2016 (2) TMI 759 - AT - Central Excise

Manufacture - captive consumption - Duty liability on oxygen produced and supplied to the contractor located within the premises of appellant - thrust of ld. Counsel s argument is that the oxygen has not been cleared out of factory and hence exemption available in terms of notification No.67/95-CE, for captive consumption is rightly claimed by them - Held that - We find that the original authority fell in error in examining the issue like ownership of goods, free of cost supply and return of recovered scrap etc. to arrive at the finding that there is no physical clearance or sale of goods and hence no duty liability. Clearance to FSNL through pipeline is an admitted fact. FSNL is a separate corporate entity having assigned factory premises of their own is also admitted. Sale for a consideration or ownership of goods are not relevant to decide excise duty liability. The contractual arrangements to meet business needs do not take away the duty liability which may otherwise exist. FSNL have established a factory at a site provided by the appellant inside their factory premises as per contract agreement. The oxygen is cleared to FSNL and consumed by FSNL. The exemption contemplated under notification No.67/95 is available if inputs (here oxygen ) manufactured in a factory is used within the factory of production. Oxygen produced by appellant is not used by appellants in their factory of production. The same is cleared to factory of FSNL and used by FSNL, though on behalf of appellant. We find the exemption as above cannot be extended in such situations. - Decided against assessee

Summary

Issues:
Duty liability on oxygen supplied to contractor within factory premises under notification No.67/95-CE.

Analysis:
The appeal challenged an order by the Commissioner (Appeals) confirming the demand for excise duty on oxygen supplied by the appellants to a contractor within their factory premises. The appellants claimed exemption under notification No.67/95-CE for captive consumption. The central issue was whether the oxygen supplied through pipelines to the contractor constituted a removal outside the factory, affecting the duty liability. The appellant argued that since the oxygen was used within the factory premises by the contractor, it did not amount to a removal as per Central Excise Rules, 2002. They contended that the contractor's activities were inside the appellant's approved premises, and thus, the oxygen was not cleared outside such premises. The appellant relied on various case laws to support their claim.

The department, on the other hand, argued that duty liability cannot be overridden by contractual arrangements, emphasizing that the physical removal of excisable goods outside the factory triggers duty liability, irrespective of the recipient's location or consideration received. The Tribunal examined the records and the arguments presented. It noted that while the oxygen did not leave the factory physically, it was supplied to a separate corporate entity, the contractor, for industrial use within the compound. The Tribunal found that the exemption under notification No.67/95-CE for captive consumption could not be extended in this scenario. It highlighted that the contractual arrangements and business needs did not absolve the duty liability that would otherwise apply.

The Tribunal dismissed the appeal, emphasizing that the duty liability on the oxygen supplied to the contractor within the factory premises was valid. It distinguished the case from precedents cited by the appellant, noting that the facts and issues in those cases were different and did not support the appellant's position. The judgment underscored that the duty liability is triggered by the physical clearance of goods, regardless of ownership, consideration, or contractual agreements. The decision reaffirmed the importance of compliance with excise duty regulations and the applicability of exemptions based on the specific circumstances of each case.