ORDER

Per Jyoti Balasundaram : The above appeal arise out of the order of the Collector (Appeals, Central Excise, Allahabad confirming the orders of the Assistant Collector by which he had classified Carbide Sludge arising in the course of manufacture of acetylene gas by the appellants under Chapter Sub-heading 2849.9Q of the CETA 1985 and confirming demands of duty of Rs. 18.216/- and Rs. 3,520/-. However the lower appellate authority set aside the penalties imposed by the adjudicating authority.

2. The appellants requested for a decision on merits; hence he heard Shri J .M. Sharma, learned DR and perused the records.

3. The appellant is a public limited company engaged in the production of industrial gases such as Oxygen, Nitrogen and dissolved Acetylene. It has its registered office and factory at Vikas Nagar, Renukoot. For production of d is solved acetylene gas, the raw material is calcium carbide which the appellant purchases from the manufacturers. The process of production of dissolved acetylene gas us under:

"Calcium carbide lumps are exposed to water. When it is exposed to water, acetylene gas is released from calcium carbide. This gas is filtered and dried and thereafter, filled into cylinders. The ash of calcium carbide is left in the water after release of acetylene gas. This waste is thrown outside in pits. This waste is commonly know as carbide sludge."

The above process is explained by the following chemical formula:

Ca C₂ 2H₂0 - C₂H₂ Ca(OH)₂

In other words when acetylene gas (C,H₂) is drawn from calcium carbide (CaC₂) after adding water (2H₂O) to it, what is left is carbide sludge (Ca(OI IX) i.e calcium (Ca) mixed with water. Thus the carbide sludge is lime waste mixed with water and has no carbide content in it.

4. In the case of Collector of Central Excise, Guntur versus Andhra Oxygen P. Ltd. reported in 1987 (30) ELT 967, it has been held by the Tribunal that carbides sludge is a waste arising in the course of manufacture of acetylene gas and it does not appear to have marketability although there had been stray cases of sale. Further, in the case of Asiatic Oxygen Ltd. Vs. Collector of Central Excise and another reported in 1989 ELT (44) 718, it has been held that carbides sludge emerges in the continuous process of manufacture of oxygen and acetylene gases and is not a marketable commodity, but only an industrial waste and hence not excisable. In a recent decision reported in 1995 (77) ELT 268 in the case of Union of India versus Indian Aluminium Company the Hon'ble Supreme Court has held that the aluminium dross and skimming are not goods or marketable commodities which can be subjected to levy of excise, though, undoubtedly, they do arise during the process of manufacture. The Supreme Court has held that it may be possible to recover some metal from such dross and skimmings and, therefore, they can be sold. But, this does not make them a marketable commodity, liven though this judgment was rendered in the context of the first Schedule to the Central Excises and Salt Act, 1944 as it stood prior to 1.3.86, the ratio thereof would continue to apply even into he context of the present tariff as the test of marketability, which is essential test for dutiability as held by the Hon'ble Supreme Court in several cases including the judgment in the case of Bore Industries Ltd. versus CCE reported in 1989 (40) ELT 280 SC, has not been satisfied in this case. It is relevant to note at this stage that the tariff entry 28.49 under which the Department seeks to classify carbides/sludge which covers only carbides, whether calcium carbide or other carbides. The only ground on which the carbides/sludge had been held to be excisable is that, it is being sold for a price which cannot be valid ground to determine the excisability of this item.

5. Following the ratio of the above cited decisions, we hold that the carbon sludge is not an excisable commodity and hence, set aside the demands and penalties.