2004 (6) TMI 416 - AT - Central Excise

Summary

Issues:
1. Classification of the product under sub-heading 2803.00 of the CETA Schedule.
2. Whether the commodity in question can be classified as "Sludge" for excise duty purposes.
3. Applicability of Notification No. 76/86-C.E., dated 10-2-1986 to the commodity.

Classification under sub-heading 2803.00:
The lower appellate authority confirmed duty demands on "Carbon Sludge/Dust" generated in the Effluent Treatment Plant (ETP) and cleared without payment of duty. The demand was based on classification under sub-heading 2803.00 of the CETA Schedule. Authorities relied on a Chemical Examiner's report, dictionaries, and encyclopedias to assert that the commodity is not "Industrial Effluent" and is classifiable under sub-heading 2803.00. The Chemical Examiner's report described the commodity as an aqueous paste of Carbon Dust with impurities, not mud, and essentially carbon in powder form. The appellants argued it was only Sludge, citing a Supreme Court judgment and exemption under Notification No. 76/86-C.E., S. No. 21.

Classification as "Sludge" for excise duty:
The Department argued that for a commodity to be classified as Sludge, it must be semi-solid/semi-liquid muddy material, which the commodity in question did not contain. It was primarily carbon mixed with water and impurities, classifiable under sub-heading 2803.00. The appellants invoiced the item as "Carbon Sludge/Dust" and marketed it during the dispute period, contradicting claims of non-marketability. The Tribunal found the product described as "Carbon Sludge/Dust" by the appellants in their documents. The Chemical Examiner's report described it as an aqueous paste of Carbon Dust, not meeting the criteria for classification under sub-heading 2803.00.

Applicability of Notification No. 76/86-C.E.:
The appellants claimed the benefit of Notification No. 76/86-C.E., S. No. 21, which covers "Sludge obtained in the Sewage or Effluent Treatment Plant." The commodity was obtained in the appellant's ETP, raising the question of whether it could be classified as Sludge. The Tribunal found that the demand of duty under sub-heading 2803.00 was not sustainable as the commodity was not 100% pure carbon, supporting the appellants' prima facie case against the duty and penalty demands. Consequently, waiver of pre-deposit and stay of recovery were granted until the appeal's disposal.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, CHENNAI highlights the issues of classification under sub-heading 2803.00, the classification of the commodity as "Sludge" for excise duty purposes, and the applicability of Notification No. 76/86-C.E. The Tribunal found in favor of the appellants, granting a waiver of pre-deposit and stay of recovery based on the prima facie case against the duty and penalty demands.