Double excise levy barred where input duty is already reflected in the finished product from a composite manufacturing process.

Excise duty cannot be levied twice on the same input when a composite manufacturing process has already brought that input to duty through the finished product. Pig iron used to produce steel ingots and incidental steel melting scrap was treated as part of one uniform process, and the duty paid on the ingots fully reflected the input. Because no reliable segregation of the pig iron between the two outputs was possible, the emergence of an exempt by-product did not justify a fresh levy on the same input. The demand on the alleged embedded pig iron in the scrap was therefore not sustainable.

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Issues: Whether excise duty could be demanded again on the pig iron input allegedly embedded in steel melting scrap when the same input had already been fully accounted for in the duty paid on steel ingots produced in the same composite manufacturing process.

Analysis: The input of pig iron was used in a single, uniform process that yielded steel ingots and incidental steel melting scrap. The duty structure and the set-off notification showed that the object was to secure one full levy on the input as ultimately reflected in the duty paid on the finished steel ingots. Because no reliable bifurcation of the pig iron between the two emerging products was possible on the facts, and because the steel ingots had borne full duty without set-off, the same input could not again be subjected to duty merely because a by-product exempted by notification also emerged. The demand therefore would result in taxing the same input twice, which was impermissible.

Conclusion: The demand on the supposed embedded pig iron in steel melting scrap was not sustainable and was set aside in favour of the assessee.

Ratio Decidendi: Where an input used in a composite manufacturing process is fully brought to duty through the excise paid on the principal finished product, no further duty can be levied on the same input merely because an exempt incidental by-product also emerges from the same process.

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