Recovered sludge from crude soya bean oil is not excisable goods where no manufacturing process creates a new product.

Sludge or soya gum settled in storage of crude soya bean oil, and oil recovered from it by decantation or filtration, were held not to constitute excisable goods. The Tribunal followed its earlier order in the assessee's own case and reasoned that the recovered material was only impurities separated from the original crude oil during storage, without any manufacturing process or emergence of a new and distinct product. On that basis, the demand for central excise duty was not sustainable and the assessee's claim was allowed.

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Issues: Whether sludge or soya gum settled in the storage tank of crude soya bean oil, and the oil recovered from it by decantation or filtration, constituted excisable goods manufactured by the assessee and were liable to central excise duty.

Analysis: The appeal was decided by following the Tribunal's earlier order in the assessee's own case involving an identical dispute. The recovered material was found to be only a part of the crude oil's impurities that settled during storage and did not undergo any manufacturing process. The separation of some oil from the sludge did not bring into existence a new product distinct from the original crude oil. The relevant chapter note and explanatory material were relied upon to hold that the residue and recovered oil were not goods emerging from manufacture.

Conclusion: The sludge and recovered oil were not excisable goods and no excise duty was payable on them; the claim of the assessee was allowed.

Final Conclusion: The impugned demand could not be sustained, and the assessee succeeded in the appeal.

Ratio Decidendi: A residue or recovered portion of the same input material, which does not undergo a manufacturing process and does not result in a new and distinct commodity, is not liable to excise duty as goods manufactured by the assessee.

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