2006 (11) TMI 452 - AT - Central Excise

Summary

Issues involved: Confirmation of demands in respect of captive consumption of diesel steam arising from the processes of sour crude, compliance with environmental standards for sulphur content, excisability of goods not meeting marketability requirements, duty liability for goods captively consumed in a refinery.

Confirmation of demands for captive consumption of diesel steam: The appellant, a PSU unit, had captive consumption of diesel steam arising from refining sour crude for electricity generation. The Ministry of Environment set a maximum sulphur content standard in 1996, leading to the appellant setting up a Diesel Hydro Desulphurization Plant to meet the new standards. The appellant stored non-marketable diesel in separate tanks, which was later used for captive consumption. The Department raised demands on these products, but the appellant argued that the demands cannot be raised as the products did not meet specified standards. The appellant cited relevant case law to support their position.

Excisability of goods not meeting marketability requirements: The Tribunal considered previous judgments, including one involving LSHS captively used in power generation, where goods not meeting marketability standards were deemed non-marketable and non-excisable. The Tribunal found that the appellant's goods, which did not meet marketability standards due to sulphur content, could not be considered excisable for captive consumption. The Tribunal also accepted the appellant's argument regarding non-dutiability of goods in a refinery declared as a warehouse, citing relevant case law.

Duty liability for goods captively consumed in a refinery: The Tribunal noted that the appellant had complied with duty payments for diesel steam consumed in the refinery. However, changes in environmental standards prevented the appellant from clearing goods in the market, leading to storage of non-marketable goods. The Tribunal upheld the appellant's contention that such goods, not meeting marketability requirements, could not be considered excisable for captive consumption. The Tribunal also found no suppression of facts and held that demands prior to a certain date were barred by time, ultimately setting aside the impugned order and allowing the appeal.