Spent solvent residue is not excisable manufacture, and a duty demand cannot be sustained on an uninvoked charging provision.

Spent solvent residue arising from repeated use in bulk drug manufacture was not treated as a distinct excisable commodity, and its clearance from the factory did not amount to manufacture under Section 2(f) of the Central Excise Act, 1944 read with Chapter Note 1(a) to Chapter 29. The Tribunal applied the earlier line of decisions on the same facts and held the duty demand unsustainable on that ground. For the post-10-05-2008 period, the demand also failed because the show cause notices invoked only Section 2(f) and did not rely on Section 2(d); the Revenue could not sustain the demand on an uninvoked basis. The impugned demand was set aside.

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Issues: (i) Whether the recovered mixture of spent solvents cleared from the factory constituted manufacture and excisable goods exigible to central excise duty under Section 2(f) of the Central Excise Act, 1944 read with Chapter Note 1(a) of Chapter 29 of the First Schedule to the Central Excise Tariff Act, 1985; and (ii) whether the demand for the post-10-05-2008 period could be sustained when the show cause notices invoked Section 2(f) of the Central Excise Act, 1944 and not Section 2(d) of that Act.

Issue (i): Whether the recovered mixture of spent solvents cleared from the factory constituted manufacture and excisable goods exigible to central excise duty under Section 2(f) of the Central Excise Act, 1944 read with Chapter Note 1(a) of Chapter 29 of the First Schedule to the Central Excise Tariff Act, 1985.

Analysis: The recovered mixture of spent solvents arose during repeated use of solvents in the manufacture of bulk drugs, after which the solvents became unfit for further use and were sold as such. The dispute had already been examined for earlier periods on the same facts, and the Tribunal treated the issue as concluded by the earlier line of decisions holding that such spent solvent residue is not a distinct excisable commodity and that its clearance does not amount to manufacture within Section 2(f). The reasoning was applied consistently to the present period, and the demand based on manufacture failed on the same footing.

Conclusion: The recovered mixture of spent solvents was not liable to central excise duty as manufacture of excisable goods under Section 2(f) was not established; the finding is in favour of the assessee.

Issue (ii): Whether the demand for the post-10-05-2008 period could be sustained when the show cause notices invoked Section 2(f) of the Central Excise Act, 1944 and not Section 2(d) of that Act.

Analysis: For the later period, the Revenue relied upon the widened definition of excisable goods under Section 2(d), but the show cause notices did not invoke that provision and proceeded only on the theory that the process amounted to manufacture under Section 2(f). Since the demand had to stand or fall on the grounds expressly taken in the notices, and the manufacture theory had already been rejected, the invocation of Section 2(d) could not salvage the demand.

Conclusion: The post-10-05-2008 demand was unsustainable because Section 2(d) was not invoked in the notices; the finding is in favour of the assessee.

Final Conclusion: The impugned order confirming the demands was set aside and the appeal succeeded, as the spent solvent clearances were held not to attract central excise duty on the grounds raised by the department.

Ratio Decidendi: A residue or spent solvent arising from repeated use in manufacture, which is not shown to emerge as a distinct excisable commodity on the manufacture theory pleaded in the notice, cannot be subjected to duty merely by later reliance on an uninvoked charging basis.

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