Customs, Excise and Gold Tribunal - Mumbai
Nirma Ltd. vs Commissioner Of Central Excise on 7 January, 2004
Equivalent citations: 2004(171)ELT238(TRI-MUMBAI)
ORDER S.S. Sekhon, Member (T)
1. The appellants are engaged in the manufacture of Linear Alkyl Benzene (LAB for short) detergent powder, etc. for the purpose of manufacture of LAB. They use a catalyst DEH - 7 which, due to usage as normally catalyst wont, gets deactivated due to deposition of carbon on its surface resulting in its efficiency and performance. It is therefore to be rejected and removed from the manufacturing stream and sold/disposed as 'Spent Catalyst'.
2. a) The appellant had imported the catalyst in July 1997 for initial charge under the EPCG scheme. This scheme EPCG i.e. Export Promotion Capital Goods imports scheme permitted the imports of Capital Goods at a concessional rate of duty with an inbuilt export performance condition. No credit could be availed on the imported goods since no CVD was paid on the import as Capital Goods.
b) The appellants, after these Capital goods catalyst were spent, sent the same on challans to the job worker for recovery of the metals i.e. Platinum. No duty was paid on such removals by the appellants. On receipt of the recovered metal, the same was sold by the appellants as metal.
c) Revenue has determined that the clearance of Spent Catalyst, resulting in this case from EPCG goods, was exigible and liable to * duty under heading 71.01.90 of Schedule to Central Excise Tariff Act, 1985 and demanded duty of Rs. 80,02,147/- under Section 11A along with perusal of equivalent amount under Section 11AC with interest.
d) Hence this appeal.
3. After hearing both sides and considering the material on record, it is found :
a) The impugned entity and exigibility and classification dispute undoubtedly on spent/wasted catalyst which are unusable Capital Goods.
b) The question therefore would arise whether Capital Goods which loose their utility and result in waste or otherwise to be disposed off, would result in manufacture of exigible goods when they are marketable. Examining this aspect it is found :
i) In the case of spent nickel catalyst, the Tribunal held that the same is not exigible as it is not result of manufacture -- (Kusum Products {1988 (33) ELT 639} confirmed by SC in 1995 (78) ELT A217 and it has been followed and approved by Larger Bench, in case of Marfed Vanaspati and Allied Industries {2000 (116) 204 LB}, Supreme Court has dismissed Revenue appeal 2003 (55) RLT 745 in Marfed case.
ii) A catalyst by definition is not raw material, if it effierces due to usage or process undertaken is lost and a new emerging entity results that cannot be termed as raw material evolving and resulting into a new entity. Therefore Spent Catalyst emerges not as a result of 'manufacture'. When the result is not of manufacture, the levy under Section 3 of the Central Excise Act, 1944 would not be attracted merely because of, as campaigned by the ld. DR, on the ground that it matches a tariff definition under chapter 71 when read with HSN notes and the entity is marketable.
iii) The Supreme Court in the case of 'cinder' emerging due to burning of coal in the case of Union of India Vs. Ahmedabad Electricity Co. Ltd. {2003 (158) 3 SC} has held as follows :
"32. From the above discussion it is clear that to be subjected to levy of excise duty 'excisable goods' must be produced or manufactured in India. For being produced and manufactured in India the raw material should have gone through the process of transformation into a new product by skillful manipulation. Excise duty is an incidence of manufacture and, therefore, it is essential that the product sought to be subjected to excise duty should have gone through the process of manufacture. Cinder cannot be said to have gone through any process of manufacture, therefore, it cannot be subjected to levy of excise duty. "
(Emphasis supplied) Applying the tests it is found Raw material transforming into a new entity is not the fact here. It is Capital goods being transformed through usage. The emphasized test as herein * above fails. Therefore no 'manufacture' under the Central Excise Act, 1944 would take place.
iv) When goods (waste/scrap) as in this case are arising out of Capital Gods, then such material would not be covered by the levy on such waste/scrap/unusable items even if they find a place in the tariff and are marketable as has been held in the case of scrap arising from locomotives Diesel Components Works {2000 (40) RLT 641} which has been followed by a catena of decisions by this Tribunal.
v) The Ld. DR's reliance on the case of Ashish Steel Pvt. Ltd. {1999 (106) ELT 269} and the Apex Curt dismissing the civil appeal filed by the assessee. (A 180 ELT Vol. 108) will not help the Revenue's case. Ashish Steel case was on ship breaking and even if ships are considered as Capital Goods, entity arising out of ship breaking are brought in the exigibility net vide specific entry and note in the Central Excise Tariff, as has been distinguished in the Diesel Components Works case {2000 (40) RLT 641} para 10 by the bench. Therefore it is to be held, that Capital goods can never be raw material, conversion thereof cannot be manufacture i.e. a manipulation of raw material to bring a new commercial by known entity, even if it is marketable or/and meets the stipulation of an entry in the tariff. That this would only be exigible manufacture in such only cases where 'a deemed manufacture clause' is brought by a Chapter or Section note or/and by notification specified by the Central Government in relation to the goods specified therein, vide the powers available due to amendment and insertion of clause (iii), by Finance Act 2002, to Section 2 (f) of the Central Excise Act 1944. There is no Chapter or/and Section note under Chapter 71 of the Tariff.
c) Once no manufacture takes place, the levy under Section 3 is not attracted, the question of classification does not arise, therefore not findings are arrived at on the classification of the entity under dispute.
d) Since no levy would arise, the duty demands under Section 11A and penalty under Section 11AC and interest cannot be upheld.
4. No findings are arrived at, on the time bar aspect, once it is found no duty demands could be made. Similarly other contentions pleaded are not being dealt with.
5. In view of the findings herein the appeal is to be allowed after setting aside the order.
6. Ordered accordingly.
(Pronounced in Court on 7/1/2004)