Customs, Excise and Gold Tribunal - Bangalore
Jsw Steel Limited (Formerly Known As ... vs The Commissioner Of Central Excise on 19 July, 2006
Equivalent citations: 2007(114)ECC227, 2007ECR227(TRI.-BANGALORE)
JUDGMENT S.L. Peeran, Member (J)
1. These misc. applications have been filed by the Revenue seeking to consider the Revenue's prayer for classifying the Corex Gas as "Carbon Monoxide (CO)" in composition and meriting classification as Oxides of Carbon under heading No. 2811.90 requiring the appellants to discharge Excise duty at 16% ad valorem.
2. The learned JCDR submits that the appellants had misclassified the said gas under Chapter No. 2705.00 and hence this matter requires to be "re-looked from the point of view of new findings of the investigations carried out by the department" and from the point of classification of the same under CSH 2811.90.
3. The prayer raised by the Commissioner in the misc. application is seriously opposed by the learned Counsel on the ground that this Bench cannot proceed to adjudicate a matter which was not the subject matter of the Show Cause Notice and the impugned order. In this regard, he relies on the Apex Court judgments rendered in the case of Gujarat State Fertilizers Co. v. CCE 7997 (91) ELT 3(SC) wherein the Apex Court has clearly laid down that the Tribunal cannot adjudicate on a matter which was not the subject matter of the proceedings before the Original authority.
4. On our careful consideration, we notice that the ground now raised in the misc. application was not the subject matter of Show Cause Notice or the adjudication order. As the issue now raised is not the subject matter of the impugned order, the prayer made in the misc. application cannot be considered in the light of the Apex Court judgments referred to by the learned Counsel. The misc. applications are, therefore, rejected.
5. In all these four appeals, the issue is common arising from four adjudication orders viz. (i) 29/2005 dated 8.12.2005; (ii) 28/2005 dated 16.11.2005; (iii) 18/2005 dated 06.07.2005; and (iv) 10/2004 dated 30.07.2004
6. The Revenue has proceeded against the appellants for levying duty in respect of a by product viz., Corex Gas which, the appellant claim to be an Off gas which arises as a technological necessity and is a by product, which cannot be subjected to the provisions of erstwhile Rule 57CC of CE Rules equivalent to Rule 57AD of CE Rules read with Rule 6(3) of Cenvat Credit Rules 2002, for demanding 8% of amount equivalent to the price. The Revenue's contention is that since the goods had been cleared at NIL rate of duty, they are required to discharge 8% equal to the price in terms of the said provision.
7. The learned Counsel has filed a list of citations and the gist of the order to show that the issue is covered in their favour. Further reference is made to the Final Order No. 1036/2006 dated 08.06.2006 passed by this Bench in their own case wherein this Bench has held that non-granulated slag is a by product emerging in the course of manufacture of HR Coils. Therefore, the provisions of Rule 57CC or Rule 6(3) would not be applicable to the by products. The Board's Circular dated 03.04.2000 was also relied. The citations referred to by the Counsel and the gist/ratio of the judgments is given in the tabulated column as extracted.
Sl. No. Case Law Citation/Particulars Gist/Ratio of the decision
1. Gas Authority of India Limited v. CCE 2001 (136) ELT 1019 (T-Mum.) Lean gas is a by-product. Demand under erstwhile Rule 57CC is not sustainable.
[paras 9, 10 of the decision] 2 Hi-tech Carbon v. CCE Lean gas/off gas emerge as a by-product. Rule 57C and Rule 57CC is not applicable to emergence of by-product.
[para 6 of the decision].
3Phillips Carbon Black Ltd. v. CCE Lean gas/Off gas emerging during manufacture of carbon black is not excisable merely because the Appellant is compelled to burn the Off gas due to environmental laws. [paras 12-14 of the decision].
4Rudra Bilas Kisan Sahakari Chini Mill Ltd. v. CCE Bagasse arising in the course of manufacture of sugar is not a final product. Demand under Rule 57CC is not called for.
[paras 5, 7 of the decision] 5 Aarti Drugs Ltd v. CCE Mother liquor emerging in the process of manufacture of methyl nitro imidazole is a by-product and Rule 57CC is not applicable to by-product. [para 11 of the decision].
6Industrial dust arising during manufacture of brass and copper are not excisable [para 4 of the decision].
7Madras Aluminum Co. Ltd. v. CCE 2005(1 26) ECR 31 7(T) Red mud emerging as a waste during manufacture of aluminum from Bauxite and sold for a price. Since accumulation would cause environmental pollution, the Tribunal held that Red mud is not excisable.
[para 4 & 5 of the decision].
8EID Parry (India) Limited v. CCE 2004 (176) ELT 734(T-Che.) Chemicals used as inputs in manufacture of sugar viz. a dutiable product and not in the manufacture of bio-compost, an exempted product. Rule 6 is not applicable.
[para 5 & 6 of the decision].
9Dalmia Magnesite Corporation v. CCE 2003 (107) ECR 298(T-SZB) Furnace oil used as fuel in the manufacture of exempted intermediate product, demand of amount under Rule 57CC is not sustainable.
10. CCE v. Dharani Sugars & Chemicals 2002 (102) ECR 590(T) Bagasse emerging during manufacture of sugar and molasses is not a final product and hence Rule 57CC is not applicable.
11. BOC India Limited v. CCE (T-Kol.) Carbon dioxide free air emerging as byproduct during manufacture of nitrogen and oxygen, Rule 57CC is not applicable [para 6 of the decision].
12. UOI v. Ahmedabad Electricity Co. Ltd.
Mere listing of an item in Schedule to CETA, 1985 is not sufficient to make it excisable since it has to pass further test of being manufactured or produced.
13. Collector v. Tata Iron & Steel Co. Ltd. (SC) Mere selling of a commodity does not mean it is marketable since a commodity can also be sold as rubbish. Everything which is sold is not necessarily a marketable commodity known to commerce which it may be worthwhile to trade in.
14. ECE Industries Ltd. v. Commissioner Limitation-Extended period of limitation not invokable in subsequent proceedings when earlier proceedings on same subject matter is pending/decided.
15. Hyderabad Polymers (P) Ltd. v. Commissioner Limitation - Earlier Show Cause Notice raising demand on similar issue and for identical amount dropped, subsequent Show Cause Notice cannot allege suppression of fact.
16. Civil Appeal filed by the Department dismissed by the Supreme Court as reported in 2006 (193) ELT A 194 maintaining the decision of the Tribunal in Rudra Bilas Kisan Sahakari Chini Mills Ltd. v.
CCE 2000 (121) ELT 119 (T) The Tribunal held that bagasse is a waste and residue of sugar industries and cannot be termed as 'final product.' The provisions of Rule 57CC are not applicable in respect of clearance of bagasse and press mud.
17. CCE v. Shakumbari Sugar & Allied Industries Ltd. 2004 (176) ELY 819 (T) maintained by the Supreme Court by dismissing Civil appeal filed by the Department as reported in 2005 (189) ELY A 62(SC) Bagasse arising in the course of manufacture of sugar is a waste which cannot be regarded as final product. Rule 57CC is not applicable.
[para 4]
18. Kerala Chemicals & Proteins Ltd. v. CCE 2006 (73) RLT 687(Y-Bang.) Inputs used in the process wherein byproduct emerged cannot be said to be used both in exempted and dutiable products and the erstwhile Rule 57CC or Rule 6 is not applicable [paras 3 & 5]
19. Sterlite industries India Ltd. v. CCE 2005 (191) ELT 401 (T-Che.) Sulphuric acid emerging during manufacture of copper anode is a by-product. Even if the by-product emerging is exempted from duty, the Cenvat credit is not demandable as per Rule 57D. The benefit of Rule 57D cannot be taken away with the introduction of Rule 57AD/57CC or Rule 6 of the Cenvat Credit Rules, 2004.
[para-29]
20. Narang Plastics Pvt. Ltd. v. CCE 2006 (134) ECR 449 (Y.-Bang.) When the appellant had reversed credit on inputs, there is no requirement to insist on payment of 8% of the price of the exempted goods.
21Jindal Vijayanagar Steel Limited v. CCE, Belgaum Final Order No. 1036/2006 dated 08.06.2006 passed by this Honorable bench in Appeal No. E/535/2005 in the appellant's own case.
Non-granulated slag is a by-product emerging in the course of manufacture of HR Coils and the provisions of Rule 57CC or Rule 6(3) would not be applicable to byproducts. Board Circular dated 3.4.2000 was relied on.
[para-6] 22 Copies of permissions dated 19.1.2001 and 6.3.1995 given by the Ministry of Environment & Forests, Government of India, New Delhi
8. In sum, the learned Counsel's submission is that in the light of the above cited judgments, the appellants are not required to discharge 8% equivalent to the price in respect of a by-product in terms of the said provisions. It is his submission that in terms of the ratio of the above judgments, the said provisions are not applicable to the by-product as in the present case Corex Gas is a by-product. Therefore, the demands are not sustainable.
9. The learned JDR opposes the prayer and submits that detailed investigations were carried out by the Revenue and it was disclosed and the investigation has lead to the discovery of facts that the item Corex Gas is nothing but a final product, which is required to be classified under CSH 2811.90 as Oxides of Carbon. The learned JDR refers to the grounds taken by the Revenue in the misc. applications and prays for an order of classification in the light of the Rules of interpretation for classification and HSN Notes.
10. The learned Counsel submits that this plea for taking up these grounds has already been rejected and an order has already been dictated. He submits that this plea to consider Corex Gas as a Carbon Monoxide cannot be considered in this proceedings.
11. The learned JDR further submits that the appellants have declared in their declarations that the item Corex Gas is a final product and its end use is a fuel. The appellants have utilized a separate technology for its manufacture and it is distinct from blast furnace technology. Therefore, it cannot be considered as a byproduct. The item, although has arisen during the course of manufacture, but it has to be considered as akin to molasses which arises in the manufacture of sugar. Molasses is dutiable. Therefore, on the same analogy, Corex Gas has to be considered under heading 2811.90 and should be made excisable at 16% ad valorem. The learned JDR further submits that even proceeding on the basis of the appellants' submission that Corex Gas is required to be classified under heading 2705.00 at Nit rate of duty, yet common inputs are being used for its manufacture. Some of the goods are exempted and some are discharged duty. Therefore, Rule 57CC read with Rule 6(3) and amended Rule 57AD of CE Rules is attracted in this matter.
12. The learned Counsel submits that the appellants' contention is that the item Corex Gas is a by-product. He submits that merely because they have filed declaration that by itself will not disentitle them from raising a plea that Corex Gas is by-product. The learned Counsel refers to the letter dated 19.01.2001 issued by the Ministry of Environment & Forests, Government of India, addressed to the appellants, who have considered the off gases from Corex plant to be treated as an Off gas. He further refers to the letter dated 06.03.1995 issued by the same Ministry treating the item to be an off gas. He submits that off gas has to be treated as a by product in the light of the cited judgments. Since the judgments of Gas Authority of India Ltd; Hi-tech Carbon, Phillips Carbon Black Ltd. (cited supra), deals with the emergence of an off gas/slag/lean gas and the same has been treated as a by-product, therefore, the ratio of these three judgments would clearly apply to the facts of the case. It is his submission that the Ministry of Environment & Forests has accepted the proposition that the gas which arises in the manufacture of the final product is nothing but an 'off gas'.
13. The learned Counsel submits that the demands are barred by time as there was no suppression and all the facts were known to the department and the issue was being adjudicated on 1.10.1999. He submits that the period involved in the matter is 01.10.1999 onwards to September 2004. He submits that although the notices have been issued within time, the Revenue's contention of suppression raised in the Show Cause Notice is not sustainable, as there was no suppression of facts.
14. On a careful consideration, we notice that the issue involved in the present case does not deal with the excitability of the Corex Gas. Therefore, the contention raised by the learned JCDR that the excitability of the Corex Gas has to be considered by this Bench cannot be considered as already the misc. applications raising fresh grounds on this point have been rejected. The only question that is required to be considered in these appeals is as to whether Corex gas is an Off gas and an Off Gas can be treated as a by-product and the benefit of the cited judgments is required to be extended to the assessees.
15. The learned Counsel has referred to the two letters issued by the Ministry of Environment & Forests who have treated the gas as an off gas. The Paper Book carries a flow chart of manufacture of Hot Rotted Coils. During the manufacture of these items, Corex Gas comes into existence. The appellants' contention is that the Corex Gas arises as a technological necessity and there is no intention to manufacture it separately while manufacturing Hot Rolled Coils. The flow chart indicates that the inputs, raw materials, pellets, iron ore, oxygen, nitrogen etc. are fed in the Corex furnace. In the furnace, these items are all melted at a very high temperature and the liquid hot iron is made to pass through another set of steel mix. The liquid steel passes through slab making and the slabs are hot rolled into coils making and the final product Hot Rolled Coils comes into existence. In terms of the flow chart, it is seen that these gases arise when all the raw materials are put in the furnace and melted. Therefore, on a careful consideration of the flow chart, the plea raised by the assessees that the Corex Gas arises as a technological necessity is required to be accepted. The Ministry of Environment & Forests also has treated the Corex Gas as an 'off gas' and as an environmental hazard. The off gases have been treated as byproducts in all the three cited judgments viz. (i) GAIL; (2) Hi-tech Carbon and (3) Phillips Carbon Black. Therefore, these three judgments would clearly apply to the facts of the case. Furthermore, we notice that in the appellants' own case, this Bench, by final order No. 1036/2006 dated 08.06.2006 has considered Non-granulated Slag arising during the course of manufacture of HR Coils as a byproduct. The flow chart shows the emergence of slag at the same stage where Corex Gas has come into existence. Therefore, the analogy drawn by the learned Counsel that the Non-granulated slag, which has been treated as a by-product should be applied to the Corex Gas arising in the same stage, is required to be accepted by following the ratio in the Final Order No. 1036/2006 dated 08.06.2006. In sum, the ratio of the cited judgments would apply to the facts of the case. The plea of the learned JDR that investigation has led to a different conclusion is not the subject matter of these appeals. As there is no estoppel in statute, Revenue can continue with their investigation. At this stage, the learned Counsel refers to Shri Vallabh Glass Works Ltd. and Anr. v. UOI and Ors. 1998 (16) ELT 171 (SC) case, which refers to the law of estoppel. It is for the appellants to raise their objection before the pending proceedings. In so far as these proceedings are concerned, the issue is covered by the cited judgments. Therefore, the appeals are allowed with consequential relief, if any.
(Pronounced and dictated in open Court)