2005 (9) TMI 8 - AT - Central Excise

(1) Manufacture - recovery process undertaken by increasing concentration of spent caustic soda lye (2) existence of exemption notification does not meant that a product is excisable (3) Refund

Summary

Issues:
Refund claim rejection on merits, unjust enrichment examination.

Analysis:
The judgment by the Appellate Tribunal CESTAT, Mumbai involved two appeals, one by the appellant and the other by the Revenue, both arising from the same impugned order by the Commissioner (Appeals). The Commissioner rejected the appellant's refund claim on merits but remanded the matter to the original adjudicating authority for re-examination on unjust enrichment grounds. The appellant used duty paid caustic soda for mercering fabrics, resulting in spent caustic soda lye, which was recycled to recover caustic soda. The process involved increasing concentration from approximately 4.6% to around 20%. Initially exempt from duty, the notification was rescinded, and duty was paid. The appellant claimed a refund, arguing that the recovery process did not constitute manufacture. They contended that as the starting and final material was the same caustic soda, no new product emerged. The Tribunal referred to precedent cases and held that the concentration change did not create a new product, aligning with the view that for a manufacturing process, a new product with different characteristics must emerge.

The Tribunal rejected the lower authorities' reasoning that the existence of an exemption notification automatically made the product excisable. They emphasized that the product must meet the basic criteria of manufacture, citing Supreme Court cases where mere mention in a tariff entry did not prove manufacture. The Tribunal found no evidence from the Revenue to prove manufacturing activity, disregarding the significance of the withdrawn exemption notification. The judgment differentiated the case from previous decisions involving crushing boulders and recovery of caustic soda, highlighting the specific context of the present case.

Ultimately, the Tribunal held that the recovered caustic soda was not excisable, and duty payment was not required. However, the refund of duty paid needed examination under the amended provisions of Section 11B concerning unjust enrichment, even though the caustic soda was consumed captively. The judgment referenced a Supreme Court case to clarify the application of unjust enrichment principles. Both appeals were disposed of accordingly, with the judgment pronounced on 13-9-2005.