Marketability of industrial effluent defeated excise duty claim and left Rule 57F(5) inapplicable.

Effluents generated in bulk drug manufacture were not shown to be marketable or clandestinely removed, so central excise duty could not be fastened on the quantity alleged to have been drained into a canal. The Revenue's reliance on limited evidence of sale of some effluent was insufficient to treat the entire quantity as dutiable without proof that the balance was marketable. The mixture of spent input and other organic compounds emerging in the manufacturing process was also not treated as an input for Rule 57F(5), making that rule inapplicable. On that basis, the duty demand failed and the appeal was rejected.

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Issues: Whether effluents generated during the manufacture of bulk drug and alleged to have been drained into a nearby canal were liable to central excise duty, and whether Rule 57F(5) applied to such effluents.

Analysis: The Revenue failed to produce material showing clandestine removal or proving that the effluent said to have been drained into the canal was marketable. The effluent was held to be a mixture of spent input and other organic compounds emerging during manufacture, and therefore it could not be treated as input for the purpose of Rule 57F(5). The finding that some effluent had been sold for value did not justify treating the entire quantity as dutiable in the absence of evidence supporting marketability of the balance quantity.

Conclusion: The effluent drained into the canal was not proved to be marketable or liable to duty, and Rule 57F(5) was inapplicable. The appeal was therefore rejected.

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