Per: K.S. Venkataramani: The appellants herein manufacture chlorine and trichloriethylene. They availed MODVAT Credit on Sulphuric Acid classified under Sub-Heading 2802.20 CETA, 1985 as an input used for drying Acetylene and Chlorine in the manufacture of their final product. The concentrated Sulphuric Acid after use in the plant becomes diluted and comes out of the plant and is then known as spent sulphuric acid with a concentration of 60% to 65%. The Department found that the appellants apart from disposing the spent sulphuric acid as waste by allowing it to mix with sand and mud, were also selling it to industrial consumers. The acid that is sold is stored in carbuoy and steel tanks and is sold periodically on the basis of contracts without payment of excise duty and without following the prescribed procedure. By as how cause notice issued on 27.8.88 duty of Rs. 15,947.07 was demanded on the spent sulphuric acid without payment of duty for the period from 1.3.86 to 27.11.86. It was alleged that duty becomes payable on the spent sulphuric acid in terms of Rule 57F (4) (a) of Central Excise Rules according to which any waste arising from the processing of inputs on which MODVAT credit has been taken, may be removed on payment of duty as if such waste is manufactured in the factory. The Department alleged that spent sulphuric acid as a waste should be cleared by appellants only on payment of duty under that Rule. On considering the reply to the show cause notice and hearing them in the matter, the Additional Collector of Central Excise, Madurai passed the impugned order dated 13.10.88 confirming the demand and also imposing a penalty of Rs. 3,000/- on the appellants.

2. Shri M.S. Rama Chandaran, General Manager appeared for the appellants and referred to their written submissions dated 18.5.95 in which the appellants had contended that there are several judicial pronouncements wherein it has been held that waste is a waste even though it may fetch some value. The case law cited are 1987 (29) E.L.T. 502 wherein Delhi High Court had held that waste and scrap obtained in the course of manufacturing the final product is not excisable. The Tribunal decision reported in 1987 (29) E.L.T. 122 (Tribunal) that spent wash is waste material and is not liable to excise duty. The Bombay High Court decision reported in 1980 (6) E.L.T. 146 that refuse or scum thrown off during the process of manufacture cannot be considered as excisable goods even though it may fetch some price in the market. The Tribunal decision reported in 1985 (22) E.L.T. 232 to say that spent earth arising as waste material from activated earth during soap manufacture is only waste material and mere fact that it is sold, is not determinative of its assessability. The appellants have further relied upon an order-in-appeal dated 27.6.90 of the Collector (Appeals) wherein the Collector (Appeals) had held that spent sulphuric acid is a waste are by product and has to be treated as waste covered by Rule 57D (). The goods are also eligible for exemption under Notification No. 170/65. The appellants further contended that the Department cannot invoke the longer period under Section 11A Central Excises and Salt Act, 1944 for demanding duty because the appellants themselves have readily disclosed all particulars regarding clearances of spent sulphuric acid to the Department on their own. The appellants have further added that in any case there was no justification for imposing a penalty on them because in this case they had not paid duty on the spent sulphuric acid due to bonafide belief that the goods being waste are not dutiable. The Supreme Court decision in the case of Hindustan Steel Limited, reported in 1978 ELT (J.159) has been cited. Shri Mewa Singh, the learned Senior Departmental Representative appearing for the Department reiterated the reasoning by Additional Collector in the impugned order and pointed out that the question here is of subjecting spent sulphuric a