2014 (4) TMI 416 - AT - Central Excise

Manufacture pulper waste and refuse - Exciability - During the process of manufacture of paper, pulper waste and refuse also emerges - Exemption under Notification No.76/86-CE, dated 10.02.1986 - Held that - Admittedly, the sludge as also pulper waste emerges during the course of manufacture of paper and paper board and such emergence is inevitable. The same cannot be held to be any incidental or ancillary process to the completion of a manufactured product. Similarly, there is no deeming provision under any section or Chapter notes so as to hold the said emergence of waste in the shape of sludge or pulper waste, as amounting to manufacture. Admittedly, the third situation involving packing or re-packing, labelling or re-labelling or declaring MRP, etc. on the said sludge and paper waste is not involved in the present cases. As such, the emergence of sludge and pulper waste during the course of manufacture of paper or paper board cannot be held to the result of any manufacturing activity. Lower authorities have classified the sludge and pulper waste as falling under the Head 4707 90 00. The said heading 4707 relates to (recovery of waste and scrap) paper or paper board. The sub-heading 47 07 90 00 specifies unsorted waste and scrap. In as much as the entry relates to waste and scrap of paper or paper board and not to sludge and pulper waste, the same cannot be held to be covered by the said entry - Decided in favour of assessee.

Issues Involved:
1. Whether the sludge obtained in the effluent treatment plant and the pulper waste can be considered excisable goods.
2. Whether the sludge and pulper waste are exempted under Notification No.76/86-CE, dated 10.02.1986.
3. Classification of sludge and pulper waste under the Central Excise Tariff.
4. Applicability of the limitation period for raising demands.

Detailed Analysis:

1. Excisability of Sludge and Pulper Waste:
The primary issue was whether the sludge from the effluent treatment plant and the pulper waste could be considered excisable goods. The lower authorities based their decision on the amendment to Section 2(d) of the Central Excise Act, 1944, introduced by Section 78 of the Finance Act, 2008. This amendment included an explanation that any article capable of being bought and sold for consideration would be deemed marketable. However, the Tribunal emphasized that for a product to be excisable, it must result from a manufacturing activity as defined under Section 2(f) of the Central Excise Act, 1944. It was concluded that the sludge and pulper waste, which emerge inevitably during the manufacture of paper, do not result from any incidental or ancillary process to the completion of a manufactured product. Therefore, these by-products cannot be considered excisable goods merely because they are sold for consideration.

2. Exemption under Notification No.76/86-CE:
The appellants argued that even if the sludge and pulper waste were considered excisable, they would be exempt under Notification No.76/86-CE, which exempts sludge obtained in sewage or effluent treatment plants belonging to municipal corporations, local authorities, or industrial units. However, since the Tribunal concluded that the sludge and pulper waste were not excisable, it did not need to address this exemption in detail.

3. Classification under Central Excise Tariff:
The lower authorities had classified the sludge and pulper waste under Heading 4707 90 00, which pertains to (recovery of waste and scrap) paper or paper board. The Tribunal found this classification incorrect, noting that the heading relates specifically to waste and scrap of paper or paper board, not to sludge and pulper waste. Thus, the classification under this heading was deemed inappropriate.

4. Limitation Period for Raising Demands:
The Tribunal noted that one of the appeals involved a demand that was barred by limitation. However, since the appeals were allowed on merits, the Tribunal did not delve into the limitation issue in detail.

Conclusion:
The Tribunal set aside the impugned orders, concluding that the sludge and pulper waste were not excisable as they did not result from a manufacturing activity. Consequently, the appeals were allowed with consequential relief to the appellants. The decision was pronounced on 07.03.2014.

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