Custom, Excise & Service Tax Tribunal
The Andhra Sugars Ltd vs Commissioner Of Customs, Central ... on 27 May, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: E/2037/2010-DB, E/1483/2012-DB [Arising out of Order-in-Original No. 15/2010-C. Ex-Commr. dated 24/06/2010 passed by the Commissioner of Customs, Central Excise & Service Tax, Guntur.] [Arising out of Order-in-Original No. 16/2012 dated 29/02/2012 passed by the Commissioner of Customs, Central Excise & Service Tax, Guntur.] For approval and signature: HON'BLE SHRI JUSTICE G. RAGHURAM, PRESIDENT HON'BLE SHRI B.S.V.MURTHY, TECHNICAL MEMBER 1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3 Whether Their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes THE ANDHRA SUGARS LTD VENKATARAYAPURAM, TANUKU, WEST GODAVARI DIST AP Appellant(s) Versus Commissioner of Customs, Central Excise and Service Tax GUNTUR P.B.NO. 331, C.R.BUILDING, KANNAVARI THOTA, GUNTUR 520 004. ANDHRA PRADESH Respondent(s)
Appearance:
Mr. K.S. RAVI SHANKAR, Sr. Advocate & Mr. N. Anand, Advocate # 152, RACE COURSE ROAD,BANGALORE BANGALORE - 560001 KARNATAKA For the Appellant Mr. S. K. Singh, Commissioner (AR) For the Respondent Date of Hearing: 27/05/2015 Date of Decision: 27/05/2015 CORAM:
HON'BLE SHRI JUSTICE G. RAGHURAM, PRESIDENT HON'BLE SHRI B.S.V.MURTHY, TECHNICAL MEMBER Final Order No. 21460-21461 / 2015 Per : B.S.V.MURTHY In both the appeals the issue involved is common and appeal No. E/2037/2010 covers the period from June 2002 to October 2006 and appeal No. E/1483/2012 covers the period from November 2006 to August 2011. The total duty demand is about Rs.7.44 crores and penalty under Section 11AC equal to the duty demanded has been imposed.
2.1 The appellant was clearing rocket fuel/propellant for use in launch vehicle/satellite projects by Indian Space Research Organisation (ISRO). Up to the year 2001, the appellant was clearing an item by name Unsymmetrical Di-Methyl Hydrazine (UDMH) without payment of duty. The exemption was claimed under Notification No.64/95-CE dated 16.3.1995 (Sl. No.7). From 2002 onwards, due to technological developments, ISRO asked the appellant to supply modified UDMH by simply mixing the same with bought out chemical called Hydrazine Hydrate (HH) in ratio of 75:25. The mixture of UDMH and HH was called/named as UH25. There is no dispute about the fact that UH25 as well as UDMH are used for the same purpose and there is no finding to the contrary also. There is no dispute regarding the eligibility of UH25 for the benefit of exemption under Notification No.64/95-CE dated 16.3.1995.
2.2 The dispute has arisen because the department has taken a view that the UDMH manufactured by the appellant and used for mixing with HH in the ratio of 75:25 has to be treated as an intermediary product and since it has been used in the manufacture of an exempted final product, the benefit of exemption notification No.67/95 is not available. On this basis, the demand for Central Excise duty on UDMH captively used has arisen.
3. The learned Sr. Counsel on behalf of the appellant submitted that the issue could not have been raised at all in view of the fact that two show-cause notices issued for the period from January 2002 to June 2002 and October 2003 to March 2004 have already been adjudicated. These two orders were challenged and in both the cases the Tribunal decided the issue in favour of the appellant. One of the orders was carried to Supreme Court and the Civil Appeal filed by the Revenue was dismissed on 11.5.2007 as reported in 2007 (213) E.L.T. A143 (SC). Therefore the impugned order is untenable. However, it was observed in the adjudicating order also that the issue decided by the Tribunal and upheld by the Honble Supreme Court was entirely different. The Commissioner has dealt with this issue in paragraph 18 in one of the impugned orders dated 24.6.2010, and has said that the issue dealt with earlier was eligibility of UDMH and UH25 for exemption under Notification No.64/95 CE only. He has observed that eligibility or otherwise of the exemption on UDMH as intermediary product under the captive consumption exemption Notification No.67/95 was not considered. He observed that Department is not questioning the eligibility of UDMH or UH 25 for the benefit of Notification No.64/95 at all and he agrees that this issue has been settled. We agree that it is possible to treat both the issues as different.
3.1 It was submitted by the learned Sr. Counsel that by mixing UDMH of 75% and HH of 25% and giving a new name UH25 to the extract cannot be said to have resulted in a new product. The product remains (propellant/fuel) with the same character and use. The advantage of adding HH was merely to increase the thrust and payload of the fuel employed for launching the rocket of ISRO. It was also submitted that this is analogous to diesel / petrol which is blended with additives for improved versions, but nevertheless called and remained diesel and petrol. It was submitted that the process cannot be considered manufacture at all and the mixture does not have a new identity. It was also submitted that the appellant never claimed the benefit of Notification No.67/95-CE because they never considered that mixing UDMH and HH amounted to manufacture. Therefore department cannot raise a demand on the ground that appellant is not eligible for exemption to UDMH on the ground that it has been used captively. The Commissioner came to the conclusion that process amounts to manufacture on the basis of this observations which are contained in paragraphs 24 to 27, which are reproduced below.
24. This inclusive definition identifies following types of activities and can be considered as manufacture. Which are:
(i) The processes that are incidental or ancillary to the completion of a manufactured product,
(ii) The activities in relation to any goods, that are mentioned either in Section Note or Chapter note that amounts to manufacture and
(iii) The activities that are mentioned in Third Schedule i.e., packing or repacking from bulk packs to retail packs.
25. As per the definition the term manufacture in the Central Excise Act, 1944, it can be understood that the processes that involve completion of a product is called as manufacture, which is almost equal to the definitions given in the standard dictionaries as mentioned above. But, goods come out of the activity of manufacture, also become excisable goods to attract levy of central excise duty, because all goods are not under levy of excise.
Conversely, all the activities that amount to manufacture under Central Excise law are not a real manufacture in view of the (2) & (3) entries of the definition of manufacture under Section 2(f).
26. As per Chapter Note-11 of Chapter 29 of the Tariff whereunder the impugned goods UDMH and UH-25, it was laid down as under:
Chapter Note-11: In relation to the products of this Chapter, labeling or re-labelling of containers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to manufacture. (emphasis supplied).
27. In the instant case, the assessee did not contest the processes that were said to be undertaken by them at their factory, that were listed in the show cause notices and also submission made by them in their replies, but objected that those processes do not amount to manufacture. It is observed from various activities/process of the assessee, to mix the UDMH along with HH in the required proportions/ratio in a mixing container and then thoroughly stirred for sufficient time (upto 90 minutes) to enable to meet the required density and specifications to make them marketable according to the needs of their customer i.e., ISRO as was detailed in their replies. Therefore, going by the definition of manufacture at Chapter Note-11 of Chapter 29, I hold that UH-25 is a newly manufactured product, in the instant case. On the basis of the above observations, he comes to the conclusion that UDMH and UH25 are two new and distinct products and each of the products is liable to duty.
4. Admittedly UH25 is manufactured by mixing 75% of UDMH and 25% of HH in mixing container and thereafter thoroughly stirred for 90 minutes to meet the required density and specifications. According to the decision of the Honble Supreme Court, to call a process as manufacture it should result in emergence of a new product with distinct name, character and use. In this case there is no doubt that ISRO has given a new name UH25. The question that arises is whether it has attained a different character and is for a different use. As regards use, there is no dispute that both UDMH and HH25 are used for the same purpose viz., as a rocket propellant or fuel. The next question that arises is whether it has attained a different character. There is no answer at all. No chemical test has been conducted to find out whether chemical composition has changed because of mixing UDMH and HH. Whether the character of product has changed as per the understanding in the relevant industry has also not been examined and considered. In the absence of any evidence to show that there is a change in the character of the product and use of the product, we cannot say that Department has been able to show that a new product, as per the definition of manufacture laid down by the Honble Supreme Court, has emerged. In such a situation, when by mixing UDMH and HH a new product is not emerging, it cannot be said that UDMH has been captively consumed in the manufacture of a product which is exempted and therefore duty liability has to be discharged on UDMH manufactured by the appellants and used within the factory.
4.1 In view of the above discussions, we find that the appellants have been able to show that there is no manufacture and no new product is emerging by mixing UDMH and HH and therefore the stand taken by the Revenue and the impugned order are not sustainable. In view of the above, the appeals are allowed with consequential relief, if any, to the appellants.
(Operative portion of the order was pronounced in open court on 27.5.2015.) JUSTICE G. RAGHURAM PRESIDENT B.S.V.MURTHY TECHNICAL MEMBER rv 6