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2020 (9) TMI 642 - AT - Central ExciseHearing of appeal - supply of necessary documents - HELD THAT - The appeal is taken up for hearing after handing over the necessary statements relied upon by the adjudicating authority in passing the impugned order to the Appellant. Valuation - short payment of duty - allegation that even though their Miraz unit sold Motor Spirit blended with Ethanol and collected duty on the whole quantity of Motor spirit including duty on Ethanol, but failed to discharge the excess duty collected on ethanol under Section 11D of Central Excise Act, 1944 - whether the appellants are required to deposit the amount of ₹ 75,94,886/- on the quantity of ethanol of 712.290 KL blended with 13533.580 KL of Motor Spirit(Petrol),when the resultant quantity of 14245.850 KL of EBP was sold as Motor Spirit ,under Section 11D, and interest under Section 11DD of Central Excise Act, 1944? - HELD THAT - The Miraj unit receives duty paid motor spirit from their manufacturing Unit at Vasco, Goa and also duty paid ethanol from independent distillers. The Motor spirit and ethanol was blended in the ratio of 95 5 at the time of clearance from the Miraj unit to the customers in tankers. The price per KL of EBP (which was mentioned in the invoice as motor spirit) was similar to the price charged by the appellant for unblended motor spirit to the customers. The Commissioner while adjudicating the demand notice for recovery of excess duty alleged to have been collected on the quantity of ethanol blended with Motor spirit, took cognizance of the fact about the activity/process of blending, whether amounts to manufacture or otherwise. Following the order of the Commissioner of Central Excise and Customs, Goa, he was also of the view that the activity of blending of motor spirit with ethanol amounts to manufacture under Section 2(f) of Central Excise Act, 1944. However, he has proceeded to observe that the appellant had failed to deposit the excess amount of duty collected from the customs on the quantity of EBP blended with motor spirit. There are no merit in the reasoning of the learned Commissioner in confirming the amount under Section 11D of the Central Excise Act, 1944. Once it is held that the activity of blending 5% of the ethanol with 95% of motor spirit results into manufacture of motor spirit (EBP), the identity of ethanol islost in the process of manufacture of the EBP. Therefore, the price charged on the invoices which includes duty at the rate applicable to motor spirit, if not paid is recoverable under Sec. 11A of CEA,1944 as duty short paid. The approach of theoretically calculating duty on non-excisable portion of the Motor spirit( i.e.ethanol), the raw material used in the manufacture of EBP, and demanding the same under Section 11D of Central Excise Act, 1944, in our considered opinion, cannot be sustained being contrary to the scheme of the Act. Also, alternatively even if it is assumed that the process of blending of ethanol with motor spirit does not amount to manufacture under Section 2(f) of Central Excise Act, 1944, even than the duty paid on motor spirit (EBP) cannot be construed as duty paid separately on Motor spirit and proportionate duty applicable to ethanol in the total duty be recoverable under Section 11D of Central Excise Act, 1944, when the price charged was inclusive of duty, and the duty attributable to Ethanol is not shown and recovered separately in the invoice - In the present case, the Revenue could not show that the appellant after blending ethanol with duty paid motor spirit collected separately, mentioning the duty on ethanol in the invoices, but not paid to the Government. Therefore, Section 11D of CEA,1944 cannot be said to have been attracted. Statements of Shri Subbara - HELD THAT - In all his statements, it is stated that the duty in the invoices prior to the disputed period were shown separately, whereas during the disputed period, it was shown as inclusive of duty. On further being asked by the department, he has stated that the resultant EBP which contains 5% of ethanol since not suffered duty but after blending with motor spirit duty was collected on the total quantity of EBP, therefore, the duty attributable to ethanol theoretically in the total duty paid on the price of motor spirit is payable but not paid - there are no merit in the said understanding of the Shri Subbaraj in stating that excess duty collected is payable but not paid under Sec. 11D of CEA,1944 because of change in the pattern of reflecting duty on the invoice. Therefore, his understanding of the applicability of Sec.11D cannot be the basis for confirming the demand. Appeal allowed on merits.
Issues Involved:
1. Whether the appellants are required to deposit the amount of ?75,94,886/- on the quantity of ethanol blended with motor spirit under Section 11D and interest under Section 11DD of Central Excise Act, 1944. 2. Applicability of Section 11D of Central Excise Act, 1944. 3. Jurisdiction of the Commissioner of Central Excise, Goa. 4. Whether blending of ethanol with motor spirit amounts to manufacture. 5. Validity of invoking different alternate provisions in the show-cause notice. 6. Consideration of statements and evidence by the Tribunal. Detailed Analysis: 1. Requirement to Deposit Amount under Section 11D: The primary issue was whether the appellants, M/s IOCL, were required to deposit ?75,94,886/- collected as excise duty on the quantity of ethanol blended with motor spirit. The Tribunal noted that the appellants blended duty-paid motor spirit with ethanol and sold the resultant Ethanol Blended Petrol (EBP) as motor spirit, with invoices indicating the price as inclusive of duty. The Revenue alleged that the appellants collected excise duty on the ethanol component but did not deposit it with the government. 2. Applicability of Section 11D of Central Excise Act, 1944: The Tribunal analyzed Section 11D, which mandates that any excess amount collected as excise duty must be deposited with the government. The appellants argued that they did not collect duty separately on ethanol, thus Section 11D was not applicable. The Tribunal agreed, stating that the duty was not shown separately in the invoices, and therefore, Section 11D was not attracted. The Tribunal cited the case of M/s National Organic Chemical Industries Ltd., which held that Section 11D applies only when the amount is collected specifically as excise duty. 3. Jurisdiction of the Commissioner of Central Excise, Goa: The appellants contended that the Commissioner of Central Excise, Goa, lacked jurisdiction to issue the show-cause notice and confirm the demand, as IOCL Miraj falls under the jurisdiction of Pune-II Commissionerate. The Tribunal did not address this issue in detail, as the appeal was allowed on merit. 4. Whether Blending of Ethanol with Motor Spirit Amounts to Manufacture: The Tribunal considered whether the blending process constituted manufacture under Section 2(f) of the Central Excise Act, 1944. The Commissioner of Central Excise & Customs, Goa, had previously held that blending amounted to manufacture. The Tribunal noted that if blending was considered manufacture, the identity of ethanol was lost, and the resultant product was motor spirit. Therefore, any duty short-paid should be recovered under Section 11A, not Section 11D. 5. Validity of Invoking Different Alternate Provisions: The appellants argued that invoking Section 11A(1) read with Section 11D(1) and Sections 11AB and 11DD in the show-cause notice was incorrect. The Tribunal did not specifically address this argument but allowed the appeal on other grounds. 6. Consideration of Statements and Evidence by the Tribunal: The High Court had remanded the case to the Tribunal, noting that relevant statements and evidence, particularly those of Shri P. Subbaraj, were not considered. The Tribunal reviewed these statements and found no categorical admission of duty recovery separately on ethanol. The Tribunal concluded that the statements did not support the Revenue's case. Conclusion: The Tribunal set aside the impugned order and allowed the appeal, concluding that the appellants were not required to deposit the alleged excess duty under Section 11D. The Tribunal emphasized that the duty was not shown separately in the invoices, and the blending process, whether considered manufacture or not, did not justify the demand under Section 11D. The appeal was allowed on merit, rendering other issues like jurisdiction and limitation academic.
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