Manufacture test for excise duty bars levy on spent solvents and sludge cleared by a 100% EOU

Excise duty on spent solvents and sludge cleared by a 100% EOU depends on whether the items are manufactured goods within the statutory definition of excisable goods. Mere inclusion in the tariff is insufficient; duty arises only if processing results in a new and distinct article with a different name, character or use. Applying this principle and the cited precedent, the clearances of spent solvents and sludge did not satisfy the test for levy, so the duty demand could not be sustained.

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Issues: Whether spent solvents and sludge cleared and sold by a 100% EOU were liable to central excise duty as excisable goods.

Analysis: The governing principle applied was that excise duty is attracted only where goods are manufactured and answer the statutory definition of excisable goods. Mere inclusion of an item in the tariff is not sufficient. Manufacture requires a process that brings about a transformation resulting in a new and distinct article with a different name, character or use. The cited precedent was followed to hold that the clearances in question did not satisfy the test for levy of duty.

Conclusion: The disputed clearances of spent solvents and sludge were not chargeable to excise duty, and the orders confirming duty demand could not be sustained.

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