2006 (3) TMI 20 - AT - Central Excise

Central Excise By-product cannot considered as manufactured goods and not excisable For Excisability both test of manufacture and marketability is required

Summary

Issues:
Whether the impugned goods "slag ash" arising as a by-product while manufacturing white phosphorus from rock phosphorus and graphite is excisable goods.

Analysis:
The main issue before the Appellate Tribunal was to determine whether the impugned goods, namely slag ash, qualify as excisable goods. The lower appellate authority had dropped the duty demand and penalty, stating that the by-product was not chargeable to duty. The Tribunal considered various decisions of the Apex Court which established the criteria for excisability. It was noted that the product must result in the manufacture of a new and separately identifiable commodity and should also be marketable.

The department argued, citing a decision of the Apex Court, that in cases of by-products regularly arising during the manufacturing process and sold, the intention is to manufacture and sell not only the main product but also the subsidiary products. The department also highlighted the relevance of Section 2(f) of the Central Excises and Salt Act, 1944, in such cases.

In response, the respondents' counsel cited specific decisions to counter the department's contention that the impugned goods were excisable products. These decisions included cases such as Union of India v. Indian Aluminum Co. Ltd., Union of India v. Ahmedabad Electricity C. Ltd., and CCE, Patna v. Tata Iron & Steel Co. Ltd.

The Tribunal referred to the decision in Indian Aluminum Co. Ltd., where the Apex Court held that not everything sold is necessarily a marketable commodity, emphasizing that certain by-products may not be liable to excise duty even if they are sold. Similarly, in the case of Ahmedabad Electricity, the Apex Court ruled that certain substances arising during processes may not meet the test of manufacture and thus may not be excisable.

Moreover, the Tribunal considered the decision in Tata Iron & Steel Co. Ltd., which relied on previous judgments to conclude that certain by-products were not excisable goods. The Tribunal emphasized that marketability alone is not sufficient to deem a product excisable if it does not meet the test of manufacture to bring about a new product.

After evaluating arguments and cited decisions, the Tribunal found that the slag ash, as a by-product, did not meet the test of manufacture for creating a new product, despite being internationally traded. Therefore, the impugned order was upheld, and the department's appeal was rejected.