Custom, Excise & Service Tax Tribunal
Cce, Ltu, Chennai vs M/S. Chennai Petroleum Corporation Ltd on 18 January, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH AT CHENNAI E/459/2005 (Arising out of Order-in-Appeal No. 3/2005 (M-I) (D) dated 22.03.2005 passed by the Commissioner of Central Excise (Appeals), Chennai). CCE, LTU, Chennai : Appellant Vs. M/s. Chennai Petroleum Corporation Ltd. : Respondent
Appearance Ms. Indira Sisupal, AC (AR) For the applicant Shri Raghavan Ramabadran, Adv., For the respondent CORAM Honble Shri D.N. PANDA, Judicial Member Honble Shri R. PERIASAMI, Technical Member Date of Hearing/Decision: 18.01.2016 Final Order No.________ Per: D.N. Panda Revenue is on the limited point against the order of the ld. Commissioner (Appeals) contending that when there is record based evidence available, that authority should not have adopted the mathematical formula of 8:13 to determine the usage of Residual Fuel Oil (RFO) in generation of Power for dutiability.
2. Perusal of the order of the ld. Commissioner (Appeals) shows that the real controversy that was alleged in the SCN was not determined and settled. At this stage, the ld. Counsel for the respondent says that the foundation of the SCN dated 04.02.2002 is to first ascertain whether Low Sulphur Heavy Stock (LSHS) is same as Residual Fuel Oil (RFO) as is apparent from para-1 of the SCN. According to him, Revenue has made an allegation that the respondent assesse was a manufacturer of LSHS (referred as RFO) falling under chapter heading 2713.30 and such RFO was used to generate electricity. Such generated power was used partly for the manufacture of excisable goods in the factory and partly that sold to TNEB. Revenue stated in SCN that LSHS (RFO) is exempted from duty if that is used captively in the manufacture of excisable goods under Notification No. 67/95-CE dated 16.03.1995. It is therefore alleged in the SCN that the quantity of LSHS (RFO) used in generation of power sold to TNEB shall disentitle the respondent assesse to Notification No. 67/95-CE dated 16.03.1995.
3. It is further submitted by the ld. Counsel for the respondent that the self-same SCN stated above gave rise to the adjudication order dated 28.06.2002 which is appealed by Revenue in the present appeal on the ground of erroneous adoption of mathematical formula to determine duty liability in respect of RFO used to generate power and sell the same to TNEB. In that order the ld. Adjudicating authority demanded duty of Rs.1,83,70,773/- holding that the respondent is not entitled to the exemption benefit granted by the aforesaid notification, since LSHS (RFO) is dutiable following Apex Court decision in CCE, Chennai Vs. Chennai Petroleum corporation Ltd. 2007 (211) ELT 193 (S.C.). Against such demand of duty, respondent assesse went to Commissioner (Appeals) and that Authority rejected the appeal of appellant for which it came before the Tribunal. But that was dismissed on the technical ground that the respondent was not permitted by the Committee on Dispute to seek redressal against the appellate order. Therefore, the matter ended there.
4. Respondent further says that RFO is not same as LSHS. RFO is not marketable and also there was no clearance made issuing any excisable invoices. Since Revenue has come in appeal, the miscarriage of Justice made in adjudication ignoring the real controversy raised in the SCN be redresssed to do justice to both sides.
5. Respondent further submitted that the crucial issue of excisability is to be determined applying twin tests of excisability prescribed by the Apex Court in the case of Board of Trustees Vs. CCE, A.P 2007 (216) ELT 513 (S.C.) which was never been considered by either adjudicating authority or appellate authority below. While such vital plea was raised all along before both the authority below. Therefore, the respondent still has the right to pursue this legitimate ground on excisability of RFO applying the twin test as has been held by the Apex Court.
6. When the controversy rested on a very crucial question of excisability of RFO whether as LSHS as is apparent from para-1 of SCN, that point needs determination which was not done by any of the authority so far. Revenue relies on the decision of the Apex Court in the case of CCE, Chennai Vs. Chennai Petroleum Corporation Limited 2007 (211) ELT 193 (S.C.) to submit that RFO is dutiable and the respondent having used RFO to generate power and sold such power partly to TNEB is not entitled to the exemption benefit under the notification in question. To this preposition of the Revenue, respondent says that when RFO is not equal to LSHS and RFO does not satisfy the twin tests of excisability following Apex Court decision in Board of Trustees (supra), there is no question of levy of duty on RFO at all. Respondent relies on the decision in the case of Hindustan Petroleum Corporation Ltd. Vs. UOI 1999 (112) ELT 8 (S.C.) to submit that the question of marketability is necessary to bring the goods to the fold of levy of duty. The burden of proving marketability is on the Revenue. But Revenue has failed to discharge the same. Therefore, Revenue cannot make allegation that RFO is dutiable being equal to LSHS which is not correct. Respondent further relies on the decision in the case of Hindustan Zinc Ltd. Vs. CCE, Jaipur 2005 (181) ELT 170 (S.C.) to submit that the view of the Apex Court in the judgment in Hindustan Petroleum Corporation Ltd. (supra) was reiterated in Hindustan Zinc Ltd.(supra).
7. On the aforesaid factual and legal background and hearing both sides at length, it is considered necessary that remand of the matter is essential to do justice to both sides on the very crucial issue that has emanated from para-1 of the SCN dated 04.02.02 to determine whether LSHS is equal to RFO and if equal, whether RFO is dutiable following the twin test i.e. process whether constituting manufacture and secondly marketability prescribed by Apex Court in the case of Board of Trustee (supra). So also it is necessary to determine whether the respondent had at any time manufactured RFO and cleared the same issuing any excisable invoice for marketing. The next step for determination is that if at all RFO is dutiable considering that to be equal to LSHS, it is the burden on Revenue to prove whether RFO is marketable. It is also further necessary to determine whether RFO is manufactured by the respondent adopting any process or it is an outcome in the course of manufacture of any other goods. These issues are most crucial for determination.
8. If the authority reaches to the conclusion that RFO is equal to LSHS according to the character, property and nature of both goods and principles of law on the subject meeting twin tests laid down in the judgment of the Apex Court in Board of Trustees (supra), then the question that shall arise consideration is whether RFO shall get any exemption under the aforesaid notification, if that is used in generation of power partly sold to TNEB..
9. We clarify that while the judgment Apex Court in Chennai Petroleum Corporation Ltd., (supra) was rendered, it appears that both sides were under the notion that RFO is dutiable. But there was no question before Apex Court whether RFO was manufactured adopting any process and is really dutiable, applying the twin test as has been laid down by the Apex Court in the case of Board of Trustees case (supra). Therefore, decision in Chennai Petroleum Corporation Ltd., (supra) is precedent on the fact that was before the Apex Court. The authority should not be confused with the decision of Chennai Petroleum Corporation Ltd., (supra) the decision of Board of Trustees (supra), Hindustan Petroleum Corporation Ltd., and Hindustan Zinc Ltd. (supra), which are on different premises.
10. With the aforesaid observations and direction the matter is remanded to the ld. Adjudicating authority to re-adjudicate the controversy as elaborately stated above including the controversy arising out of para-1 of SCN dated 04.02.2002. It may be stated that adjudication made travelling beyond SCN is nullity. Whereas in the present case, the SCN having foundation, in the interest of justice, it is considered necessary that the points specifically stated in para-7 aforesaid requires determination by a reasoned and speaking order. The matter having travelled for a long period of 13 years, the adjudicating authority, taking into consideration the observations and directions above, shall re-adjudicate the matter expeditiously and complcete the same within three months of receipt of this order affording reasonable opportunity of hearing to the respondent and a reasoned and speaking order passed.
11. Revenue appeal is disposed in the manner indicated above.
(Dictated and pronounced in open court)
(R. PERIASAMI) (D.N. PANDA)
TECHNICAL MEMBER JUDICIAL MEMBER
BB
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