Customs, Excise and Gold Tribunal - Delhi
Asiatic Oxygen Ltd. And Collector Of C. ... vs Collector Of C. Ex. And Bansal ... on 29 July, 1989
Equivalent citations: 1992ECR264(TRI.-DELHI), 1989(44)ELT718(TRI-DEL)
ORDER D.M. Vasavada, Member (T)
1. Issue, which is common in all these appeals, is whether carbide sludge can be classified as 'manufactured goods' and whether it is excisable. So we dispose of all these three appeals by this common order.
2. The assessee has been asked to pay excise duty of Rs. 1,17,447/- for removal of carbide sludge for the period from 1-9-1982 to 26-11-1985 by the order dated 5-10-1988 passed by the Additional Collector of Central Excise, Bolpur which has given rise to appeal No. E/09/89-C. Subsequently, the said assessee has been asked to pay ' Rs. 8,6407- by way of excise duty on clearance of carbide sludge from 2-6-1987 to 14-9-1987 by the Assistant Collector (Central Excise) and the said order has been confirmed by the ld. Collector of Customs & Central Excise, Calcutta vide his Order-in-Appeal No.178/BR/85 dated 15-4-1985. The said order has given rise to the Appeal No. E/364/89-C.
3. In Appeal No. E/1820/85-C, Jurisdictional Assistant Collector classified carbide sludge as excisable goods falling under T.1.68 against which the assessee, M/s. Bansal Industrial Gases, went in appeal and the ld. Collector set aside the order. Aggrieved by the said Order No. 178/BR/85 dated 15-4-1985, the Revenue has come up in appeal.
4. We heard Sh. J.S. Agarwal, ld. Advocate for Asiatic Oxygen Ltd., while the appellants, M/s. Bansal Industrial Gases, sent written submissions and submitted that the appeal be decided on merits in their absence. We heard Sh. S. Chakravorty, ld. JDR, for the Revenue in all the three appeals.
5. Sh. J.S. Agarwal, ld. Advocate submitted that the issue has been covered against Revenue by an order of this Tribunal in the case of Collector of Central Excise, Gunter v. Andhra Oxygen (P) Ltd. reported in 1987 (30) E.L.T. 967 (Trib.).
6. As against this, the ld. D.R. submitted that the issue has not been finally decided and it is open to the Revenue to prove by credible evidence that carbide sludge is 'goods' and is excisable. So, to appreciate arguments from both sides, we reproduce the relevant portion of the said judgment hereunder:
"It appears that carbide sludge is only waste arising in the course of manufacture of acetylene gas. It does not appear to have marketability though there have been some stray cases of sale. There is nothing to disbelieve the respondents when they say it is only an affluent and waste. Considering all this, we are not inclined to interfere with the orders passed by the Collector (Appeals) and we, therefore, dismiss the appeal."
"We make it clear that it would be open to Revenue to prove by credible evidence, if that be available, that carbide sludge is goods as per tests laid down by law and this decision would not act as a fetter, should such credible evidence be available."
7. From the above, it can be seen that the issue has been kept open and that Revenue can prove that carbide sludge is goods as per tests laid down by law. So, now we will have to examine what is the position of law and what is the evidence produced by the Revenue?
8. We may first examine position of law. In this connection, it will be advisable to examine various decisions of the Hon'ble Supreme Court and various High Courts wherein various principles, have been laid down.
9. L.A., Shri Agarwal has cited some of these judgments:
(i) Union of India v. Delhi Cloth & General Mills Co. (1977 (1) E.L.T. J 199) AIR 1963 [(S.C.) 791, where it has been laid down as under :
"Goods must be something which can ordinarily come to the market and be bought and sold and that the 'manufacture' which is liable to excise duty must, therefore, be the "bringing into existence of a new substance known to market".
"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 and use". (Quoted in Permanent Edition of Words and Phrases, Vol. 26 from an American judgment)"
(ii) The above judgment was followed in S.B. Sugar Mills v. UOI [1978 (2) E.L.T. J 336 (S.C.)] wherein it has been held as under :
"To become goods it must be something which can come to the market to be bought and sold and is known to the market".
(iii) The above two judgments were followed by Hon'ble Bombay High Court in Indian Aluminium Co. Ltd. v. A.K. Bandopadhyaya and Ors. [1980 (6) E.L.T. 146 (Bom.) where it has been held as under :
"Dross and skimmings are merely the refuse, scum or rubbish thrown out in the process of manufacture of aluminium sheets and cannot be said the result of treatment, labour or manipulation whereby a new and different article emerges with a distinctive name, character or use which can ordinarily come to the market to be bought and sold. Merely because such refuse or scum may fetch some price in the market does not justify it being called a by-product, much less an end product or a finished product."
(iv) Union Carbide India Ltd. v. UOI [1986 (24) E.L.T. 169 (S.C.) wherein it has been held as under:
"To become goods article must be something which can ordinarily come to the market to be bought and sold. Articles in crude or elementary form not dutiable as they are merely intermediate products and not goods (aluminium cans or torch bodies)."
(v) Modi Rubber Ltd. v. UOI [1987 (29) E.L.T. 502 (Delhi) wherein it has been held as under:
"It cannot be said that waste/scrap is the result of any treatment or any labour by the petitioner company whereby a new and different article emerges. The process whether essential or incidental or ancillery to fall within the ambit of the expression manufacture is one which must have some relation to the manufacture of a finished product. The waste/scrap is obtained not by any process of manufacture but in the course of manufacturing process to produce the end product of tyres, tubes, flaps, etc. If raw-material of rubber compound has undergone some change in the process of manufacture so as to turn into waste or scrap, it cannot be equalised with any finished product. Therefore, no duty can be levied on such waste and scrap."
(vi) Bhor Industries Ltd. v. Collector of Central Excise [1989 (40) E.L.T. 280 (S.C.)]-
"Marketability is an essential ingredient of dutiability".
10. From the above judgments, following position of law emerges:
The manufacturer does not take to manufacture waste and it is not obtained by any process of manufacture but is obtained in the course of manufacturing process. It is not the result of any treatment or any labour by the manufacturer whereby new and different article emerges. Manufacture implies change but every change is not manufacture. Something more is necessary. There must be transformation and new and different article must emerge having a definite name, character and use. It must be capable of being brought to the market regularly for being bought and sold. Merely because it may fetch some price some time, will not justify it being called a by-product.
11. Keeping in view the above position of law, this Tribunal has consistently taken the view that waste or scrap is not a manufactured product and is not dutiable which can be seen from the following judgments of this Tribunal:
- Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. v. Collector of Central Excise, Indore - 1985 (21) E.L.T. 832 (Trib.) -
"Destruction of hydrochlorine acid by neutralisation into slurry is not creation of goods and, therefore, not excisable."
- Hindustan Lever Ltd. v. Collector of C.Ex,-1985 (22) E.L.T. 232 (Trib.) -
"Spent earth arising from activated earth during soap manufacture -Not liable to duty being not the result of manufacture and being baser than activated earth."
-Indian Aluminium Co. Ltd. & Anr. v. Collector of Central Excise, Bangalore -1987(31) E.L.T. 158 (Trib.) -
"Aluminium dross and skimmings - although can be sold and fetch some price are not 'goods' and not liable to excise duty."
- Collector of Central Excise, Bhubaneswar v. Aluminium Industries Ltd. - 1987 (31) E.L.T. 748 (Trib.) -
"Aluminium dross and skimmings - Dutiability - Waste/scrap obtained not by any process of manufacture but in course of manufacturing the end product not excisable goods."
- Collector of C. Ex. v. Gayatri Glass Works -1988 (33) E.L.T. 124 (Trib.) -
"Waste/scrap dutiable only if obtained by a process of manufacture and not if generated in the course of manufacture of an end-product-"Bhagar" - Molten or broken glass, generated during the course of manufacture of articles of glass not excisable."
- Collector of Central Excise v. Dunlop India Ltd. - 1988 (36) E.L.T. 329 (Trib.) -
"Waste/scrap - Arising during course of manufacture of tyres, tubes, flaps, etc. or resulting from destruction of manufactured products - Not qualifying as "manufactures" and hence not "goods".
-Indian Tube Co. Ltd. v. Collector of Central Excise -1988 (37) E.L.T. 418 (Trib.) - "Waste picke/liquor is in the nature of waste product and has neither marketability nor saleability - Not liable to duty." -H.M.M. Ltd. v. Collector of Central Excise -1989 (40) E.L.T. 422 (Trib.) -
"Coal cinder is a waste material - Merely because it can fetch some sale price not treatable as excisable goods."
- Collector of Central Excise, Allahabad v. Captainganj Distillery, Captainganj - 1987 (11) ECR 493 (Cegat SB-C) -
"Spent Wash is a waste material arising in the process of manufacture and is not marketable and, therefore, not leviable to duty under Item 68".
- Collector of Central Excise, Calcutta v. Papyrus Papers Limited -1988 (33) E.L.T. 97 (Tribunal) (Cegat SB-C) -
"Cinder - Waste though utilised and capable of fetching a price cannot be said to be manufactured and is not liable to duty."
It has also been stated in this order that - (i) 1987 (31) E.L.T. 452 (Trib.) was decided prior to decision of Modi Rubber Ltd. (Delhi) (supra) and (ii) 1987 (30) E.L.T. 313 (Trib.) was decided without Modi Rubber Ltd. (supra) being brought to notice of the Tribunal and so both the judgments have been ignored.
- Collector of Central Excise, Patna v. TISCO - E/SB/Appeal No. 82/82/D decided vide order No. 942 of 1986 dated 14-11-1986 (Tribunal) (unreported) wherein it has been held that aluminium blocks skimmings are not excisable.
- TISCO v. Collector of Central Excise, Delhi Appeal No. E/1539/82 BI decided vide order No. 815 of 1986 dated 17-12-1986 wherein Tribunal has held that sludge, a waste product, arising in the course of production of metal from iron ore is not "goods" and is not excisable.
12. As against these, the ld. D.R. has cited the following cases :
-KliandelwalMetal & Engineering Works & Anr. etc. v. Union of India & Ors. reported in 1985 (20) E.L.T. 222 (S.C.) wherein the question was of levy of additional duty of customs in accordance with Section 3(1) of the Customs Tariff Act, 1975. In this judgment, it has been laid down as under:
"Even if the duty referred to in Section 3(1) of the Tariff Act, 1975 is regarded as in the nature of a countervailing duty, the brass scrap imported by the appellants would still be liable to the levy of that duty. The reason is that scrap or waste is a by-product of manufacture and, is an integral part and an inevitable incident of the manufacturing process. Brass scrap is manufactured or happens to be manufactured in India. It is well-known as a marketable commodity, both of Indian and foreign origin. The brass scrap produced in India must receive protection by the imposition of a countervailing duty on imported brass scrap."
- Seshasayee Paper and Boards Ltd. v. Collector of Central Excise, Madras and Ors. reported in 1987 (28) E.L.T. 258, wherein, relying upon Khandelwal's case (supra), it has been held that causticising lime sludge manufactured out of paper, even though as scrap, is an excisable goods, capable of being produced or manufactured in India and hence is liable to duty.
- Collector of Central Excise, Gunturand Ors. v. Andhra Pradesh State Electricity Board, Hyderabad and Ors. reported in 1987 (29) E.L.T. 324 (Trib.), wherein, also relying upon Khandelwal's case (supra) Fly Ash, a waste product, produced during the course of burning of pulverised coal is a big product and is a marketable, commercial commodity known and traded as such, has been held liable to excise duty.
13. In Khandelwal's case (supra), on facts, it was found that brass scrap is a commodity which is bought and sold in market on commercial basis. So, ratio of that judgment cannot be brought to bear on facts of the present case. In A.P. State Electricity Board case, the Tribunal found that Fly Ash is also a marketable commodity known and traded as such. So, it has been decided on facts of that case and it cannot be said that a rule has been laid down by that judgment that all waste products are excisable.
14. In case of both the assesses' process, whereby carbide sludge is formed, is almost common, and the process whereby it emerges is not in dispute. On perusal of the same, it can be seen that the assessees do not undertake to produce this commodity, but it emerges in the process of manufacture of products which the assessees are licensed to produce and in fact they do produce, namely, oxygen and acetylene gas. The process is such that emergence of carbide sludge at the end of the process, cannot be avoided. In the case of Asiatic Oxygen, the Revenue has produced some evidence to show that the assessee has, at times, sold some of this sludge. Against this, it is the contention of the assessee that they have to vacate the pits wherein this sludge is gathered for collection of sludge formation of which is a continuous process and for that purpose they have hired contractors and they do not charge anything to the contractors for the sludge and the contrators do not pay the charges but they claim supervision charges from the contractors. Then such heaps of sludge cannot be measured, weighed or revised accounted for. Assuming that the assessee charges something to the contractor, then also it almost negligible. In case of Bansal Industries, the adjudicating authority has found that for some years, the assessee has sold this sludge to some person who purchased it for using in brick manufacture as a substitute for lime. There also the price charged is negligible. Assuming that the carbide sludge does fetch some price then also that by itself will not be a criteria to bring sludge into net of excise.
15. As discussed above, it is very clear that carbide sludge is industrial waste and cannot be termed as "manufactured goods" and hence is not excisable.
16. In light of the above discussion, we hold that carbide sludge cannot be considered as manufactured goods and also it is not excisable.
17. In view of the above findings, Appeal Nos. E/09/89C and E/364/89-C require to be allowed.
18. In Appeal No. 09/89-C, point of limitation is also to be considered. In para 7 of his order dated 15-9-1988, ld. Collector has stated that the assessee has, in their letter dated 9-2-1982, and also in the written submission at the time of personal hearing, stated that the non-excisability of the carbide sludge is already decided by the Appellate Collector's orders nos. 138/WB/82 dated 19-7-1982 and 214/WB/82 dated 27-9-1982. The appellants have produced copies of both these orders on record. So, the department knew that carbide sludge is being formed as a result of manufacturing process by the appellant company, and aspects of its saleability and durability were already adjudicated. So, there was no suppression or there was no mis-representation. As the appellants were treating it as a waste product and that is why non-excisable, there was no question of declaring the facts to the department which otherwise the department knew. So, there was no question of clandestine removal also. Copy of show cause notice is not on record. But in the impugned order, the ld. Collector has not stated that there was any mis-representation. So, there are no grounds to invoke the extended period of limitation. In that case a show cause notice dated 2-12-1985 raising demand for the period from 1-9-82 to 26-11-1985 would clearly be time-barred for the period before 2-6-85. So, to that extent, the demand of excise duty can be time-barred. But as we are allowing the appeals on merits, it is not necessary for us to enter into the calculation of the time barred demand.
19. Appeal No. 1820/85-C, filed by the Revenue, will have to be dismissed. So we pass the following order :
(i) Appeals Nos. E/09/89-C and E/364/89-C are allowed with consequential relief to the appellants,
(ii) Appeal No. E/1820/85-C is dismissed.