2015 (5) TMI 100 - HC - Central Excise

Rate of duty on Ethanol Blended Petrol (EBP) - Benefits of Exemption Notification No.6/2002- CE dated 01.03.2012 and the Notification No.15/2003-C.E., dated 01.03.2003 - held that - Benefit is given to the final product, i.e., 5% ethanol doped petrol (EBP) which is a blend of 95% motor spirit(petrol) and 5% ethanol. Both the said products were being stored in the premises of the refinery of the assessee and on the ethanol, the excise duty had been paid whereas on the motor spirit, the excise duty was not paid at the time of mixing the two, before the EBP was taken out from the factory/refinery premises. However, it is common case of the parties that as per Rule 8, the said duty has been paid on motor spirit (petrol) also, within the required period by 5th day of the following month. Once that is so and the duty has also been paid, it would be too technical a default to penalise the Corporation on the ground that the duty should have been paid prior to the mixing and therefore, deny it the benefit of exemption. It is not the case of the appellant-Department that thereafter, there was non-payment of the excise duty upon the motor spirit and therefore, the Tribunal was right in following its earlier view of the co-ordinate Bench of Ahmedabad, wherein it has been held that as per Rule 8, the duty liability shall be deemed to have been discharged and the amount payable is credited to the account of the Central Government by the specified date. - Decided against Revenue.

Summary

Issues:
1. Interpretation of Exemption Notifications
2. Treatment of Ethanol Blended Petrol (EBP) as Motor Spirit
3. Validity of Invoices for Ethanol Blended Petrol (EBP)

Interpretation of Exemption Notifications:
The appellant challenged the Tribunal's decision to grant benefits of Exemption Notifications No.6/2002-CE and No.15/2003-CE to the respondent despite non-compliance with stipulated conditions. The respondent, a petroleum products manufacturer, faced a show cause notice for allegedly not meeting duty payment conditions under the notifications. The Commissioner confirmed the central excise duty demand, penalty, and interest against the respondent. However, the Tribunal overturned this decision based on a judgment by CESTAT, Ahmedabad. The appellant argued that strict compliance with notification conditions is necessary, citing Eagle Flask Industries Ltd. v. Commissioner of C.Ex., Pune. In contrast, the respondent contended that duty payment on motor spirit was timely and there was no violation warranting exemption denial. The High Court upheld the Tribunal's decision, emphasizing that duty payment on both products was made within the required period, as per Rule 8 of the Central Excise Rules, 2002. The Court noted that the benefit of exemption applied to the final product, EBP, and technical non-compliance did not justify denial of exemption.

Treatment of Ethanol Blended Petrol (EBP) as Motor Spirit:
The appellant contested the Tribunal's classification of duty paid clearance of EBP as duty paid clearance of Motor Spirit, highlighting their distinct characteristics. The respondent was accused of treating invoices for EBP as pertaining to Motor Spirit clearance, despite the prohibition on exchanging invoices. The High Court, however, found that the duty on both EBP components had been paid within the prescribed period, and the duty liability was deemed discharged under Rule 8. As the duty was paid on the motor spirit before mixing, the Court deemed it technical to penalize the Corporation for not paying duty before blending. The Court upheld the Tribunal's decision, emphasizing that the duty payment on the motor spirit was made on time, justifying the treatment of EBP as a separate product eligible for exemption.

Validity of Invoices for Ethanol Blended Petrol (EBP):
The issue of treating invoices generated for EBP clearance as pertaining to Motor Spirit arose due to the mixing process and duty payment sequence. The appellant argued that such treatment violated rules and conditions for duty exemption. However, the High Court, relying on Rule 8 and the timely duty payment on both components of EBP, concluded that the duty liability was discharged as required. The Court dismissed the appeal, stating that the procedural requirements were met, and the benefit of exemption rightly applied to the final product, EBP. The judgment clarified that technical non-compliance with duty payment sequence did not warrant denial of exemption under the relevant notifications.