Marketability of waste polymer supports duty, but assessable value needs reprocessing deduction and penalty and interest fail.

Waste ABS polymer was held marketable because it was sold in the market and used for reprocessing, so excise duty remained payable on that basis. Its assessable value, however, had to be recomputed after allowing deduction for reprocessing cost, with the earlier allowance of Rs. 5 per kg applied in the assessee's favour. Penalty was set aside because the case involved short levy without suppression or clandestine conduct, and interest could not be sustained since it was not covered by the show cause notice.

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Issues: (i) whether waste ABS polymer was marketable and therefore liable to excise duty; (ii) whether the assessable value of the waste could be taken at the value of processed granules without deduction for reprocessing cost; (iii) whether penalty was sustainable; and (iv) whether interest could be demanded without a corresponding show cause notice.

Issue (i): whether waste ABS polymer was marketable and therefore liable to excise duty.

Analysis: The record showed that the waste ABS polymer was used for reprocessing into granules and was also sold in the market. No material was produced to establish any special characteristic making the waste non-marketable. Mere non-sale by the assessee was held to be irrelevant where marketability otherwise stood established.

Conclusion: The waste ABS polymer was marketable and the duty demand on that score was not displaced.

Issue (ii): whether the assessable value of the waste could be taken at the value of processed granules without deduction for reprocessing cost.

Analysis: The waste was only an input for the final reprocessed granules, and reprocessing necessarily involved cost. The value of the waste therefore could not be equated with the value of the finished granules without allowing a proper deduction towards processing expenses. A deduction of Rs. 5 per kg. had been allowed in an earlier order and there was no justification for refusing the same deduction for the present period.

Conclusion: The assessable value had to be recomputed after allowing deduction of Rs. 5 per kg. towards reprocessing cost, in favour of the assessee.

Issue (iii): whether penalty was sustainable.

Analysis: The matter was one of short levy. The notice had been issued within the normal period, and there was no allegation or material showing suppression of facts with intent to evade duty. The activities were not clandestine.

Conclusion: The penalty was not justified and was set aside, in favour of the assessee.

Issue (iv): whether interest could be demanded without a corresponding show cause notice.

Analysis: A demand in adjudication cannot travel beyond the scope of the show cause notice. Since interest had not been claimed in the notice, the levy of interest could not be sustained.

Conclusion: The demand for interest was unsustainable and was set aside, in favour of the assessee.

Final Conclusion: The dispute on duty survived only to the limited extent of fresh quantification after allowing the reprocessing deduction, while the penalty and interest demands failed.

Ratio Decidendi: Marketability may be inferred from actual market sale and use for reprocessing; assessable value must reflect deductions for processing cost where the goods are not the final product; and no penalty or interest can be sustained absent suppression or a notice covering such demand.

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