Spent mercury as waste catalyst not excisable, as catalyst is not raw material and no manufacture occurred.

Spent mercury cleared from a caustic soda plant after conversion from the mercury process to the membrane process was treated as waste catalyst, not as fresh input or manufactured goods. Because a catalyst is not raw material and spent catalyst does not arise by transformation of raw material into excisable goods, the provision on waste from processing of inputs did not apply. As excise duty is attracted only to goods produced or manufactured, the spent mercury was held not liable to central excise duty. The consequential demand for duty, interest and penalty was therefore unsustainable.

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Issues: Whether the clearance of spent mercury, being a used catalyst arising from the dismounting of the caustic soda plant, was liable to central excise duty and consequential demand of duty, interest and penalty.

Analysis: The mercury had been used as a catalyst in the caustic soda manufacturing process and the evidence showed that the plant had been switched over from the mercury process to the membrane process. The cleared material was spent mercury and not fresh input mercury. The provision dealing with waste arising from processing of inputs applied only where the waste arose from inputs in the nature of raw material. A catalyst is not raw material, and spent catalyst does not emerge by transformation of a raw material into manufactured goods. Since excise duty is attracted only to goods produced or manufactured, spent mercury in the form of waste catalyst could not be treated as excisable goods. The demand based on recovery of duty, interest and penalty was therefore not sustainable.

Conclusion: The demand was unsustainable and the Revenue's challenge failed; the clearance of spent mercury as waste catalyst was not liable to central excise duty.

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