2024 (7) TMI 474 - AT - Central Excise

Dutiability - black sand produced during the manufacturing process of castings - manufactured goods or not - HELD THAT - It is not the case of the revenue that the object of the Appellant was to manufacture black sand; even if the appellant intended to manufacture black sand, that too using natural sand which by itself is a non- dutiable goods. When the Natural Sand turns out black during the manufacture of castings, it does not lose its character; may be the natural sand turns out black and other than this, there are no material differences brought out on record. The authorities have clearly erred in fastening the appellant with duty liability on Black sand which was not manufactured - the impugned order set aside - appeal allowed.

Summary

Issues:
- Whether the black sand produced during the manufacturing process of castings is liable for Central Excise Duty?

Analysis:
1. The appellant, engaged in manufacturing castings of iron and aluminum, was alleged to have cleared 'Black Sand' without paying Central Excise Duty. The revenue claimed that 'Black Sand' was excisable goods as per the Central Excise Tariff Act, 1985.

2. The appellant provided detailed explanations, stating that the black sand was a residue of the manufacturing process and not a distinct product. The Adjudicating Authority upheld the duty demands proposed in the show-cause notices.

3. The First Appellate Authority referred to the definition of 'Manufacture' and emphasized the marketability of black sand, relying on the Ujagar Paints case to establish that black sand was a distinct product and hence dutiable.

4. The appellant argued that black sand was not a manufactured product but a waste residue of the manufacturing process. They cited previous decisions to support their claim.

5. The departmental representative supported the lower authorities' findings, stating that black sand attracted a 12% ad valorem duty rate under the Central Excise Tariff Act.

6. The main issue before the Tribunal was whether black sand was a manufactured product liable for duty. The Tribunal analyzed the definition of 'excisable goods' and observed that the authorities failed to prove that black sand was a manufactured product distinct from natural sand.

7. The Tribunal emphasized that the natural sand turning black during the manufacturing process did not change its character or marketability. They referenced a Supreme Court decision to highlight the importance of both the manufacturing process and marketability for an item to be considered 'goods.'

8. The Tribunal disagreed with the revenue's classification of black sand under the Central Excise Tariff Act, stating that the mere inclusion in the tariff did not establish black sand as a manufactured product. They noted that black sand was a residue of natural sand and not a distinct product like slag or dross.

9. Ultimately, the Tribunal concluded that the authorities erred in imposing duty on black sand, ruling in favor of the appellant and setting aside the duty demands. The appeals were allowed with consequential benefits as per the law.