ORDER
P.G. Chacko, Member (J)
1. In these cases, the lower appellate authority has confirmed demands of duty against the appellants on “Carbon Sludge/Dust”, a product, which was generated in their Effluent Treatment Plant (ETP) and cleared without payment of duty during the period Feb.’92 – March 2000. A certain penalty which was imposed on the assessee by the original authority has also been sustained by the Commissioner (Appeals). The present applications seek waiver of pre-deposit and stay of recovery in respect of the duty and penalty amounts.
2. We have examined the records and heard both sides. It appears from the records and submissions that the demand of duty is based on classification of the product under sub-heading 2803.00 of the CETA Schedule. The authorities below have held, by relying on a report of the Chemical Examiner, Dictionaries and Encyclopaedia, that the commodity in question cannot be called an “Industrial Effluent” and hence cannot be defined as ‘Sludge’ and further that it is definitely classifiable under sub-heading 2803.00 ibid. The Chemical Examiner’s Report is that “the commodity is an aqueous paste of Carbon Dust, containing traces of Calcium compound”. On the basis of this report, it has been held that the product does not contain mud and is essentially carbon in powder form with some impurities. It is also observed that the item is recognised as only Carbon Dust in trade parlance. Yet another observation is that the assessee themselves had invoiced the item as Carbon Dust. Ld. Counsel has contested these findings and has claimed that the commodity in question was only Sludge, which was not excisable as it was not marketable. He has, in this context, relied on the Supreme Court’s judgment in Commissioner of Central Excise, Patna v. Bansal Indus. Gases Bihar ltd. – 2003 (151) E.L.T. 4 (S.C.). Ld. Counsel further submits that the exemption under Notification No. 76/86-C.E., dated 10-2-1986 was also available to the commodity in terms of S. No. 21 of the Table annexed thereto.
3. Ld. DR has countered the above arguments by submitting that it is clear from the Chemical Examiner’s Report coupled with Dictionaries of English and as well as those of Science and Technology that, for any commodity to be classified as Sludge, it must be a semi-solid/semi-liquid state of muddy material. In the instant case, the commodity did not contain any mud. It was composed essentially of carbon mixed with water, with traces of impurities. According to the DR, such a commodity is classifiable under sub-heading 2803.00, attracting Central Excise duty. Countering the Counsel’s plea that the item was not marketable, the DR submits that the item in question was actually marketed by the party during the period of dispute.
4. After examining the submissions, we find that the product in question was described as “Carbon Sludge/Dust” by the appellants in their Invoices. In their Sale Orders also, they described the item as “Carbon Sludge”. They have claimed the benefit of the above Notification in terms of S. No. 21 of the Table annexed thereto. This entry provides the following description, “Sludge obtained in the Sewage or Effluent Treatment Plant belonging to Municipal Corporation, Local Authority or an Industrial Unit.”
In the instant case, there appears to be no dispute of the fact that the commodity in question was obtained in the Effluent Treatment Plant belonging to the appellant’s industrial unit. The short question is whether the commodity can be classified as Sludge? The appellants described it as ‘Carbon Sludge’ in their Sale Orders and as ‘Carbon Sludge/Dust’ in their Invoices. According to the Chemical Examiner’s Report, the Commodity is an “aqueous paste of Carbon Dust, containing traces of Calcium compound”. Sub-heading 2803.00, where-under duty has been demanded by the authorities below, reads “Carbon (carbon blacks and other forms of carbon not elsewhere specified or included)”. This subheading falls under the caption “Chemical Elements”, which means that a commodity to be classified under this sub-heading should be elemental carbon. Even according to the Chemical Examiner’s Report, the commodity in question was not 100% pure carbon. Thus, in any case, the demand of duty under the above Tariff entry is prima facie not sustainable. Therefore, without going into details of the rival contentions, we take the view that the appellants have established a strong prima facie case against the demand of duty confirmed against them under sub-heading 2803.00 of the CETA Schedule. Consequently, they must have a strong case insofar as the penalty is also concerned. In the result, waiver of pre-deposit and stay of recovery are granted till the disposal of the appeals.