1998 (2) TMI 276 - AT - Central Excise

Summary

Issues:
Classification of product under Heading 28.07, Excisability of spent sulphuric acid, Burden of proof on manufacturer.

Analysis:
The appeal involved a dispute regarding the classification of a product by the Department against the order of the Collector of Central Excise (Appeals). The respondents were engaged in manufacturing 'Organic Surface Active Agents' and filed classification lists mentioning 'Spent Sulphuric Acid' under Chapter Heading 2807.00 seeking exemption under a specific notification. However, a subsequent classification list indicated that Spent Sulphuric Acid was non-taxable under Chapter 34 or 28, leading to a show cause notice for classification under Heading 28.07 (para 2).

The Department contended that the unreacted sulphuric acid remaining after the manufacturing process was chargeable to duty as it was still sulphuric acid, albeit in diluted form and had a market value. The respondents argued that Spent Sulphuric Acid was a by-product obtained during the manufacturing process and not a regenerated or manufactured product, supported by an expert opinion (para 5-7).

The Tribunal analyzed the legal principles involved, emphasizing that a specific entry in the tariff was not conclusive in determining excisability. The onus was on the manufacturer to prove that the product was not excisable despite the tariff entry, satisfying criteria of manufacture and marketability as 'goods.' The test of marketability was crucial, as per Supreme Court precedents (para 8).

Ultimately, the Tribunal upheld the Collector (Appeals) order, ruling in favor of the respondents. It found that the unreacted sulphuric acid, termed Spent Sulphuric Acid, was not a manufactured product but a leftover by-product disposed of as such. Charging duty on this unused portion would amount to double taxation, as the duty was already paid on the total quantity purchased initially. Therefore, the Department's appeal was dismissed (para 9).