1991 (5) TMI 176 - AT - Central Excise

Sulphur Sludge Not Dutiable under CET Act: Tribunal Rules in Favor of Appellants

The Tribunal held that 'sulphur sludge' arising as waste during manufacturing is not dutiable under Chapter No. 3801.90 of the CET Act, 1985. Relying on ... Excisability of waste and scrap arising during manufacture - goods as 'by-product' versus industrial waste - non-manufactured material not liable to duty under Section 2(f) and Section 3 of the Central Excises and Salt Act - marketability criterion for excisabilityExcisability of waste and scrap arising during manufacture - goods as 'by-product' versus industrial waste - marketability criterion for excisability - Whether 'sulphur sludge' arising during the appellant's manufacture process is excisable as goods and liable to duty. - HELD THAT: - The Tribunal applied the ratio of earlier decisions considering waste/scrap that arise incidentally in the process of manufacture. It recorded that the sulphur sludge was not manufactured or sold but emerged as waste and scrap during melting of sulphur for production of sulphuric acid and related products. The sludge lacked the distinguishing name, character or use of the finished commodity, was not a product of deliberate manufacture, and was not a marketable commodity capable of being measured, weighed or accounted for as goods. On those grounds and following the principles in the cited authorities, the sulphur sludge cannot be treated as goods or by-product attracting excise duty under the statutory definitions in Section 2(f) and the charging provisions in Section 3 of the Central Excises and Salt Act.Impugned demand set aside; sulphur sludge held not excisable and appeal allowed.Final Conclusion: The Tribunal allowed the appeal, holding that the sulphur sludge arising as waste during manufacture is not excisable as goods and the Collector's demand is set aside. Issues: Classification of 'sulphur sludge' under Chapter No. 3801.90 of CET Act, 1985 and its dutiability under Section 9(2) read with Section 11A of the Central Excises and Salt Act.In this case, the appeal was filed against the Order-in-Original confirming the duty demand on 'sulphur sludge' under Chapter No. 3801.90 of the CET Act, 1985. The appellants argued that the product should not be dutiable as it arose as 'waste and scrap material' during the manufacture of sulphuric acid in their factory. The appellants relied on previous rulings of the Delhi High Court and the Tribunal to support their position. The learned SDR, on the other hand, reiterated the findings of the Collector but acknowledged that the product in question was not manufactured but arose as waste and scrap during the manufacturing process. With the consent of both sides, the appeal was taken up for final disposal by granting a stay.The Delhi High Court ruling in the case of Modi Rubber Ltd. established the principle that waste/scrap obtained during the manufacturing process, without transforming into a new article, is not excisable under the Central Excises and Salt Act. The Court emphasized that waste and scrap lack distinguishing characteristics of goods and cannot be subject to duty. The Tribunal's decision in the case of Asiatic Oxygen Ltd. regarding carbide sludge reiterated that industrial waste, not a marketable commodity, is excisable. The Tribunal further considered spent bleaching earth as waste material, supporting the view that such materials are excisable. In the present case, the Tribunal found that 'sulphur sludge' emerged during the production of sulphuric acid and other products, akin to waste and scrap material, lacking the characteristics of a manufactured item. Therefore, the Tribunal concluded that 'sulphur sludge' does not qualify as goods under the Central Excises and Salt Act, and the duty demand on it was unjustified. The impugned order was set aside, allowing the appeal in favor of the appellants.