2008 (9) TMI 858 - AT - Central Excise

Stay/Dispensation of pre-deposit - Gas arising as a technological necessity during manufacture of HR coils

Summary

Issues Involved:
1. Classification of gases produced during the manufacture of HR Coils.
2. Determination of whether the gases are excisable goods.
3. Burden of proof on the Revenue to establish the classification and excisability of the gases.
4. Requirement for pre-deposit of duty and penalty by the appellant.

Detailed Analysis:

1. Classification of Gases Produced During Manufacture:
The primary issue was whether the gases produced during the manufacture of HR Coils should be classified as Carbon Monoxide under Chapter Heading 28112940, which would make them liable to duty at 16% ad valorem. The appellant argued that the gases were Corex gas, a mixture of carbon monoxide, carbon dioxide, and hydrogen, and not pure carbon monoxide. The Tribunal had previously treated these gases as arising out of a technological necessity and not as carbon monoxide.

2. Determination of Whether the Gases Are Excisable Goods:
The appellant contended that the gases were not manufactured by them and did not result in excisable goods. They relied on expert opinions from Dr. G. Sundar of BITS Pilani and Dr. Dipak Mazumdar of IIT Kanpur, who stated that the Corex process produces a mixture of gases that cannot be separated into individual components like carbon monoxide. The Revenue failed to provide any rebuttal evidence or expert testimony to counter these claims.

3. Burden of Proof on the Revenue:
The Tribunal emphasized that the burden to establish the classification and excisability of the gases lay with the Revenue. The Revenue did not take samples or provide expert evidence to prove that the gases were carbon monoxide. They relied on statements from the appellant's officials and a tabulated analysis showing the percentage composition of the gases. However, this was insufficient to classify the gases as carbon monoxide.

4. Requirement for Pre-deposit of Duty and Penalty:
The appellant was required to pre-deposit a duty of Rs. 24,24,54,942/- and a penalty of Rs. 1 crore. However, the Tribunal found that the Revenue had not discharged its burden of proof regarding the classification of the gases. The Tribunal noted that the previous order in the appellant's favor treated the gases as arising out of technological necessity, and the technical evidence supported this view. Consequently, the Tribunal granted a waiver of pre-deposit and stayed its recovery until the disposal of the appeal.

Conclusion:
The Tribunal concluded that the Revenue had not established that the gases were carbon monoxide and thus liable to duty. The expert evidence provided by the appellant was not rebutted by the Revenue. The Tribunal granted a stay on the pre-deposit requirement and scheduled the matter for final hearing, emphasizing that the burden of proof for classification lay with the Revenue. The appeal was to be heard out of turn due to the significant revenue involved.