Excisability and penalty enhancement: a sold chemical residue was marketable, but penalty could not be increased without revenue challenge.

A chemically identifiable residual product of industry was treated as excisable and marketable because chemical testing showed it to be an organic compound covered by Chapter 38, and its actual sale supported marketability. The extended period of limitation was held invocable since no prior declaration or departmental knowledge of clearance was shown. However, enhancement of the penalty under Rule 173Q was unsustainable because the original penalty had not been challenged by the revenue, so the appellate authority could not increase it. The demand and finding of excisability were upheld, while the penalty remained confined to the original amount.

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Issues: (i) whether waste high boiler was excisable and marketable, and whether the demand was barred by limitation; (ii) whether the enhancement of penalty under Rule 173Q was sustainable.

Issue (i): whether waste high boiler was excisable and marketable, and whether the demand was barred by limitation.

Analysis: The product, though described as waste high boiler, was found on chemical test to be an organic compound and a residual product of chemical industry covered under Chapter 38 of the Central Excise Tariff Act, 1985. It was sold by the assessee during the relevant period, which negatived the plea of non-marketability. On limitation, no evidence was produced to show prior declaration or knowledge of the department regarding its clearance, and removal without intimation attracted the extended period.

Conclusion: The product was excisable and marketable, and the extended period of limitation was invocable, against the assessee.

Issue (ii): whether the enhancement of penalty under Rule 173Q was sustainable.

Analysis: The original adjudication had imposed penalty of Rs. 15,000 under Rule 173Q of the Central Excise Rules, 1944, and the revenue had not challenged that order. In absence of any appeal by the revenue seeking enhancement, the Commissioner (Appeals) could not enhance the penalty.

Conclusion: The enhancement of penalty under Rule 173Q was unsustainable and was set aside in favour of the assessee.

Final Conclusion: The demand and finding of excisability were sustained, but the penalty under Rule 173Q was confined to the original amount, resulting in only partial relief to the assessee.

Ratio Decidendi: A chemically identifiable residual product of industry that is sold in the market is excisable and marketable, and penalty enhancement cannot be made in the absence of a challenge by the revenue to the original quantum of penalty.

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