Customs, Excise and Gold Tribunal - Mumbai
Commissioner Of Central Excise vs Lubrizol India Pvt. Ltd. on 9 December, 2005
ORDER Archana Wadhwa, Member (J)
1. The short issue involved in the present appeal of the revenue is as to whether "Waste Filter Cake" generated in the respondent's factory during the course of manufacture of Chemical Additives falling under Chapter Heading 38 and 39 of the first schedule of Central Excise Tariff Act, 1985, is an excisable commodity classifiable under heading 3824.90. It is seen that the matter had earlier come up before the Tribunal in the respondent's own case against an order of the Commissioner and was disposed off vide order No. C-1/3806/01/WZB/2001 dated 13-12-2001, when the same was remanded to the Commissioner for fresh decision in the light of the Larger Bench's decision.
2. In the present proceedings, the Commissioner (Appeals) has taken note of the above decision of the Tribunal, apart from the discussing the issue on merits and has held that waste filter cake cannot be held to be excisable inasmuch as the same is not a manufactured product, but a waste material with negative commercial value. The revenue's grievance in the present appeal is that reference to the earlier order of the Tribunal was not justified inasmuch as the matter was only remanded and the issue was not decided.
3. However, after hearing both sides, we find that the Commissioner (Appeals) has not solely relied upon the Tribunal's order but has taken into consideration the entire facts and evidence on record for arriving at his findings. As such, we do not find any force in the above contention of the revenue.
4. As regards the merits of the case, it is seen that M/s. Lubrizol (I) Pvt Ltd., are engaged in the manufacture of chemical additive. During the process of manufacture of chemical additives, which are antioxidant detergent, proves of filtration is earned out. During the filtration process, filter media/filter and (siliceous material) is used for filtration, purification, etc. During the said process, filter aid absorbs the impurities and post particles from the said chemical additives which is under filtration process. These filter aid/filter media gets exhausted of its capacity after certain period of its use and what emerges is waste which is predominant siliceous material which is termed as "Waste Filter Cake" (hereinafter termed as WFC). The said WFC contains some preposition of oil/chemical additive besides impurities and course material.
5. As per the appellants, prior to the period 1993-94, the respondent were removing the said WFC in regular intervals from their factory and were dumping the same in and around Turbhe Village for the purpose of land filling. By reason of toxic nature number, complaints were made by the nearby residents especially cattle owners against the dumping of the said WFC. Therefore, the respondent decided to have this WFC to be given to the processors free of cost to be lifted by the processors for the purpose of processing and removing the toxic-ity and to remove oil/chemical additive, which is absorbed by the filter aid by the process of solvent extraction method.
6. In the year 2000, a show cause notice was issued to the respondents raising demand of duty for the period from 1994-99, which was subsequently confirmed by the Commissioner vide order-in-original No. 35/2000 dated 31-5-2000. On appeal against the above order, the matter was remanded by the Tribunal and in de novo proceedings, the Commissioner decided in favour of the respondents and vacated the show cause notice by holding the WFC is not a manufactured product and hence, not excisable. He considered the following evidence in detail:-
(i) The manufacturing process and emergence of WFC out of filter aid when it loses its capacity to filter (kindly refer page No. 15 to 16 of the compilation filed by respondent) and the investigation done by the Field Officers has not negated this fact.
(ii) The evidence of report of IIT and the report of UDCT on the subject matter of WFC (kindly refer Page Nos. 8 to 14 of the compilation filed by respondent)
(iii) The case law of Markfed Vanaspati decided by the Larger Bench of Hon'ble Tribunal and confirmed by Hon'ble Apex Court (kindly refer page Nos. 26 to 37 of the compilation filed by respondent) as directed by Hon'ble Tribunal in remand order dated 27-7-2001 (kindly refer Page Nos. 22 to 25 of the compilation filed by respondent).
(iv) Other following case laws :
(a) Hindustan Lever v. CCE
(b) Rajaram Brothers v. CCE (kindly refer page Nos. 39 to 40 of compilation filed by respondent)
(c) Indian Aluminium Co. Ltd., v. CCE, Bhubaneshwar (kindly refer Page Nos. 55 to 56 of compilation filed by respondent)
7. The above order of the Commissioner has not been challenged by the revenue and as such, it seems that the issue of excisability of waste filter cake stands at rest by the subsequent order of the Commissioner passed in the year 2004, which has attained finality.
8. Apart from the above facts, the Commissioner (Appeals) in the present proceedings has also referred to the Condensed Chemical Dictionary and the Larger Bench's decision in the case of Commissioner of Central Excise v. Markfed Vanaspati & Allied Industries reported in 2003 (153) E.L.T. 491 (S.C.), which stands confirmed by the Hon'ble Supreme Court. For better appreciation, we reproduce the relevant paragraphs of the Commissioner (Appeals)'s order :-
As per the Condensed Chemical Dictionary - Residual Oil is a liquid or semi liquid product obtained as residue from the distillation of petroleum. They contained the asphalt hydrocarbons also known as tailings and residuum combustible. The meaning of residual given in 21st Century Dictionary is - One relating to residue, remaining, left over unaccounted for, something which remains or is left over is a residue.
As per the said meaning something which is left over after processing is known as residue and it will retain properties of a particular material and can be used as fresh material. Whereas, waste filter cake is rubbish which remains after the process of filtration of chemical additives. The said item cannot be used as such and therefore the said waste cannot be called as residual.
The appellant also stated that in their own case, the Chemical Examiner report exactly state that the sample is in the form of brown coloured soft lump. It comprises of inorganic filter media (siliceous material) and mineral hydro carbon oil. The weight of the siliceous material is 60%. Thus the filter media used for filtration and for removing the impurities, after its use, becomes a rubbish in the form of brown or black lump depending upon the material which is filtered. From the discussions and the comparison of the waste filter cake with the waste described in the case of Marfed Vanaspati & Allied Industries and in the case of Rajaram v. CCE, Indore it merges that both are identical having similar functions and therefore the waste filter cake which is a spent earth in siliceous form is not a manufactured product in the light of the above two Judgments.
The appellant has also produced a certificate given by M/s. Lubrizol Corporation, USA as per which waste filter cake is a waste material with negative commercial value. The appellant has also submitted reports from the department of Chemical Technology, University of Mumbai and department of chemical Engineering, IIT Mumbai, which clearly shows that waste filter cake is not a marketable material and has no commercial value. It is pertinent to note that the adjudicating authority has worked out the value of waste filter cake cleared from the unit of the appellant on the basis of comparison of extracted product and virgin product. Neither in the show cause notice not in the order, the adjudicating authority had produced any evidence in the form of documents or a statement wherein it can be shown that waste filter cake in such form can be sold in the market or purchased in the market or it has any commercial value. It is well settled proposition of the law that valuation of any kind has to be worked out as it is and not after any form of processing. Thus the mechanism applied by the adjudicating authority in determining the value is illegal and arbitrary.
9. The revenue in their memo of appeal have not contested the above findings of non-marketability of waste filter cake. The issue stands decided by the Larger Bench decision of the Tribunal in the case of Markfed Vanaspati & Allied Industries, referred supra. It is established law that everything, which is sold is not necessarily a marketable commodity as known to the commerce. The Tribunal in the case of South India Viscose Ltd., v. Collector of Central Excise, Coimbatore has held that effluent sludge, arising during the process of manufacture of wood pulp which is only a waste and cannot be held to be excisable. Similarly, in the case of Hindustan Lever Ltd., Bombay v. Collector of Central Excise, Calcutta , spent earth arising as waste material from activated earth during soap manufacture was held to be not qualifying as a manufactured article by virtue of sale of the same. As such, we are of the view that the Waste Filter Cake has been rightly held to be non excisable by the Commissioner (Appeals). Accordingly, the appeal filed by the revenue is rejected.
(Pronounced in Court on 9-12-2005)