Waste residue from neutralisation is not manufacture; pipeline dispatch with power does not deny excise exemption.

Neutralisation of hydrochloric acid into slurry did not amount to manufacture because the process destroyed a toxic input and produced only a waste residue, not a new marketable commodity. The slurry therefore was not goods and was not liable to central excise duty. Its later dispatch through a pipeline, even with the aid of power, did not constitute manufacture of the slurry by use of power, so the exemption under the notification could not be denied. The excise demand was unsustainable and the assessee remained entitled to the exemption.

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Issues: (i) Whether the neutralisation of hydrochloric acid resulting in slurry amounted to manufacture of excisable goods liable to central excise duty; and (ii) whether dispatch of the slurry through a pipeline by use of power amounted to manufacture so as to deny exemption under the notification.

Issue (i): Whether the neutralisation of hydrochloric acid resulting in slurry amounted to manufacture of excisable goods liable to central excise duty.

Analysis: The neutralisation process was undertaken to destroy a toxic acid and not to produce a new commodity. The slurry was only waste effluent, known to and permitted by the excise authorities, and remained a worthless residue for years. A waste which is not created for profit and is not a manufactured product does not become excisable merely because someone later finds a limited use for it.

Conclusion: The slurry was not goods and was not liable to central excise duty.

Issue (ii): Whether dispatch of the slurry through a pipeline by use of power amounted to manufacture so as to deny exemption under the notification.

Analysis: The slurry was already fully formed before dispatch. Mere removal through a pipeline, even if assisted by power, does not amount to manufacture of the slurry by use of power. The notification therefore could not be denied on that ground.

Conclusion: The assessee was entitled to the exemption under the notification.

Final Conclusion: The appeal succeeded and the central excise demand could not be sustained against the assessee; the authorities were directed to proceed consistently with the ruling on non-excisability and consequential exemption.

Ratio Decidendi: A residue produced by destruction of an input substance, without creation of a new marketable commodity, is not manufacture of goods for excise purposes, and mere pipeline dispatch of such residue does not amount to manufacture by use of power.

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