2019 (8) TMI 255 - AT - Central Excise

Valuation - residue - leftover solvents known as spent solvents - Department was of the opinion that these are goods which are manufactured / produced by the appellant along with the final products and are therefore chargeable to excise duty at appropriate rates - HELD THAT - In the same issue for a different period, this Bench in M/S. ORCHID PHARMA LTD. (FORMERLY M/S. ORCHID CHEMICALS PHARMACEUTICALS LTD.) VERSUS THE COMMISSIONER OF G.S.T. CENTRAL EXCISE, CHENNAI NORTH 2019 (2) TMI 10 - CESTAT CHENNAI held that no duty is chargeable on the spent solvents / sludge which arises during the process of manufacture of the final products. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether spent solvents and sludge arising during the manufacture of final products are chargeable to excise duty.

Analysis:
The case involved a manufacturer of pharmaceutical products facing demands for excise duty on spent solvents and sludge arising during the manufacturing process. The department argued that these products, being marketable, are chargeable to excise duty. The appellant contended that based on a previous decision by the same Bench, these products are not subject to excise duty. The appellant cited the judgment of the Hon'ble Apex Court in the case of Grasim Industries Ltd. to support their argument that excise duty is levied on manufactured goods and that the conditions under Section 2(d) and Section 2(f) of the Act must be conjunctively satisfied for imposition of excise duty. The appellant emphasized that the spent solvents and sludge are not manufactured or produced by them but arise during the manufacturing process.

The appellant relied on a previous decision by the same Bench for a different period, where it was held that no excise duty is payable on spent solvents and sludge. The Bench reaffirmed its earlier decision, noting that the products in question do not attract excise duty as they arise during the manufacturing process and are not manufactured or produced by the appellant. The Bench emphasized the importance of satisfying the conditions under Section 2(d) and Section 2(f) of the Act for the imposition of excise duty. The decision was consistent with the principles laid down by the Hon'ble Apex Court and previous tribunal decisions.

The Revenue argued that the goods in question, being marketable, are subject to excise duty as per the Explanation to section 2(d) of the Central Excise Act. The Revenue relied on a tribunal decision and a judgment of the Hon'ble High Court to support their position that similar products arising during the manufacturing process are chargeable to excise duty. However, the Bench found no reason to deviate from its earlier decision and allowed the appeal in favor of the appellant, providing consequential relief.

In conclusion, the judgment clarified that spent solvents and sludge arising during the manufacturing process of final products are not chargeable to excise duty based on the interpretation of relevant legal provisions and previous decisions by the same Bench. The decision highlighted the importance of satisfying the conditions under the Central Excise Act for the imposition of excise duty and upheld the appellant's position in this case.