No duty on accounted process loss during filling where unavoidable manufacturing waste is non-excisable and remission applies.

Duty was not payable on liquid chlorine lost during the unavoidable special filling process used to make the product marketable, because the loss occurred within the factory, was fully accounted for, and was not due to clandestine removal. The resulting sniff gas was treated as non-excisable waste, and remission was therefore required for the accounted loss. The assessee succeeded on the duty liability arising from process loss during filling, and the departmental challenge to the relief for the later period failed.

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Issues: Whether duty was payable on the quantity of liquid chlorine lost during the special filling process into cylinders and whether remission should be granted for such accounted loss.

Analysis: Liquid chlorine, though a manufactured product and entered in RG-1, could not be removed from the factory in marketable form without the special filling process. The loss occurred within the factory during the unavoidable process of making the product marketable, was fully accounted for, and was not the result of clandestine removal. The resulting sniff gas was treated as non-excisable waste, supported by the departmental circular relied upon in the decision.

Conclusion: No duty was payable on the loss arising during the special filling process, and remission ought to be granted for the accounted loss. The issue is decided in favour of the assessee.

Final Conclusion: The assessee succeeded on the duty liability arising from process loss during filling, while the departmental challenge to the relief granted for the later period failed.

Ratio Decidendi: Duty is not exigible on an accounted, unavoidable loss occurring in the course of completing manufacture and rendering the goods marketable, where the lost residue is non-excisable waste and there is no clandestine removal.

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