2012 (2) TMI 434 - AT - Central Excise

Denial of exemption under S. No. 32D in Notification No. 6/2002-C.E., dated 1-3-2002 - Process not done at assessee s premises - Held that - exemption cannot be denied for the reason that blending was not done in a tank of the Appellants. The Appellants control the blending process and take responsibility for the standards of the blended product. Since the products were used for the intended process, we prima facie do not agree that exemption should be denied for the reason that process of blending took place in the tanks of trucks. Also there is no condition in the notification that Appellants should have been holding a license from BIS authorities. Prima facie we do not agree with the argument of Revenue that the Appellants were collecting amounts representing as excise duty from the consumers when the goods were sold at a price inclusive of all costs and levies. The provisions of Section 11D appears to be prima facie not applicable, to the situation. Accepting the interpretation canvassed by Revenue will result in total denial of exemption that is notified by the Revenue which is prima facie not justified. The notification does not prescribe that the blended product should be sold at a lower price - Appellants have made out a prima facie case for waiver of pre-deposit of dues arising from the impugned order for admission of the appeal - Stay granted.

Issues:
1. Denial of concessional rate of duty for blending ethanol with petrol.
2. Allegation of blending process not done in a registered plant.
3. Requirement of license from BIS authorities for ethanol blended petrol.
4. Allegation of collecting amounts representing excise duty from consumers.

Analysis:

Issue 1: Denial of concessional rate of duty for blending ethanol with petrol
The Appellants, as manufacturers of petroleum products, were availing a concessional rate of duty for blending motor spirit with ethanol as per government notifications. The Revenue alleged that the blending process was not conducted in a registered plant, leading to a Show Cause Notice demanding duty on petrol cleared for blending with ethanol. The Appellants argued that they complied with the prescribed blending ratio and marketed the blended petrol without violating any notification conditions. The Tribunal held that the Appellants controlled the blending process, maintained product standards, and used the products as intended, thus finding no justification for denying the exemption based on the location of the blending process.

Issue 2: Allegation of blending process not done in a registered plant
The Revenue contended that supplying petrol and ethanol separately into the same tank did not constitute blending by the Appellants. However, the Tribunal disagreed, emphasizing that the Appellants oversaw the blending process, ensured product quality, and bore responsibility for the blended product's standards. The Tribunal found no requirement in the notification mandating the blending to occur in a specific location, thereby rejecting the Revenue's argument on this point.

Issue 3: Requirement of license from BIS authorities for ethanol blended petrol
The Revenue argued that the Appellants lacked a valid license from BIS authorities for blending ethanol with petrol. The Appellants countered by providing test reports confirming compliance with BIS standards, asserting that the notification did not necessitate holding a license but compliance with the standards. The Tribunal agreed with the Appellants, finding no explicit requirement in the notification for possessing a BIS license, thereby dismissing the Revenue's contention.

Issue 4: Allegation of collecting amounts representing excise duty from consumers
The Revenue alleged that selling blended petrol at the same price as unblended petrol misled consumers into believing they were paying the same excise duty, resulting in the Appellants collecting amounts equivalent to excise duty. However, the Tribunal disagreed, stating that the selling price included all costs and levies, and there was no evidence of misrepresentation by the Appellants. The Tribunal found the provisions of Section 11D inapplicable in this situation, rejecting the Revenue's claim of collecting amounts as excise duty.

In conclusion, the Tribunal found in favor of the Appellants, holding that they established a prima facie case for waiving the pre-deposit of dues arising from the disputed order. The Tribunal granted a stay on the collection of such dues during the appeal's pendency, emphasizing that the Revenue's interpretation would unjustly deny the notified exemption without valid grounds.

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