TMI Blog1999 (11) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed consistent view in Hindustan Lever Ltd. v. CCE, 1985 (22) E.L.T. 232 (Tribunal), Modi Vanaspati Mfg. Co. v. CCE, 1990 (47) E.L.T. 57 (Tribunal) that spent earth is not excisable being not a manufactured product. 3. But after the enforcement of the new Tariff 1985, the different Benches of the Tribunal had rendered contradictory decisions on this point. In Kashmir Vanaspati Ltd. v. CCE, 1996 (13) RLT 670 (Tribunal), Shriram Foods Fertiliser Ltd. v. CCE, Final Order Nos. 126 and 127/96-C, CCE v. Kusum Products Ltd., 1996 (18) RLT 32 (Tribunal), CCE v. Mehta Vegetable Products, 1996 (93) E.L.T. 229 (Tribunal), the Benches of the Tribunal had taken the view that spent earth is not excisable, by following the ratio of the law laid down by the Apex Court in Indian Aluminium Co. Ltd., 1995 (77) E.L.T. 268 (S.C.). However, the contrary view that the spent earth is excisable, as the same stands covered by the specific sub-heading No. 1507 of the new Tariff, had been taken by the Benches of the Tribunal in CCE v. Oswal Vanaspati, 1994 (70) E.L.T. 236, CCE v. Tata Oil Mills Co. Ltd., 1996 (85) E.L.T. 391. 4. Faced with all the above referred for and against decisions of the various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The test of manufacture has to be satisfied before any goods can be subjected to excise duty. Rather the expression produced or manufactured has been explained by the Apex Court in Moti Laminates Ltd. v. CCE, Ahmedabad, 1995 (76) E.L.T. 241 (S.C.) to mean that the goods so produced must also satisfy the test of marketability. Therefore, now two tests - one of manufacture and other of marketability, have to be satisfied before subjecting any goods to levy of excise duty. 8. The expression manufacture stands defined by Section 2(f) of the Central Excise Act as under :- manufacture includes any process; - (i) incidental or ancillary to the completion of manufactured product; and (ii) which is specified in relation to any goods in the Section or Chapter notes of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture, and the word manufacture shall be construed accordingly. 9. This expression has also been interpreted by the Apex Court in various judgments. In Union of India others v. Delhi Cloth General Mills, 1977 (1) E.L.T. (J 199) the Apex Court has interpreted this expression manufacture as under :- The word ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is residue/remains of the activated clay. 13. The activated clay is not used for manufacturing edible oils. It is only used for deodouring, bleaching and decolouring of oils. These processes of bleaching and decolouring etc. cannot be equated with that of manufacture under the law. In Union of India Ors. v. Delhi Cloth General Mills (supra), the Apex Court while defining the expression manufacture as used in Section 2(f) has ruled that this expression cannot be equated to processing. Therefore, spent earth cannot be said to be a manufactured product. It is only another name of activated clay, when that clay loses its absorbent character, strength during the course of refining and bleaching the edible oils. 14. It is in fact the same earth which is once initially known as activated clay/earth and which after losing its absorbent character in the process of refining the edible oil by absorbing the impurities and traces of oil therefrom becomes known as spent earth . Therefore, it cannot be concluded that it is a manufactured product. 15. The argument of the learned SDR that spent earth is a by-product resulting from the manufacture of the edible oils cannot be accepte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd then by the High Court. The Apex Court also dismissed the appeals of the Revenue. The question regarding the exigibility of the acid sludge was neither directly or indirectly in issue before the Apex Court in that case. The Apex Court had nowhere observed that acid sludge being the by-product was liable to levy of excise duty. The set off claimed by the Bharat Petroleum, in that case, was also not in respect of the excise duty, but the sales tax on the product, acid sludge. Such is not the position in the case on hand. Here, as observed above, spent earth is not a manufactured product and it cannot even be termed as a by-product. The observation reproduced above regarding manufacture was made in the light of the definition of that word in the Sales Tax Act. That definition differs from the one given in the Excise Act. 17. Similarly, the opinion expressed by the Larger Bench of the Tribunal in CCE v. Keti Chemicals, 1999 (113) E.L.T. 689 on which also heavy reliance has been placed by the SDR to contend that spent earth is also a by-product, is of no avail to the Revenue. In that case, the assessees were manufacturer of acid slurry and detergent powder and one of the raw mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal is right in saying that the diluted Sulphuric Acid, that is, the liquid which remains after user, cannot be said to have been manufactured by the respondent and, therefore, no duty can be levied thereon. This view expressed by Their Lordships gives a quietus to the issue that a substance used in the manufacture of another when gets changed in its character or properties will not become a by-product of the manufacturing process. 19. For purifying water to make it potable it is passed through sand and charcoal. By deposit of waste and other impurities on account of long use the sand and charcoal will lose its potency to purify water any further. Such sand and charcoal cannot, by any stretch of imagination, be considered as the outcome of any manufacturing process. In this case, we have no doubt that no manufacturing process takes place. Likewise, activated earth is used only to bleach and purify oil which is passed through it. The earth loses its efficacy to purify and becomes spent earth. This is not the outcome of any manufacturing process. 20. Similarly, the view of the Tribunal in CCE, Vadodara v. India Gelatine and Chemical, 1996 (88) E.L.T. 425 that sludge, dust a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Section is in addition to any other duty imposed under the Act. But this view of the Apex Court was subsequently doubted in Hyderabad Industries Ltd. Anr. v. Union of India - 1999 (108) E.L.T. 321 (S.C.) = 1999 (32) RLT 541 by the another Bench of the Apex Court as is clear from para 14 of the judgment and later on overruled by the Constitution Bench. Moreover the question whether the goods could be subjected to levy of excise duty even if it did not satisfy the test of manufacture and marketability, was not at all in issue before the Apex Court in Khandelwal Metal Ind. Ltd. Therefore, the observations made therein and referred to above do not advance the case of the Revenue before us. 22. Similarly, the view taken by the Bench of the Tribunal in HMT Ltd. v. CCE, Final Order No. 793-794/85-C, dated 16-12-1986 by following the above referred observations of the Apex Court in Khandelwal Metal Ind. Ltd. case, that moly sludge arising in the process of manufacture of filament, tungsten wires is a by-product and liable to pay excise duty, cannot be attached any legal value when the view of the Apex Court was not accepted in Hyderabad Industries Ltd. case (supra) and in fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds mention in a specific or a residuary sub-heading or a heading of the Schedule in the Tariff still it has to satisfy the test of manufacture before it can be subjected to levy of excise duty. If it is not a manufactured good or article, no excise duty can be levied thereon, even if finds mention in the Tariff Schedule. 25. The Apex Court has laid down two criteria for levy of excise duty, the first being that goods so produced must be a distinct commodity known as such in common parlance or to the commercial community for the purpose of buying and selling and the second being marketability (Moti Laminates Pvt. Ltd.). Therefore, not only one test, that is of manufacture or produce, but also another of marketability also to be satisfied, while determining the excisability and dutiability of the goods. By merely bringing the goods in a specific heading/sub-heading of the Tariff Schedule, the goods cannot be subjected to the levy of excise duty. In Hyderabad Industries Ltd. v. Union of India, 1995 (78) E.L.T. 641, the Apex Court in this regard has also ruled that Tariff Schedule by placing the goods in specific or general category does not alter the basic character of leviabili ..... X X X X Extracts X X X X X X X X Extracts X X X X
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