2003 INSC 0351
                                    SUPREME COURT OF INDIA

                            Commissioner of Central Excise, Chandigarh-I

                                                      Vs.

                             M/s. Markfed Vanaspati & Allied Industries

                                          C.A.Nos.77-80 of 2001

                                    (S.N. Variava and H.K. Sema JJ.)

                                                  09.04.2003

                                                JUDGMENT

S.N. Variava, J.

1. These appeals are against the judgment of the larger Bench of the Customs, Excise and
Gold (Control) Appellate Tribunal (CEGAT). The question for consideration is whether
"spent earth" is liable to excise duty or not. Under the Tariff, prior to its amendment in 1985,
it had been consistency held that "spent earth" was not liable to duty. However, with the
enforcement of new Tariff in 1985, a conflict arose between various benches of the Tribunal.
Some benches held that "spent earth" was still not excisable, whereas other benches held
that, as it now stood included by a specific sub-heading, it became excisable. In view of these
conflicting decisions, the matter was placed before the larger Bench of the CEGAT which by
the impugned judgment has held that "spent earth" was still not dutiable. Hence these
Appeals.

2. The only question for consideration for us is whether a good becomes excisable merely
because it falls within a tariff item. After 1985 Tariff item 1507 reads as "residue resulting
from the treatment of fatty substances". It is submitted that "spent earth" is a residue resulting
from treatment and is thus now excisable. What we have to consider is whether the well
settled twin tests of "manufacture and marketability" cease to apply if a good falls within a
Tariff Entry.

3. Prior to this Entry being introduced in 1985, it had been consistently held that "spent
earth" was not manufactured. It had been consistently held that "spent earth" remained
"earth" even after processing. It has been consistently held that all that happened was that its
capacity to absorb was reduced. It had been consistently held that duty having been paid on
"earth", not duty was leviable on "spent earth" as it remained the same product. It had been
held that to levy duty on "spent earth" would amount to levying duty twice. It is on this
ground that it has been held that "spent earth" was not excisable. Even now it has not been
shown that there is manufacture. The only submission is that "spent earth" is a residue
resulting from the treatment of fatty substances. The submission is that now that there is a

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specific Entry which makes "residue resulting from the treatment of fatty substances"
excisable, duty has to be paid on "spent earth". In other words, what is submitted is that
merely because a good falls within one of the Tariff items it becomes excisable.

4. In support of their submission, reliance is placed on the case of Lal Woollen & Silk Mills
(P) Ltd., Amritsar v. Collector of Central Excise, Chandigarh reported in1. In this case the
question was whether excise duty was to be paid on dyed worsted woollen yarn made from
duty paid worsted woollen grey yarn. It was argued that there was no manufacture. The
Court, however, held as follows:

        "Admittedly both "dyed yarn" and "grey yarn" are covered by two separate distinct
        heads of tariff items with different duty. So this itself recognizes them to be two
        different goods with separate levy. In view of this it cannot be urged that there is no
        manufacture of "dyed yarn" from the "grey yarn."

        Undoubtedly this authority appears to support the contention which is raised.

5. However, it appears to us that the observation made in this authority are "per incuram". In
so observing, the decision of a larger Bench of this Court in the case of Collector of Central
Excise, Indore v. Universal Cable Ltd. reported in2 has not been noted or considered. In this
case an argument that a good becomes excisable because it is covered by Tariff Entry, has
been negatived. In the case of B.P.L. Pharmaceuticals Ltd. v. Collector of Central Excise
reported in3 it has also been held that merely because there is a change in the Tariff Item the
good does not become excisable. Subsequently in a judgment dated 13th February, 2003 in
Civil Appeal No. 6745 of 1999 it has been held that merely because an item falls in a Tariff
Entry, it does not become excisable unless there is manufacture and the good is marketable.
In Lal Woollen & Silk Mills' case (supra) it has not been held that the twin test of
manufacture and marketability is not to apply. It is not possible to accept the contention that
merely because an item falls in a Tariff Entry it must be deemed that there is manufacture.
The law still remains that the burden that there is manufacture and that what is manufactured
is on the revenue. In this case no new evidence is placed to show that there is manufacture.
"Spent earth" was "earth" on which duty has been paid. It remains earth even after the
processing. Thus if duty was to be levied on it again, it would amount to levying double duty
on the same product.

6. Under the circumstances, we find no infirmity in the impugned judgment. The Appeals
stand dismissed. There shall be no order as to costs.
Appeal dismissed.

11999(4) SCC 466
21995 Supp (2) SCC 465
31995 Supp (3) 1

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