TaxTMI 
TaxTMI 
2008 (8) TMI 237
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....time of release was ordered to be encashed by way of fine in lieu of confiscation. A penalty of Rs. 50,000/- was also imposed on Mr. A.S. Kothari, Vice-President of the appellants under Rule 209A ibid. 2. Heard both the sides. 3. The appellants are, inter alia, engaged in the manufacture of caustic soda and liquid chlorine in their factory. They are also availing themselves of the Modvat credit of the duty paid on inputs used in or in relation to the manufacture of their final product. Prime Virgin Mercury (PMV) is one such input. The said input is used in the Mercury Cells of the unit where caustic soda (NaOH), Chlorine (Cl2) and Hydrogen (H2) are produced/manufactured. The appellants have two sets of Mercury Cells in their unit, out of which old one has been dismantled in 1998. 4. In an electrolytic cell, sodium chloride solution (brine solution) is introduced, which is then subjected to an electric current. Chlorine evolves, which is collected at the anode. Sodium ion is liberated, which reacts with mercury, which acts as moving cathode, to form sodium amalgam. The sodium amalgam is taken to secondary cell, where it reacts with water to give caustic soda, hydrogen and m....
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....-2-1986 and no Modvat credit was availed on this mercury. 10. A show cause notice dated 9-7-1999 was issued to the appellants directing them to show cause as to why an amount of Rs. 23,22,806/- should not be demanded and recovered from them under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A of the Central Excise Act, 1944. The show cause notice also proposed to confiscate a quantity of 15.688 MTs of used mercury recovered and lying with them on 14-1-1999. Further the show cause proposed to impose penalty and confiscate plant, building, machinery etc. used in connection with the alleged manufacture, production, storage, removal or disposal of the mercury. 11. For raising the aforesaid demand of duty, the show cause notice alleged that the appellants had cleared 67.918 MTs of used mercury recovered from the mercury cell and that the same was liable to duty on the following grounds: (a) the used mercury is produced and manufactured by the appellants by the reaction of sodium amalgam with water; (b) repacking of used mercury from the mercury cell into the smaller container would amount to manufacture in view of the Note 10 to Chapter 28. (c) the used....
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....having the same physical and chemical characteristics since the said mercury regenerated is used again as cathode in the primary cell. Therefore, there cannot be any emergence of new product with distinct name, character or use. The fact that sodium amalgam has emerged at the intermediate stage is of no consequence. In view of the aforesaid decision of the Supreme Court, no duty is liable to be paid on used mercury now recovered and cleared from the 32 discarded electrolytic cells. This submission is also supported by the following decisions of the Tribunal: (a) Kolhapur Steels Ltd. v. CCE reported in 1983 (14) E.L.T. 1947 (Tri); (b) Salco Extrusions Pvt. Ltd., Bombay v. CCE reported in 1984 (16) E.L.T. 356. (v) The fact that the used mercury regained in the secondary cell had some impurities in it does not make the used mercury any different from the mercury originally fed into the cell. The name, character and use of used mercury is undisputedly the same as the mercury originally fed into the cell. Therefore, there is no new product emerging in the process. The above decisions of the Supreme Court and the Tribunal apply squarely to the facts of this case. (vi) The Tri....
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.... attach a label to, (2) (usu. Foil. By as) assign to a category (labelled them irresponsible). (iii) Oxford Encyclopedic Dictionary - By Bay Books. Label - 1. Slip of paper, card, linen, metal etc., for attracting to object and indicating its nature, owner, name, destination, etc., adhesive stamp. The plain reading of the aforesaid meaning of the word "labeling" clearly shows that the term "labelling" would not cover the activity of marking the weight of the product contained in the container. (b) It is undisputed that they had cleared the used mercury in 300 Kg. drums. The used mercury was removed from the electrolytic cell, transferred into small flasks and thereafter once again transferred into drums of 300 Kg. in which they were ultimately cleared. Such 300 Kg. drums cannot be termed as "retail packs" by any stretch of imagination. They have provided ample evidence to the effect that mercury is sold universally in flasks having capacity of 34.5 Kg. (ix) The provisions of Rule 57F(18) of the Central Excise Rules, 1944 are not applicable, as held by the Tribunal in NRC's case. Rule 57F(18) read as under: "Any waste, arising from the processing of inputs, in resp....
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.... to retail packs to render the product marketable or (c) adoption of any other treatment to render the product marketable. The case laws heavily relied upon by the appellants, holding that to amount to manufacture, both the relabelling and repacking from bulk must exist, is not applicable to the present case as the facts are quite different in the present case. First and the last part of the subject note i.e. (a) and (c) above, cover the present case. (iii) Undisputedly, the chemical reaction takes place resulting in the emergence of the subject product UMS, as brought out in paras 4 and 28 of the order passed by the Commissioner. In all the cases relied upon by the appellants, the chemical reaction was absent. Thus, the UMS so generated after the chemical reaction, is a new product, attracting fresh duty in the light of the Tribunal's decision in the case of Gujarat State Fertilizers reported in 1990 (47) E.L.T. 76 (T). In this case, the names of the input and the emerging product are also different viz PYM (Prime Virgin Mercury) and UMS (Used Mercury Scrap) showing that both these products are known differently in the trade parlance. It is on record that 68 MTs of UMS....
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....econdary cells, wherein a decomposer it reacts with water. Chemical reaction, which takes place is as under:- 2NaHg + 2H2O = 2NaOH + H2 + 2Hg (Sodium Amalgam) + (Water) = (Caustic Soda) + (Hydrogen) + (Mercury) The Caustic Soda and Hydrogen gas are taken out and the Mercury recovered is recycled into the primary cells, where process continues. Thus in Primary Cells, Mercury is totally consumed and loses its identity. At this stage Sodium Amalgam (NaHg) which is a separate classifiable excisable commodities come into existence. Since manufacture of Caustic Soda is a continuous process, Sodium Amalgam emerges at intermediate product, and it is further captively consumed for manufacture of Caustic Soda. In this process Hydrogen gas is produced and Mercury is regenerated. Regenerated Mercury is again captively used/consumed in the process cycle. The UMS produced/recovered is an excisable....
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....uct emerges albeit with the same name and chemical composition. The ammonia so obtained is not the original ammonia that was used in the manufacture of molten urea, The ammonia regenerated after decomposition of molten urea is a new product, attracting fresh excise duty." 17. We find that although the Tribunal's decision in Gujarat State Fertilizers reported in 1990 (47) E.L.T. 76 (T) has been indirectly overruled by the Supreme Court but it was not overruled on the grounds of manufacture or on the question of excisability of regenerated Ammonia. Hence, the ratio of this decision is still applicable to the facts of the present case. 18. The Tribunal's decision in the case of NRC Ltd. reported in 2005 (192) E.L.T. 187 (T) is not applicable to the facts of present case for the following reasons: (i) Para 3 of the Tribunal's decision indicates that in the case of NRC Ltd., Modvat credit was sought to be denied/recovered, while in the present case the Central Excise duty on UMS is sought to be recovered. (ii) The said Tribunal decision proceeded on relying on Apex Court's decision in case of Union of India v. Ahmedabad Electricity Co. Ltd. reported in 2003 (158) E.L.T. 3 (S....
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....these requirements are satisfied as UMS has arisen from the processing of PVM in respect of which credit has been taken. Once the appellants avail of the benefit of Modvat credit under the Modvat Credit Rules, all the provisions dealing with Modvat credit will be applicable and it cannot be claimed by them that the waste products are not manufactured and as such duty is not chargeable on such products. The benefit has to be availed of with the resultant liability. 21. Chapter Note 10 to Chapter 28 reads as under: "In relation to product of this chapter, labelling or relabelling and packing from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to "manufacture". In this case, Mercury recovered by decomposition of Sodium amalgam in secondary mercury cells was stored in tonners having capacity of storing 7.5 MTs to 8 MTs Mercury. Before dispatch, the Mercury was taken out from tonners to a tray with the use of compressor, and them from tray, Mercury was filled into small flasks having capacity of 34.5 kgs to 38 kgs. At this stage, the impurities contained in the Mercury were removed with water and ....