2008 (2) TMI 217 - AT - Central Excise

Demand of duty on refinery gas generated in the factory of the appellants, part of which is allowed to escape in the atmosphere through the flaring system and part of which is utilized internally for generation of heat - Having considered the impugned goods to be not manufactured , the department cannot be charge excise duty on a portion of such goods, merely because the same is put to some use for generating heat and thereby achieving fuel economy assessee s appeal allowed

Summary

Issues:
Demand of duty on refinery gas allowed to escape vs. utilized internally for heat generation. Interpretation of Circular No. 246/80/96-CX. Exemption under Notification No. 75/94-C.E. Department's ability to charge excise duty. Consistency with previous decisions.

Analysis:
The case involves a dispute over the demand of duty on refinery gas generated by the appellants, with part escaping through flaring systems and part used internally for heat generation. The appellant's advocate argued that the goods are not marketable and cannot be charged excise duty based on Circular No. 246/80/96-CX, which deems such goods as other than 'manufactured.' Additionally, the appellant highlighted a COD clearance rejecting the department's appeal regarding the same product's excisability for another entity.

The department contended that the Circular only applies to refinery gas escaping in the atmosphere, not the gas used internally. They argued that no automatic duty exemption applies to internally utilized gas. However, after reviewing the case records and Circular, the Tribunal found that the Circular exempts refinery gas under Notification No. 75/94-C.E. but later revoked the exemption as it wasn't considered a 'manufactured' product. The Tribunal agreed with the appellant that duty cannot be charged on goods used for fuel economy, as per the Circular.

The Tribunal referenced a previous case involving IOC Ltd., where they held that refinery gas is not a 'manufactured' product. Citing consistency with their previous decision, the Tribunal set aside the impugned order and allowed the appeal. This decision emphasizes the binding nature of Circulars issued by the Board and the importance of maintaining consistency in interpreting excise duty regulations.

This judgment clarifies the application of Circulars in determining excisability, the distinction between 'manufactured' and non-manufactured goods, and the department's limitations in charging excise duty based on Circular provisions. The decision underscores the significance of prior decisions in shaping current interpretations and upholding the principles of tax law.