2008 (5) TMI 567 - AT - Central Excise

Summary

Issues:
1. Challenge to demand of duty and penalty on oxygen manufactured and captively consumed.
2. Marketability of oxygen for excisability determination.

Analysis:

Issue 1: Challenge to demand of duty and penalty
The appellants contested the demand of duty amounting to over Rs.18.4 crores for the period between July 1997 to June 2007, related to the oxygen produced by them and used internally in their smelter and sulphuric acid plant. They also disputed an equal amount of penalty imposed on them. The oxygen, with a purity of approximately 95%, was utilized internally in their manufacturing processes. The appellants argued that the oxygen gas, in the form it was produced, was not marketable and thus not excisable. Additionally, they claimed exemption from duty on oxygen used in the production of duty-free sulphuric acid. The adjudicating authority initially rejected these contentions, leading to an appeal before the Tribunal. The Tribunal remanded the case for a fresh decision, including the aspect of oxygen marketability, which formed the basis of the subsequent appeal against the Commissioner's order.

Issue 2: Marketability of oxygen
Upon reviewing the remanded proceedings, the Tribunal noted the absence of a conclusive determination regarding the marketability of the oxygen in question in the Commissioner's order. The burden to establish the marketability of the oxygen rested with the Revenue, and the lack of evidence on this crucial aspect was highlighted by the appellants. The Tribunal observed that the essential test for dutiability, i.e., whether the oxygen could be marketed in its manufactured form, had not been adequately addressed by the Revenue. Consequently, the Tribunal provisionally opined that the oxygen produced by the appellants and internally consumed in their manufacturing processes was not fit for commercial sale. As a result, the Tribunal decided to waive the pre-deposit and stay the recovery of the duty and penalty amounts pending further proceedings.

In conclusion, the Tribunal's judgment primarily revolved around the marketability of the oxygen produced and used internally by the appellants, ultimately leading to a decision in favor of the appellants based on the preliminary assessment of the oxygen's non-commercial nature.