TMI Blog2008 (8) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... esent appeals against Order-in-Original dated 27-11-2001 passed by Commissioner of Central Excise, Indore, confirming demand of duty amounting to Rs. 23,22,806/- on 67.918 MTs of used mercury cleared during the period 14-5-1998 to 19-12-1998 together with interest. The Commissioner also imposed penalty of Rs. 23,22,806/- on the appellants under Section 11AC of the Central Excise Rules, 1944 read with Rule 173Q of the Central Excise Rules, 1944. The seized quantity of 15.688 MTs of used mercury valued at Rs. 29,80,777/- was ordered for confiscation under Rule 173Q ibid, and the Bank Guarantee for Rs. 7,45,000/- executed at the 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 use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that they were disposing of 85 to 90 MTs of the used mercury contained in the cell out of the 96.5 MTs of mercury initially charged prior to 28-2-1986. They had submitted that the used mercury so cleared was the mercury regenerated from the mercury initially charged in the cell on which they have not taken Modvat credit. 9. During the period 14-5-1998 to 19-12-1998, the appellants cleared 67.918 MT of used mercury contained in the cell. They had not paid duty on this quantity of used mercury on the ground that this quantity of used mercury was from and out of that quantity which was initially charged in the cell installed prior to 28-2-1986 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 plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eported in 2005 (192) E.L.T. 187 (T). In NRC's case, the assessee had cleared used mercury obtained from dismounting of caustic soda plant and the Revenue alleged that such mercury was a manufactured product liable to excise duty. The CESTAT categorically held that such product is not a manufactured product and hence not liable to excise duty. (iv) The decision of the Hon'ble Supreme Court in the case of Indian Organic Chemicals Ltd. reported in 1996 (88) E.L.T. 644 (S.C.) supports their submission that there cannot be any manufacture of mercury out of mercury itself. The regenerated mercury and the mercury used as cathode originally are 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epacking from bulk pack to retail pack. (viii) There are following two distinct grounds for the Chapter Note 10 to Chapter 28 being inapplicable to present matter: (a) The containers in which the mercury was filled up were having the indication of the weight of the mercury. Such an indication of weight cannot be treated as labeling or relabelling. This is evident from the meaning of the words "labelling" and "label" as given in the following dictionaries: (i) The Chambers Dictionary - New Edition - By Allied Chambers. Labelling - to fix a label to; to describe by or on a label. (ii) DK Illustrated Oxford Dictionary - By Dorling Kindersley. Labelling (1) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t aside. 15. The ld. J.D.R. advanced the following points in support of the findings of the Commissioner: (i) The loose, bulk UMS (Used Mercury Scrap) generated in the secondary cells and so recovered from these cells was packed in M.S. Drums and labelled (marked) with description of the goods, gross and net weight, serial number of the packages etc. so as to render the same marketable, obviously because the UMS could not be sold in loose, bulk state; (ii) Note 10 to Chapter 28 provides 3 (three) situations amounting to manufacture viz. (a) labelling to render the product marketable; or (b) re-labelling of containers and repacking from bulk 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 emerg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Para 4 "Study of manufacturing process carried out in their Mercury cells unit, revealed that the noticee are engaged in the manufacture of UMS. For manufacture of caustic soda PVM is feed in primary cells where it reacts with brine solution (NaCl). The reaction which took place in the primary cell is as under : - 2NaCl (Sodium Chloride) + 2Hg (Mercury) = 2NaHg (Sodium Amalgam) + Cl 2 (Chlorine) The Chlorine gas produced is sucked out. The Sodium Amalgam (NaHg) is a separate compound, classifiable under heading 2851 of CETA, 1985 (other inorganic compound). NaHg is then passed into secondary cells, wherein a decomposer it reacts with water. Chemical reaction, which takes place is as under:- 2NaHg + 2H 2 O = 2NaOH + H 2 + 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... water, and it amounts to manufacture. Hon'ble Tribunal in their decision in case of Gujarat State Fertilizers Co. Ltd. v. Collector, Central Excise reported in 1990 (47) E.L.T. 76 (T) held as under:- "The ammonia used in the manufacture of molten urea is consumed captively in its manufacture and by virtue of splitting up of residual urea into its original constituents namely ammonia and carbon dioxide a regenerated product 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the fresh Mercury has always been added in the existing Mercury inventory. Therefore, it cannot be said that the UMS cleared during 14-5-1998 to 19-12-1998 was generated out of the Mercury fed in the cells over a decade ago i.e. prior to 1986. Rule 57F(18) provides for payment of duty if the (i) waste has arisen from the processing of inputs; and (ii) the credit of duty in respect of such inputs has been taken by the assessee. In the present case, both 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 " ..... X X X X Extracts X X X X X X X X Extracts X X X X
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