Duty on clearance of used or contaminated input goods was upheld where mercury was removed after manufacture.

Clearance of mercury used in the manufacture of caustic soda, even after a change in process and in contaminated form, was treated as clearance of the same merchandise used in manufacture and held liable to central excise duty. The Tribunal noted that the facts aligned with cited decisions on duty liability for such clearance, and observed that if CENVAT credit had been taken on the mercury, removal would also trigger duty under Rule 3(4) of the CENVAT Credit Rules, 2001. The penalty challenge under Section 11AC was not sustained in light of the duty liability on the clearance.

---

---

Issues: Whether mercury used in the manufacture of caustic soda, when cleared after change of process, was liable to central excise duty and whether penalty under Section 11AC was sustainable.

Analysis: The cleared mercury was treated as the same merchandise used in the manufacturing process, albeit in contaminated form, and the facts were found to be on par with the cited decisions holding such clearance liable to duty. The Tribunal also noted that, if CENVAT credit had been availed on the mercury, the clearance would attract duty under Rule 3(4) of the CENVAT Credit Rules, 2001. The challenge to penalty did not survive in view of the finding that duty was payable on the clearance.

Conclusion: Clearance of the mercury attracted central excise duty, and the appeal against the demand and penalty failed.

Final Conclusion: The demand of duty on clearance of mercury was upheld and the appeal was rejected.

Ratio Decidendi: Clearance of used or contaminated input goods after their use in manufacture is liable to duty when the goods are removed as such or in a form attracting the applicable CENVAT reversal provision.

---