2017 (6) TMI 704 - AT - Central Excise

Manufacture of mineralized water from sea water - Revenue s stand in the appeal is that for use of DM water in assessee s unit as per N/N. 67/95-CE dated 16.3.95, the Respondent is required to pay duty @ 16% which is on consumption of DM water for further manufacturing of mineral water which attracts nil rate of duty - Held that - the plea of the Revenue that adjudicating authority did not properly examine the facts and the facts that the impugned order was set aside earlier by the Tribunal vide its order dated 26.6.2008 mentioned above, we find that the subject matter raised in the present appeal of the Revenue deserves to be remanded for de novo decision by the original adjudicating authority who shall decide the matter afresh - appeal allowed by way of remand.

Issues: Appeal against confirmation of Central Excise duty and education cess, classification of de-mineralized water, limitation period for show cause notices, proper examination of captive use of water.

Confirmation of Central Excise Duty: The appeal was against the confirmation of Central Excise duty and education cess amounting to ? 44,83,752/- and ? 89,675/- respectively, against the respondent company. The issue revolved around the classification of de-mineralized water falling under Chapter Heading 28.51 of the Central Excise Tariff Act. The Revenue contended that duty was required to be paid at 16% on the consumption of de-mineralized water for further manufacturing of mineral water, which attracted a nil rate of duty. The adjudicating authority had exempted the duty for the period up to 28.2.2005 as the water was used within the manufacturing plant for making potable water. However, the Revenue argued that the demands for the period up to 28.2.2005 and from March 2005 to February 2006 were wrongly dropped.

Limitation Period for Show Cause Notices: The Department issued two show cause notices dated 6.3.2007 for recovery of duty, but the adjudicating authority dropped the demand for the period prior to 1.3.2005 on merits and for the period March 2005 to February 2006 on the ground of limitation. The Department contended that both notices were issued on the same date and served to the respondent on the same date, so the demands were within limitation due to suppression of facts.

Proper Examination of Captive Use of Water: During the hearing, it was highlighted that the adjudicating authority did not properly examine the captive use of de-mineralized water by the respondent. The show cause notice mentioned that certain quantities of water were supplied to different units of the assessee and were not captively consumed. The Tribunal had earlier set aside the impugned order and remanded the matter for adjudging the duty liability in terms of a specific notification.

Judgment: The Tribunal found that the matter deserved to be remanded for a fresh decision by the original adjudicating authority within four months from the date of receipt of the order. The appeal was allowed by way of remand, setting aside the impugned order in respect of the issues raised by the Revenue. The remanded matter was to be decided after giving a personal hearing to both sides.

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