2014 (4) TMI 416 - AT - Central Excise

Tribunal: Sludge & Pulper Waste Not Excisable

The Tribunal concluded that the sludge from the effluent treatment plant and the pulper waste were not excisable goods as they did not result from a ... Excisable goods - manufacture - marketability - explanation to Section 2(d) of the Central Excise Act - waste, residue or refuse arising during the course of manufacture - Board Circular No.904/24/2009-CX - classification under tariff heading 4707Excisable goods - manufacture - marketability - explanation to Section 2(d) of the Central Excise Act - waste, residue or refuse arising during the course of manufacture - Board Circular No.904/24/2009-CX - classification under tariff heading 4707 - Sludge from the effluent treatment plant and pulper waste/refuse are not excisable goods - HELD THAT: - The Tribunal examined whether sludge and pulper waste, which emerge inevitably during the course of manufacture of paper and paper board, constitute the result of a manufacturing activity and thus fall within the concept of excisable goods. The definition of 'manufacture' requires a process resulting in a manufactured product, or inclusion by deeming provision or incidental/ancillary processes such as packing or treatment rendering a product marketable. The emergence of sludge and pulper waste is neither a process of manufacture nor covered by any deeming provision or ancillary process specified in the statute. Consequently, merely being sold for consideration does not convert waste or refuse into a manufactured excisable product; the added explanation to Section 2(d) relating to marketability cannot be read so as to supply the missing criterion of manufacture. The Tribunal relied on precedents holding that waste arising in the course of manufacture remains waste despite marketability. Further, the Board Circular No.904/24/2009-CX, which treated saleability of waste as rendering it excisable, has been quashed by the High Court of Allahabad in the cited decision and therefore cannot support taxation here. Finally, the tariff entry under heading 4707 relates to waste and scrap of paper or paperboard and does not encompass sludge and pulper waste; that classification cannot be invoked to hold the material excisable. For these reasons the materials sold by the appellants are not excisable goods. [Paras 11, 12, 13, 14, 16]Appeals allowed on merits; sludge and pulper waste are not excisable and the impugned demands and penalties set aside.Final Conclusion: The appeals are allowed on merits; the impugned orders confirming duty and penalties in respect of sludge and pulper waste are set aside and consequential relief granted to the appellants. Issues Involved:1. Whether the sludge obtained in the effluent treatment plant and the pulper waste can be considered excisable goods.2. Whether the sludge and pulper waste are exempted under Notification No.76/86-CE, dated 10.02.1986.3. Classification of sludge and pulper waste under the Central Excise Tariff.4. Applicability of the limitation period for raising demands.Detailed Analysis:1. Excisability of Sludge and Pulper Waste:The primary issue was whether the sludge from the effluent treatment plant and the pulper waste could be considered excisable goods. The lower authorities based their decision on the amendment to Section 2(d) of the Central Excise Act, 1944, introduced by Section 78 of the Finance Act, 2008. This amendment included an explanation that any article capable of being bought and sold for consideration would be deemed marketable. However, the Tribunal emphasized that for a product to be excisable, it must result from a manufacturing activity as defined under Section 2(f) of the Central Excise Act, 1944. It was concluded that the sludge and pulper waste, which emerge inevitably during the manufacture of paper, do not result from any incidental or ancillary process to the completion of a manufactured product. Therefore, these by-products cannot be considered excisable goods merely because they are sold for consideration.2. Exemption under Notification No.76/86-CE:The appellants argued that even if the sludge and pulper waste were considered excisable, they would be exempt under Notification No.76/86-CE, which exempts sludge obtained in sewage or effluent treatment plants belonging to municipal corporations, local authorities, or industrial units. However, since the Tribunal concluded that the sludge and pulper waste were not excisable, it did not need to address this exemption in detail.3. Classification under Central Excise Tariff:The lower authorities had classified the sludge and pulper waste under Heading 4707 90 00, which pertains to (recovery of waste and scrap) paper or paper board. The Tribunal found this classification incorrect, noting that the heading relates specifically to waste and scrap of paper or paper board, not to sludge and pulper waste. Thus, the classification under this heading was deemed inappropriate.4. Limitation Period for Raising Demands:The Tribunal noted that one of the appeals involved a demand that was barred by limitation. However, since the appeals were allowed on merits, the Tribunal did not delve into the limitation issue in detail.Conclusion:The Tribunal set aside the impugned orders, concluding that the sludge and pulper waste were not excisable as they did not result from a manufacturing activity. Consequently, the appeals were allowed with consequential relief to the appellants. The decision was pronounced on 07.03.2014.