to prove that there is manufacture and that what is manufactured is on the revenue. In this case no new evidence is placed to show that there is manufacture. "Spent earth" was "earth" on which duty has been paid. It remains earth even after the processing. Thus if duty was to be levied on it again, it would amount to levying double duty on the same product."
No evidence it appears that the appellants mis-declared Methanol of purity ranging from 90 to 97% as waste solvent and cleared it as a nominal assessable value of Rs. 1.50 per kg while collecting extra cash ranging from Rs. 2.00 to Rs. 2.50 per kg, directly from the customers/Commission agents. Appellant not raised any invoices as Fictitious firms and diverted the material to other customer in order to collect extra amounts.
The facts were in the knowledge of the department, since the invoices and gate passes were submitted to Range Officer and no objection was raised at that time there is no evidence of under valuation. The demand of duty, recovery of interest under Section 11AB and imposition of penalty under Section 11AC of the Act not sustainable and personal penalty also not warranted.
There is no willful mis-statement or suppression of facts or contravention of provisions of Central Excise Act, 1944 or the Rules made there under with intent to evade payment of duty on their part. There is no under valuation of the goods, waste solvent and waste methanol alleged in the notice. As such invocation of the extended period of 5 years under proviso to Section 11A(1) of demanding duty from January 1995 in this case is not sustainable. In the case of Lubrichem Industries v. CCE, Bombay , Tamilnadu Housing Board v. CCE, Madras , Cosmic Dye Chemicals v. CCE, Mumbai and Pushpam Pharmaceutical v. CCE, Mumbai reported in 1999 (78) ELT 401 (SC). In view of the above, the demand for the period from 1/95 to 9/99 was hit by time limitation under Section 11A(1) of the Central Excise Act, 1944.
Regarding imposition of personal penalty under Rule 209A of Central Excise Rules, 1944 on Shri B. Krishna Prasad, M.D. of the unit. I observe that no adequate satisfactory reasons are mentioned in the show cause notice and also no elaboration or finding given by the adjudicating authority. The Hon'ble Tribunal in the case of Cipta Coated Steels Ltd. v. CCE, Aurangabad held that penalty not imposable under 209A of Central Excise Rules, 1944 in absence of any evidence to show the guilty mind on the part of the appellants. I hold that the personal penalty is not imposable on Shri B.K. Prasad under Rule 209A of Central Excise Rules, 1944.
Following the ratio of the decisions of the judicial fora cited supra, coupled with the fact that recovering waste methanol/waste solvent through the process of refining does not amount to manufacture and the resultant products waste Methanol/waste solvent does not find a place in the schedule to the Central Excise Tariff Act, 1985, and the failure of the Department to adduce any fresh evidence to prove the fact that the emergence of waste methanol/waste solvent and the subsequent process of refining the same amounts to manufacture, I hold that there was no event of manufacture of the impugned goods and hence the said goods are not excisable.
Following the ratio of the above decision and discussion, I hold that the order passed by the Additional Commissioner is liable to be set aside. In view of the foregoing, the following order is passed.
ORDER The impugned order of the Additional Commissioner is set aside and the appeal is allowed.
3. Revenue in all these appeals contend that the spent solvents which have been used and reused and latter purified and sold are required to be considered as goods, as the duty has not been paid. The proceedings initiated against them for recovery is justified. It has also been contended that the under-valuation of the goods and clandestine removal has resulted in revenue loss and hence, spent methanol should be considered as goods, as it has undergone purification.
4. The learned SDR reiterated the grounds and contended that the order of the Commissioner (A) is not justifiable.
5. The learned Advocate submits that the process of purifying the spent solvents, which has been used and reused again and again and sold to the outsiders cannot be considered as new goods. In this regard, the relies on the judgment of the Tribunal affirmed by the Apex Court in the case of S.D. Fine Chem (Pvt.) Ltd. v. Collector reported in 1997 (91) ELT 610, wherein it has been held that purification of bought out chemicals through distillation or recrystallisation does not amounts to manufacture and no new goods come into existence. The Tribunal relied on large number decisions of Supreme Court and the Tribunal ruling which has been affirmed by the Supreme Court. The learned Counsel relies on the judgments rendered in the case of New Sharrock Mills v. CCE, Vadodara wherein the Tribunal has held that recovery of caustic soda from spent caustic soda lye by increasing concentration of spent caustic soda lye does not amount to manufacture inasmuch as caustic soda itself was initial product used in mercering the fabrics. The Tribunal took the view that no product, different and distinct from initial product emerged in the process. The learned Counsel submitted that the issue being covered by the cited judgments, there is no infirmity in the Commissioner's order and prays for dismissal of the appeals.
6. On a careful consideration, we notice from the extracted order of the Commissioner (supra) that the Commissioner has examined the issue in depth and in detail. It has been clearly brought out that the spent solvents had already been utilized in the factory and latter it had undergone further purification for reuse. The excess spent solvents were sold to the outsiders, as it had lost its value and therefore, what was sold was not new goods but only spent solvents which had undergone certain purification process. Such purification process of chemicals has been held to be not a process of manufacture as held in the case of S. D. Fine Chem (supra), this issue has been affirmed by the Supreme Court. The Tribunal ruling in the case of New Sharrock (supra) held that recovery of caustic soda from spent caustic soda lye by increasing the concentration of spent caustic soda lye does not amount to manufacture inasmuch as caustic soda itself was initial product used for mercering the fabrics. This judgment clearly applies to the facts of the case. We reproduce para 4-8 herein below:
4. The appellants main contention is that the process of concentration by evaporation of water cannot be held to be process of manufacture so as to make recovered caustic soda liable to duty. Mere existence of Notification No. 191/68-Central Excise, upto a certain period and subsequent withdrawal by the same will not, by itself, confer the status of manufacture to the recovery process, if the same cannot be independently considered as manufacture. It has also been argued that they started with caustic soda and through the intermediate process of emergence of spent caustic soda lye, recovered caustic soda only. As such, the starting material and the final material being the same i.e. caustic soda, it cannot be said that any manufacture resulting in emergence of new product has taken place. It is their contention that caustic soda recovered from the lye is already duty paid caustic soda received by them initially. For the above proposition, reliance has been placed upon various decisions of the judicial as also quasi judicial authorities.
5. We find that an identical issue arose before the Tribunal in the case of Alchemie Pvt. Ltd. v. Commissioner (T) and the Tribunal after taking note of the earlier two decisions in the case of Commissioner, Central Excise v. Bakul Aromatics & Chemicals Ltd. S.D. Fine Chemicals Pvt. Ltd. v. Commissioner, Central Excise 1997 (91) E.L.T. 610, held that as the resultant product has the same characteristics except for the concentration, it is not possible to say that change in concentration would result in emergence of new product Similarly in the case of Commissioner v. Yash Pharma Chemicals (Bombay) Pvt. Ltd. 2001 (135) E.LT. 1206 (Tri. - Del.) it was held, after taking note of the precedent decisions that howsoever elaborate the process undertaken is, the test for determination whether manufacture has taken place or not in the sense, Central Excise law is whether new products having different name, use and character has come into existence or not. Accordingly, the process of recovery of tartaric acid from L2 ABT was held as not manufacturing process as tartaric acid was already present in initial product L2 ABT and the entire process was originally started with the product Tartaric acid. By applying the above tests to the present case, we are of the view that the recovery process undertaken by the appellant by increasing the concentration of spent caustic soda lye does not amount to manufacture inasmuch caustic soda itself was the initial product used for mercering the fabrics. No new product different and distinct from the initial product can be said to have been emerged.
6. The reasoning of the lower authorities that the existence of notification exempting the product is conclusive to show that the product was excisable and as such, has correctly discharged duty burden, on exemption being withdrawn, does not appeal to us in as much, the product for being held as excisable, needs to satisfy the basic criteria of manufacture. The Hon'ble Supreme Court in the case of U.O.I. v. Ahmedabad Electricity Company held 'cinder' as 'non-excisable' even though cinder was mentioned as one of the exempted product in Notification No. 76/86-Central Excise dated 10-2-1986. Similarly in the case of Commissioner v. Markfed Vanaspati and Allied Industries 2003 (153) E.LT. 491 (S.C.) it was observed that mere mention of a product in tariff entry is no ground for holding the same to be manufactured and the onus to prove manufacture is on the Revenue. We do not find any evidence produced by the Revenue to discharge such burden except referring to the notification. Having held that there is no manufacturing activity involved, we do not find existence of notification as of any consequence so as to hold otherwise.
7. The Hon'ble Supreme Court decision in the case of Jaiprakash Industries Ltd. reported in 2002 (146) E.LT. 481 (S.C.) relied upon by the Id. SDR is not applicable to the facts of the case and the same deals with the issue of crushing of boulders into smaller stones and bajari by the mechanical process. Similarly, we find that the issue before the Tribunal in the case of Amrit Chemicals 1990 (45) E.LT. 282 (T), referred to by Id. DR was as regards interpretation of Notification No. 113/74, dated 20-7-1994 in respect of recovery of caustic soda from spent caustic soda lye and the issue of 'manufacture' was never raised. As such, the Tribunal did not have the occasion to deal with this aspect and granted relief on the basis of applicability of notification.
8. In view of our foregoing discussion we hold that caustic soda recovered from spent caustic soda lye was not excisable and duty was not required to be paid. However, the refund of duty already paid, is to be examined in the light of the amended provisions of Section 11B relatable to unjust enrichment, which would be applicable even though the caustic soda was consumed captively, as clarified by the Hon'ble Supreme Court in the case of Union of India v. Solar Pesticides
7. In view of the above judgments and the reasoning adopted by the Commissioner being legal and proper. Therefore, we do not find any merit in these Revenue appeals and reject the same.
(Pronounced in open Court on 10 MAR 2006)