2026 (3) TMI 904 - AT - Central Excise

Taxability of manufacturing waste: Dolochar from sponge iron is not an excisable manufactured good, so duty disallowed.

Dolochar produced during sponge iron manufacture does not qualify as a distinct manufactured excisable commodity because it is an unavoidable waste/by ... Excisability of goods - Manufacturer of Sponge Iron falling under S.H.7203.10.00 - Determination of dolochar, arising as waste in sponge iron - manufactured excisable commodity within the meaning of Sections 2(d) and 2(f) - Whether in the course of manufacture of final product of Sponge Iron, dolochar which has been generated during the process, is liable to pay duty, or not ? Excisability of process-generated waste - HELD THAT:- In the process of manufacture of Sponge Iron, Coal Ashes, Char (burnt remains of Coal), devolatilized Dolomite, Iron particles etc. are generated which is nothing but ‘waste’ which is also known as ‘Dolochar’ in the trade and it has no primary use. The ‘Dolochar’ generated in the process of manufacture of Sponge Iron are in the nature of unavoidable/ inevitable waste which fetches some price when sold out in the market. The Tribunal held that dolochar arising in the course of sponge iron manufacture is an unavoidable waste/coal char and not a distinct manufactured excisable commodity. The conclusion was reached by following earlier coordinate decisions of this Tribunal (including M/s Alok Steel Industries Ltd. [2020 (1) TMI 581 - CESTAT KOLKATA] and M/s Jharkhand Ispat Pvt. Ltd.[2022 (2) TMI 598 - CESTAT KOLKATA]) which determined that dolochar is akin to waste/coal char and not subject to central excise; a contrary coordinate decision was treated as per incuriam and not followed. The Tribunal therefore found no sustainable basis for a duty demand on dolochar. [Paras 6, 7] No duty is payable on dolochar generated during the manufacture of sponge iron; the demand is not sustainable Final Conclusion: The appeal is allowed; the impugned demand for excise duty on dolochar is set aside and no duty is payable on dolochar generated in the course of manufacture of sponge iron. Issues: Whether dolochar generated during the course of manufacture of sponge iron is liable to central excise duty as a manufactured excisable good.Analysis: The issue requires determining if dolochar constitutes a distinct manufactured excisable commodity within the meaning of Sections 2(d) and 2(f) and attracts levy under Section 3 of the Central Excise Act, 1944. Coordinate Tribunal decisions hold that dolochar arising as waste in sponge iron manufacture is not a manufactured product but a waste item predominantly comprising coal/char and used as fuel; such decisions have been followed and earlier contrary rulings found per incuriam. The question involves application of the taxable event of manufacture and classification principles; where goods are unavoidable waste of the manufacturing process and do not emerge as a distinct excisable product, duty is not attracted. Precedents relied upon by the Tribunal establish that dolochar is akin to fuel/char and not a new manufactured excisable commodity, and therefore duty demand cannot be sustained.Conclusion: Dolochar generated in the course of manufacture of sponge iron is not liable to central excise duty; the demand, interest and penalty imposed are set aside and the appeal is allowed with consequential reliefs, if any.