1999 (11) TMI 230 - AT - Central Excise

Summary

Issues Involved:
1. Whether "spent earth" is liable to excise duty or not.

Summary:

Issue: Whether "spent earth" is liable to excise duty or not.

The necessity of the reference arose due to conflicting decisions of various Benches of the Tribunal regarding the exigibility of spent earth. Under the erstwhile Tariff 1944, the consistent view was that spent earth is not excisable as it is not a manufactured product. However, after the enforcement of the new Tariff 1985, contradictory decisions emerged.

The learned Counsel for the assessees contended that spent earth is not a manufactured product but simply waste emerging in the course of refining oils with activated fuller's earth. Placing it in a specific Tariff sub-heading in the new Tariff 1985 does not alter its basic character. The learned JDR argued that spent earth is a by-product resulting from the manufacture of oils and is covered by sub-heading No. 1507 of the Tariff, making it excisable and dutiable.

Section 3 of the Central Excise Act levies duty on excisable goods mentioned in the Schedule, provided they are produced and manufactured. The test of manufacture and marketability must be satisfied before any goods can be subjected to excise duty. The expression "manufacture" as defined by Section 2(f) of the Central Excise Act includes any process incidental or ancillary to the completion of a manufactured product.

The Tribunal examined the nature of spent earth, concluding that it is not a manufactured product but merely the residue of activated clay used for decolouring and bleaching oils. The processes of bleaching and decolouring cannot be equated with manufacture. The Tribunal also noted that spent earth is not a by-product resulting from the manufacture of oils but merely the second name of activated clay when it loses its absorbent character.

The Tribunal rejected the argument that spent earth is excisable simply because it is covered by a specific sub-heading in the new Tariff. The goods must satisfy the test of manufacture before being subjected to excise duty, even if they are mentioned in the Tariff Schedule. The Tribunal concluded that spent earth is not dutiable as it does not satisfy the test of manufacture, despite being marketable.

The reference was answered accordingly, and appeals involving the excisability of spent earth were to be posted before the concerned Bench for final disposal.