2006 (3) TMI 433 - AT - Central Excise

Demands - cleared spent methane clandestinely - Dutiability - Penalty - HELD THAT - The reasoning of the lower authorities that the existence of notification exempting the product is conclusive to show that the product was excisable and as such, has correctly discharged duty burden, on exemption being withdrawn, does not appeal to us in as much, the product for being held as excisable, needs to satisfy the basic criteria of manufacture. The Hon ble Supreme Court in the case of U.O.I, v. Ahmedabad Electricity Company 2003 (10) TMI 47 - SUPREME COURT as held cinder as non-excisable even though cinder was mentioned as one of the exempted product in Notification No. 76/86-Central Excise. Similarly in the case of Commissioner v. Markfed Vanaspati and Allied Industries 2003 (4) TMI 98 - SUPREME COURT it was observed that mere mention of a product in tariff entry is no ground for holding the same to be manufactured and the onus to prove manufacture is on the Revenue. We do not find any evidence produced by the Revenue to discharge such burden except referring to the notification. Having held that there is no manufacturing activity involved, we do not find existence of notification as of any consequence so as to hold otherwise. Thus, we hold that caustic soda recovered from spent caustic soda lye was not excisable and duty was not required to be paid. However, the refund of duty already paid, is to be examined in the light of the amended provisions of Section 11B relatable to unjust enrichment, which would be applicable even though the caustic soda was consumed captively, as clarified by the Hon ble Supreme Court in the case of Union of India v. Solar Pesticides 2000 (2) TMI 237 - SUPREME COURT . In view of the above judgments and the reasoning adopted by the Commissioner being legal and proper. Therefore, we do not find any merit in these Revenue appeals and reject the same.

Issues Involved:
1. Whether the spent solvents purified and reused by the assessee are dutiable.
2. Allegation of clandestine removal and under-valuation of spent solvents.
3. Applicability of extended period for demand under Section 11A(1) of the Central Excise Act, 1944.
4. Imposition of personal penalty under Rule 209A of Central Excise Rules, 1944.

Issue-wise Detailed Analysis:

1. Dutiability of Spent Solvents:
The primary issue revolves around whether the spent solvents, which were purified and reused, are considered dutiable goods. The Commissioner, in her Order-in-Appeal, concluded that the spent solvents were not dutiable as they do not qualify as "goods." This conclusion was supported by the Tribunal's previous decisions, such as the case of Collector of Central Excise & Customs, Pune v. Industrial Oxygen Company Ltd., where it was held that by-products like lime sludge, even if sold, do not automatically become excisable goods unless they are treated as commodities in the normal course. Similarly, in the case of CCE, Chandigarh v. Markfed Vanaspati and Allied Industries, it was held that the burden to prove manufacture lies on the revenue, and in the absence of new evidence showing manufacture, the spent solvents cannot be deemed as new goods subject to excise duty.

2. Allegation of Clandestine Removal and Under-valuation:
The revenue alleged that the assessee clandestinely removed spent methanol by under-valuing it, thus evading duty. However, the Commissioner found no evidence supporting these allegations. The invoices and gate passes were submitted to the Range Officer without objections, indicating no under-valuation. Furthermore, it was determined that there was no willful misstatement or suppression of facts by the assessee, negating the grounds for clandestine removal and under-valuation.

3. Applicability of Extended Period for Demand:
The revenue sought to invoke the extended period of five years under the proviso to Section 11A(1) of the Central Excise Act, 1944, for demanding duty from January 1995. However, the Commissioner ruled that the demand for the period from 1/95 to 9/99 was hit by time limitation. This decision was based on precedents such as the cases of M/s. Lubrichem Industries v. CCE, Bombay and M/s. Tamilnadu Housing Board v. CCE, Madras, which emphasized that extended periods could not be invoked without evidence of willful misstatement or suppression of facts.

4. Imposition of Personal Penalty:
Regarding the imposition of personal penalty under Rule 209A of Central Excise Rules, 1944, on Shri B. Krishna Prasad, M.D. of the unit, the Commissioner observed that the show cause notice did not provide adequate reasons or evidence to justify the penalty. The Tribunal, in the case of M/s. Cipta Coated Steels Ltd. v. CCE, Aurangabad, held that penalties under Rule 209A could not be imposed without evidence of a guilty mind. Therefore, the personal penalty on Shri B.K. Prasad was deemed unwarranted.

Conclusion:
The Tribunal upheld the Commissioner's detailed reasoning that the spent solvents, after being purified, did not constitute new goods and thus were not excisable. The allegations of clandestine removal and under-valuation were unsupported by evidence, and the extended period for demand was not applicable due to the absence of willful misstatement or suppression of facts. Consequently, the imposition of personal penalty was also found to be unjustified. The Tribunal dismissed the revenue's appeals, affirming the Commissioner's order that the purified spent solvents were not subject to excise duty.

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