2005 (9) TMI 131 - AT - Central Excise

Duty - Recovery of caustic soda from spent caustic soda lye - Manufacturing process Or Not - Refund - Unjust enrichment - 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conclusive to show that the product was excisable and as such, has correctly discharged duty burden, on exemption being withdrawn, does not appeal to us in as much, the product for being held as excisable, needs to satisfy the basic criteria of manufacture.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 dated 10-2-1986. 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. The Hon'ble Supreme Court decision in the case of Jaiprakash Industries Ltd. 2002 (11) TMI 92 - SUPREME COURT relied upon by the ld. SDR is not applicable to the facts of the case and the same deals with the issue of crushing of boulders into smaller stones and bajari by the mechanical process. Similarly, we find that the issue before the Tribunal in the case of Amrit Chemicals 1989 (8) TMI 204 - CEGAT, NEW DELHI , referred to by ld. DR was as regards interpretation of Notification No. 113/74, dated 20-7-1994 in respect of recovery of caustic soda from spent caustic soda lye and the issue of 'manufacture' was never raised. As such, the Tribunal did not have the occasion to deal with this aspect and granted relief on the basis of applicability of notification. 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 . Both the appeals are disposed off accordingly.

Summary

Issues:
Refund claim rejection based on unjust enrichment due to goods used captively in textiles process.

Analysis:
The appeals, filed by the appellant and the Revenue, were addressed together as they stemmed from the same order by the Commissioner (Appeals). The appellant's refund claim was rejected on its merits, while the matter was remanded to the original adjudicating authority to re-examine the unjust enrichment aspect. The goods in question were used captively in the textiles process, leading to the rejection of the refund claim. The appellant used duty paid caustic soda for mercering fabrics, resulting in the recovery of caustic soda from spent caustic soda lye. This recovered caustic soda was initially exempt from duty but became taxable after a notification rescinded the exemption. The appellant claimed a refund for the duty paid during a specific period, contending that the recovery process did not amount to manufacturing, as the starting and final material remained the same - caustic soda.

The main argument put forth by the appellant was that the concentration process through evaporation of water did not constitute manufacturing, as it did not result in the emergence of a new product. The appellant emphasized that the recovered caustic soda was the same duty paid caustic soda used initially. The Tribunal referred to previous decisions to support the appellant's stance, highlighting that a change in concentration alone did not create a new product. The Tribunal also emphasized that the test for determining manufacturing under Central Excise law was the emergence of a new product with distinct characteristics, which was not the case here.

The Tribunal rejected the lower authorities' reasoning that the existence of the notification exempting the product automatically made it excisable. It was emphasized that the basic criteria of manufacturing needed to be satisfied, and the burden of proving manufacture lay with the Revenue. The Tribunal cited Supreme Court decisions to support this stance, emphasizing that the mere mention of a product in a tariff entry or notification did not automatically classify it as manufactured. The Tribunal found no evidence presented by the Revenue to prove manufacturing activity, thus dismissing the significance of the rescinded notification in this context.

The Tribunal clarified that the caustic soda recovered from spent caustic soda lye was not excisable, and therefore, duty payment was not required. However, the refund of duty already paid needed to be assessed in light of the provisions related to unjust enrichment. The Tribunal referenced a Supreme Court case to emphasize that even if the caustic soda was consumed captively, the provisions related to unjust enrichment still applied. Ultimately, both appeals were disposed of accordingly, with the judgment pronounced on 13-9-2005.