Aluminium dross and skimmings not treated as manufactured excisable goods; excise liability denied for byproducts.

Aluminium dross and skimmings were held not to qualify as manufactured excisable goods because they are refuse/byproducts, not the result of a skilful transformation into a new and different article. The court reasoned that mere ability to fetch a sale price does not satisfy the marketability or manufacture tests; saleability alone does not establish production by manufacture in India. The decision applied the principle that excise is an incidence of manufacture and that goods must undergo transformation to attract duty, and relied on the requirement that definition and manufacture tests be satisfied conjunctively. Appeal allowed for the assessee.

---

---

Issues: Whether the Explanation inserted in Section 2(d) of the Central Excise Act, 1944 (w.e.f. 10 May 2008) or other amendments result in aluminium dross and skimmings being excisable goods liable to central excise duty.

Analysis: The statutory definitions in Section 2(d) (excisable goods) and Section 2(f) (manufacture) and Section 3 (levy of excise) require assessment of two conjunctive conditions: (i) the item must fall within entries of the First Schedule to the Central Excise Tariff Act, 1985 and be capable of being produced or manufactured in India; and (ii) the item must satisfy the legal test of 'manufacture' meaning a transformation into a new and different article with distinctive name, character or use. Supreme Court authority establishes that mere marketability or presence of an entry in the Tariff Schedule does not alone satisfy the manufacture requirement. The Explanation to Section 2(d) deeming goods to be marketable does not, without more, negate or supplant the manufacture test in Section 2(f). The Tribunal's conclusion treating marketability alone (or the deeming Explanation) as sufficient to render dross and skimmings excisable departs from the conjunctive test established by Supreme Court precedents and fails to identify facts showing a different transformational process that would satisfy Section 2(f).

Conclusion: The Explanation to Section 2(d) does not by itself render aluminium dross and skimmings excisable; both the Section 2(d) and Section 2(f) conditions must be satisfied conjunctively and, on the facts and binding precedents, aluminium dross and skimmings do not meet the manufacture test and are not excisable. The Tribunal's larger Bench decision to the contrary is quashed and set aside.

---