Custom, Excise & Service Tax Tribunal
M/S. Travancore Cochin Chemicals Ltd vs Commissioner Of Central Excise, ... on 25 January, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal Involved: E/147/2007 [Order-in-Appeal No.423/2006 CE (CHN) dated 2.1.2007 passed by the Commissioner of Central Excise, Customs & Service Tax (Appeals), Cochin.] M/s. Travancore Cochin Chemicals Ltd. Eloor, Udyogamandal P.O. Kochi 683 501. Appellant(s) Versus Commissioner of Central Excise, Customs and Service Tax (Appeals) C. R. Building, I. S. Press Road, Cochin 18. ANDHRA PRADESH Respondent(s)
Appearance:
Mr. Sandeep Gopalkrishnan, Advocate Menon & Pai, Advocates P. B. No.1911, I. S. Press Road, Cochin 682 018.
For the Appellant Mr. K. T. Pakshi Rajan, Asst. Commissioner (AR) For the Respondent Date of Hearing: 18/01/2016 Date of Decision: 25/01/2016 CORAM:
HON'BLE SHRI M. V. RAVINDRAN, JUDICIAL MEMBER HON'BLE SHRI ASHOK K ARYA, TECHNICAL MEMBER FINAL ORDER No.: 20166/ 2016 Per : ASHOK K ARYA Both sides have been heard.
The appellant viz., Travancore Cochin Chemicals Ltd., have been manufacturing caustic soda through their Mercury Cell Processing Plant during July 2004. The appellant later changed their manufacturing process to the Membrane Cell Process and had stopped production of caustic soda through the Mercury Cell Processing plant. The appellant had stock of 42262.5 kg of mercury in the plant and sold the said mercury on 22.9.2004 without payment of duty and without raising any invoice.
2. The Revenue issued the appellant show-cause notice asking for the duty at the rate of 16% totalling to Rs.17,78,406/-.
2.1 The Revenue vide order of Joint Commissioner confirmed the duty of Rs.17,78,406/- along with interest and also imposed equivalent penalty under Section 11AC of the Central Excise Act.
2.2 The order of the Joint Commissioner was confirmed by Order-in-Appeal by Commissioner (Appeals).
3. The appellant is before this Tribunal preferring the appeal against the order of the Commissioner (Appeals). The appellant inter alia has argued as follows:
(a) There was no manufacture of mercury by the appellant attracting any Central Excise duty.
(b) Sodium Chloride upon electrolysis produced Sodium which dissolves in mercury to form an AMALGUM which later reacts with water to produce Sodium Hydroxide with the liberation of Mercury. There is no reaction taking place inside the cell and the Sodium is merely carried by Mercury into next cell where the Sodium is liberated leaving the Mercury unaffected. Thus the Mercury remained the same commercial product but for process of contamination with some impurities and on the clearance of the said used/contaminated mercury no duty was payable by the appellant-company.
(c) Mercury is also not an accident by product. Mercury in the instant case, was part of the electrolysis plant in so far as it functioned as cathode in the electrolytic process. The lower authorities, therefore, erred in holding that the appellant had manufactured mercury during the course of electrolytic process and that Central Excise duty would be payable on the clearance of mercury pursuant to decommissioning of the plant.
(d) It was therefore, not a case of clearance of input as such for the purpose of determination of any duty liability under the CENVAT Credit Rules. There was no provision in the CENVAT Credit Rules warranting a reversal of credit of duty on the Mercury in circumstances where the input was not cleared as such to rather clearance was of used inputs.
3.1 The appellant further pleads that there was no justification for imposition of penalty equal to the duty liability under Section 11AC of Central Excise Act. It is settled law that under Section 11AC penalty is only mandatory and the quantum being discretionary.
3.2 In support, the appellant has cited the Honble apex court decision in the case of Indian Organic Chemicals Ltd. vs. Collector of Customs & Excise: 1996 (88) E.L.T. 644 (S.C.).
4. The learned AR representing the Revenue argued that the input mercury was used in the manufacture of caustic soda and the waste or contaminated mercury was cleared, the duty of Central Excise is liable to be paid. In support Revenue cited the decision of Delhi Tribunal in the case of Modi Alkalies & Chemicals Ltd. vs. CCE: 2005 (186) E.L.T. 202 (Tri.-Del.). Revenue also cited the decision of Honble Supreme Court in the case of Lord Chloro Alkali Ltd. vs. CCE: 2015 (322) E.L.T. 822 (S.C.).
5. After careful examination of the facts on record and the submissions made by both sides, we are of the considered view that the facts are similar to the cases cited by the Revenue i.e., the case of Modi Alkalies & Chemicals Ltd. (supra) decided by CESTAT, Delhi and the case of Lord Chloro Alkali Ltd. (supra) decided by the Honble Supreme Court.
5.1 The facts on record are that the appellant had used Mercury for manufacture of caustic soda and when they shifted their process of manufacturing from Mercury Cell Process to Membrane Cell Process, they had cleared their stock of Mercury, which could be in the contaminated form (as was used by them for manufacturing), and had cleared the same without payment of any duty though the item was liable for payment of duty. The goods were not sold on invoice and there was no any intimation to the Department regarding the sale.
5.2 The appellants contention is that they brought the Mercury as an input and they sold it as such only and when they had got the duty-paid Mercury there was no question of any payment of duty on its disposal by way of sale, when they had shifted the manufacturing process from Mercury Cell Process to Membrane Cell Process. The appellant also stated during the hearing before the Tribunal that they had not taken any CENVAT credit in respect of this Mercury. However, facts on record do not throw any light on the fact if the appellant had taken any CENVAT or not on the said item of Mercury. However, regarding this sale/clearance of Mercury (or contaminated mercury), the appellant is entitled to the benefit of Rule 3(4) of CENVAT Credit Rules, 2001 for payment of duty of Central Excise on the said cleared/sold Mercury, if the appellant has got the documentary evidence of having taken CENVAT credit for the purchase of the said Mercury.
5.3 The appellants reliance on the case of Indian Organic Chemicals Ltd. (supra) cannot support their case when the Honble Supreme Court in its recent case decided on 7.8.2015 in the case of Lord Chloro Alkali Ltd. (supra), where facts were similar, clearly held that the Mercury obtained through manufacture of caustic soda and cleared as such is liable to duty of Central Excise. In this regard, CESTAT Delhis decision in the case of Modi Alkalies & Chemicals Ltd. (supra) also aptly reinforces Revenues stand that the mercury cleared as such is liable to duty of Central Excise.
6. The appeal is rejected in above terms.
(Order pronounced in open court on 25.1.2016.) ASHOK K ARYA TECHNICAL MEMBER M. V. RAVINDRAN JUDICIAL MEMBER rv 7