1989 (7) TMI 238 - AT - Central Excise

Summary

Issues Involved:
1. Classification of carbide sludge as 'manufactured goods.'
2. Excisability of carbide sludge.
3. Applicability of the extended period of limitation for excise duty demand.

Detailed Analysis:

1. Classification of Carbide Sludge as 'Manufactured Goods':
The primary issue in these appeals is whether carbide sludge can be classified as 'manufactured goods.' The Tribunal examined various judgments to determine the position of law regarding what constitutes 'manufactured goods.' According to the cited judgments, for an article to be considered 'manufactured goods,' it must undergo a transformation resulting in a new and different article with a distinctive name, character, and use. It must also be capable of being brought to the market regularly for being bought and sold. The Tribunal consistently held that waste or scrap, which is not the result of any treatment or labor by the manufacturer but is obtained in the course of the manufacturing process, does not qualify as 'manufactured goods.'

2. Excisability of Carbide Sludge:
The Tribunal reviewed several precedents, including Union of India v. Delhi Cloth & General Mills Co., S.B. Sugar Mills v. UOI, and Union Carbide India Ltd. v. UOI, which established that marketability is an essential ingredient of dutiability. The Tribunal noted that carbide sludge is industrial waste generated during the manufacture of acetylene gas and does not have significant marketability. Even though there have been instances where the sludge was sold, the sales were negligible and did not justify classifying the sludge as a by-product or end product. The Tribunal concluded that carbide sludge is not 'manufactured goods' and, therefore, is not excisable.

3. Applicability of the Extended Period of Limitation:
In Appeal No. 09/89-C, the Tribunal also considered whether the extended period of limitation for excise duty demand was applicable. The Tribunal found that the department was already aware of the formation of carbide sludge as a result of the manufacturing process, as evidenced by previous adjudications. There was no suppression or misrepresentation by the assessee. Therefore, the extended period of limitation could not be invoked, and the demand for the period before 2-6-85 was time-barred. However, since the appeals were allowed on merits, the Tribunal did not delve into the calculation of the time-barred demand.

Conclusion:
1. Carbide sludge cannot be classified as 'manufactured goods' and is not excisable.
2. The appeals Nos. E/09/89-C and E/364/89-C filed by the assessees are allowed with consequential relief.
3. The appeal No. E/1820/85-C filed by the Revenue is dismissed.