2008 (3) TMI 30 - SC - Central Excise

Marketability and Excisability of Methane Gas - an article does not become liable to excise duty merely because of its specification in the schedule to the Central Excise Tariff Act unless it is salable and known to the market department failed to produce any evidence - demand set-aside.

Summary

Issues:
Classification of Methane gas for excise duty when consumed captively and not marketed.

Analysis:
The appeal was filed against the Final Order passed by the Tribunal regarding the classification of Methane gas under Chapter Heading 2711.29 of the Central Excise Tariff Act, 1985 for excise duty when consumed captively and not marketed. The respondent was engaged in manufacturing de-natured Ethyl Alcohol, producing Methane gas as a by-product used as fuel in the distillery. The Revenue issued a show cause notice for imposing excise duty on the Methane gas produced by the respondent. The Adjudicating Authority confirmed the demand and imposed penalties. The Commissioner (Appeals) accepted the appeal, concluding that the gas was not marketable, shifting the burden of proof to the Department. The Tribunal upheld this decision, emphasizing the lack of evidence on marketability by the Revenue. The Tribunal referred to a previous judgment highlighting marketability as essential for excise duty. The Supreme Court agreed that mere specification in the schedule does not make an article liable to excise duty unless it is marketable. The Revenue failed to prove marketability, leading to the dismissal of the appeal.

In conclusion, the Supreme Court dismissed the appeal, emphasizing that excise duty is not applicable unless the goods are marketable, a fact established by the Commissioner (Appeals) and confirmed by the Tribunal. The lack of evidence presented by the Revenue regarding marketability led to the decision that Methane gas was not marketable and hence not subject to excise duty. The judgment highlighted the importance of proving marketability for the imposition of excise duty, ultimately ruling in favor of the respondent.