Customs, Excise and Gold Tribunal - Delhi
Nizam Sugar Factory Limited vs Collector Of C. Ex. on 18 March, 1998
Equivalent citations: 1998(101)ELT62(TRI-DEL)
ORDER Jyoti Balasundaram, Member (J)
1. The above appeals relate to the issue of classification of impure gases emanating as a bye-product during the process of fermentation of molasses. According to the appellants, it is not goods within the meaning of Excise Law as it is not marketable while according to the Department, the item is excisable goods falling for classification under T.I. 14H of the Schedule to the erstwhile Central Excise Tariff upto 28-2-1986 and under sub-heading 2811.10 of the Schedule to the Central Excise Tariff Act, 1985 after 1-3-1986.
2. The brief facts necessary for understanding the scope of the controversy are that M/s. Andhra Pradesh Government Power Alcohol Factory processes molasses received from M/s. Nizam Sugar Factory Ltd. for the purpose of manufacture of rectified spirit. During this process, a mixture of gases including impure Carbon dioxide gas is also produced and under an agreement, M/s. Andhra Pradesh Government Power Carbon dioxide Alcohol Factory supply the gas to M/s. Nizam Sugar Factory who leased the carbon di oxide gas to M/s. Siraj Trading Company under an agreement and M/s. A.P.G.P.A.F. received royalty from M/s. Nizam Sugar Factory for the supply of this gas.
3. The Department issued show cause notices at different points of time alleging that the impure carbon dioxide gas was classifiable under T.I. 14H (upto 28-2-1986) and under Chapter 28 of the new Tariff from 1-3-1986. The notices were adjudicated, rejecting the claim of the appellants that the impure gas was not an excisable commodity and upholding the classification under the respective Tariff headings mentioned above. In addition, penalties have also been imposed on the appellants. Hence these appeals.
4. Arguing on behalf of the assessees, Shri J.V. Suryanarayana, learned Counsel submits that the composition of gases clearly shows that Carbon Monoxide is present to the extent of 3 per cent and therefore, this is sufficient to establish the case of the appellants that the impure gas is not goods known to the market because the presence of the carbon monoxide to the extent of 3% would make the goods non-marketable. He submits that the impure gas cannot be considered to be goods falling for dassifiration under any heading of the Tariff and therefore, demand requires to be set aside along with the penalty.
5. On the other hand, the learned DR draws our attention to the order of the Tribunal in the case of Mangalore Chemicals & Fertilizers Ltd. reported in [1998 (98) E.L.T. 490] in which the Bench has held that carbon dioxide in impure form is classifiable under T.I. 14H of the Schedule to the erstwhile Central Excise Tariff irrespective of the percentage of purity. He submits that this decision of the Tribunal covers the issue of classification of the disputed items upto the advent of the new Tariff and after 1-3-1986, the item undisputedly falls for classification under Chapter 28 sub-heading 2811.20. He seeks to distinguish the decision of the Hon'ble Supreme Court in the case of Poulose & Mathen v. Collector of Central Excise reported in [1997 (90) E.L.T. 264 (S.C.)] relied upon by the learned Counsel, by submitting that the decision of the Supreme Court was not in the context of classification of goods in dispute in the present case but in the context of the particular notice issued on the basis of CBEC Tariff Advice and therefore, submits that decision of the classification as referred to in the Mangalore Chemicals and Fertilizers case requires to be followed in these cases also.
6. We have carefully considered the rival submissions. We find that there is great force in the contention of the learned DR. In the case of Mangalore Chemicals and Fertilizers (supra), the issue before the Tribunal was the classification of carbon dioxide in impure form which was sold to another party. The Tribunal has held that semi-finished carbon dioxide is separate goods on which duty is chargeable under T.I. 14H of the Schedule to the erstwhile Tariff. The Tribunal has held that the carbon dioxide was classifiable under that heading irrespective of the percentage of purity. On the other hand, the judgment of the Hon'ble Supreme Court proceeds on the basis that the Tribunal should not have ignored the Trade Notice issued in September, 1981 to the effect that CO2 is not conforming to marketable grade as per ISI specification, is classifiable under T.I. 68 of the erstwhile Central Excise Tariff and not under T.I. 14H. The Supreme Court took the view that the Tribunal should not have ignored the Trade Notice of 1981 (No. 83/81) and the Supreme Court has held that the Tribunal also failed to notice that the earlier tariff advice was in force at the time when the proceeding was pending before the Assistant Commissioner and also when the Appellate Collector set aside the order of the Assistant Collector and gave relief to the assessees. The Supreme Court has therefore, set aside the Tribunal's order and restored the order of the Collector (Appeals) based upon the Trade Notice No. 220/81. Para 15 of the Hon'ble Supreme Court which is relevant is reproduced below.
"15. One aspect deserves to be noticed in this context. The earlier tariff advice No. 83/81 on the basis of which Trade Notice No. 220/81 was issued by the Collector of Central Excise and Customs is binding on the department. It should be given effect to. There is no material on record to show that this has been rescinded or departed from, and even so, to what extent. Even assuming that the later tariff advice No. 6/85 has taken a different view - about which there is no positive material - the facts point out that the concerned department itself was having considerable doubts about the matter. The position was not free from doubt. It was far from clear. In such a case, where two opinions are possible, the assessee should be given the benefit of doubt and that opinion which is in its favour should be given effect to. In the light of the above, it is unnecessary to adjudicate the Other points involved in the appeal on merits."
7. From the above, we are of the view that the decision of the Tribunal in the case of Mangalore Chemicals case which is squarely on the issue of classification of impure gas, is directly applicable to the present case and therefore, following the ratio thereof, we hold that the item in question is classifiable under T.I. 14H for the period upto 28-2-1986. For the period subsequent to 1-3-1986, on a query from the Bench, the learned Counsel stated that if the view is taken that the impure gas is excisable, then it would be covered by Tariff Heading 2811.10 of the Schedule to the Central Excise Tariff Advice, 1985 which covers Carbon dioxide.
8. We therefore, see no infirmity in the orders of the Collector holding that the impure gases in question falls for classification under Heading 2811.10 of the Schedule to the Central Excise Tariff Act, 1985 for the period covered by the three appeals namely March to June, 1988, June, 1988 to November, 1988 and September, 1989 to 31st January, 1990. The duty demand is upheld in all the three cases. On a totality of the facts and circumstances of the case, and further having regard to the fact that the appellant is a Government concern, we are of the view that penalty is not warranted and accordingly set aside the penalty in all the three cases. Subject to the above modification, the impugned orders are upheld and the appeals rejected.