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2021 (11) TMI 113 - AT - Central ExciseProcess amounting to manufacture or not - clearance of ethanol blended motor spirit (EBMS) - exempt goods or not - period 01.07.2004 to 07.08.2004 - scope of Circular F.No.366/5/2002-TRU dated 02.01.2003 - when the appellant paid the duty on ethanol blended motor spirit on its value of clearance that whether the activity of blending of motor spirit with ethanol is amount to manufacture or otherwise? - whether the appellant once again required to pay duty on motor sprit unblended? HELD THAT - Even after blending of 5% ethanol with 95% motor spirit, the product EBMS remains motor spirit as per the chemical nature of product as well as use thereof. It is also the fact that whether it is a unblended motor spirit or ethanol blended motor spirit, both falls under same BIS specification 2796, it is also established that whether it is unblended or blended product fall under the same class. There is no different product arise only by activity of blending with 5% ethanol. Blending of ethanol with 95% motor spirit does not amount to manufacture as envisaged in section 2(f) of Central Excise Act, 1944. The contention of the adjudicating authority that the circular mention about methanol not ethanol, there are no difference whether it is methanol or ethanol since the property of both are same and the purpose of mixing is also same which is evident from the above Para 4.1 of IS 2796-2000. The only issue is that whether the blending of either ethanol or methanol with motor spirit amount to manufacture. This is abundantly made clear as per the above opinion of the chemical examiner and the same was accepted by the Central Board of Excise Customs. Therefore, this circular being binding on the adjudicating authority should have scrupulously followed the same and ought not to have been held that blending of ethanol with motor spirit is amount to manufacture. In the case of HINDUSTAN PETROLEUM CORPN. LTD. VERSUS COMMR. OF C. EX, DELHI ROHTAK 2008 (9) TMI 154 - CESTAT, NEW DELHI it was held that mere blending of motor spirit with small quantities of additives to improve the quality of motor spirit and to reduce emission levels does not amount to manufacture. Since even after addition motor spirit continues to be used as motor spirit. In the present case not only it is supported by the aforesaid judgments but there is a clear board circular according to which the blending of ethanol and motor spirit cannot be held as amount to manufacture. The adjudicating authority has also made reliance on Notification No.62/2002- CE, 63/2002-CE 64/2002-CE all dated 31.12.02 and contended that since by these notifications EBMS is exempted that shows that the EBMS is a manufactured goods. We completely disagree with this proposition of the learned adjudicating authority that merely because a product is exempted by itself cannot be a manufacture goods. First, it is to be tested that activity is whether amount to manufacture and if it is so, then only the application of exemption notification comes into play. Therefore, it is settled law that merely by any product is appearing either in the notification or tariff entry, for this reason it cannot be concluded that the goods are manufactured goods. The process independently to be seen that whether it amounts to manufacture or not - thus, blending of 5% ethanol with 95% motor spirit which made the product EBMS does not amount to manufacture. Payment of duty on the value of EBMS by the appellant - HELD THAT - It is settled law that excise duty needs to be paid on the product in the form it is cleared at a value from the factory. This issue has been settled by the Hon ble Supreme Court in the case of SIDHARTHA TUBES LTD. VERSUS COLLECTOR OF CENTRAL EXCISE 1999 (11) TMI 69 - SUPREME COURT . The appellant has correctly paid the duty on the EBMS and they were not required to pay duty on motor spirit. It is also to be noted that the appellant had paid duty on EBMS instead of motor spirit that they paid higher duty as compared to the duty payable on motor spirit therefore, there is no loss of revenue by paying the duty on EBMS - the payment of duty by the appellant on EBMS is correct and legal and they are not required to pay any duty again on the motor spirit. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Whether the process of blending 5% ethanol with 95% motor spirit (EBMS) amounts to manufacture. 2. Applicability of excise duty on unblended motor spirit used in the manufacture of EBMS. 3. Interpretation and relevance of various notifications and circulars regarding the excise duty on EBMS. 4. Whether the appellant is required to pay duty on motor spirit prior to blending if duty has already been paid on EBMS. Detailed Analysis: 1. Whether the process of blending 5% ethanol with 95% motor spirit (EBMS) amounts to manufacture: The tribunal examined whether blending ethanol with motor spirit constitutes manufacturing under Section 2(f) of the Central Excise Act, 1944. It was found that blending 5% ethanol with 95% motor spirit does not change the chemical nature or use of the product. Both unblended and blended motor spirit fall under the same BIS specification 2796 and tariff heading 27.10, indicating no new product with distinct characteristics or commercial use is created. The tribunal relied on CBEC Circular No. 83/83/94-CX dated 13.12.1994, which clarified that blending methanol with motor spirit does not amount to manufacture, and found no significant difference between methanol and ethanol in this context. The tribunal cited multiple judgments, including Hindustan Petroleum Corporation v. CCE and Bharat Petroleum Corporation Ltd. v. CCE, which supported the view that blending additives with motor spirit does not constitute manufacturing. 2. Applicability of excise duty on unblended motor spirit used in the manufacture of EBMS: The tribunal held that since blending ethanol with motor spirit does not amount to manufacture, the appellant is not required to pay excise duty on the unblended motor spirit. The duty should be paid on the product in the form it is cleared from the factory, which in this case is EBMS. This is consistent with the Supreme Court's judgment in Sidhartha Tubes Ltd., which stated that duty must be paid on the final product's value when cleared from the factory, even if an intermediate process does not constitute manufacturing. 3. Interpretation and relevance of various notifications and circulars regarding the excise duty on EBMS: The tribunal considered several notifications and circulars, including Notification No. 25/2006-CE (NT) dated 20.11.2006, which exempted EBMS from excise duty for a specific period if duty was paid on motor spirit and ethanol. The tribunal concluded that the existence of an exemption notification does not imply that the process of blending ethanol with motor spirit amounts to manufacture. The tribunal also referenced CBEC Circular No. 1078/02/2021-CX dated 22.06.2021, which clarified that no additional duty is required on EBMS if duty is already paid on its components. 4. Whether the appellant is required to pay duty on motor spirit prior to blending if duty has already been paid on EBMS: The tribunal found that the appellant had correctly paid duty on the higher value of EBMS and was not required to pay duty on the unblended motor spirit. The tribunal noted that paying duty on EBMS instead of motor spirit resulted in higher duty payments, ensuring no revenue loss. The tribunal rejected the adjudicating authority's reliance on Notification No. 67/95-CE, stating that motor spirit cannot be considered an intermediate product since blending does not constitute manufacturing. Conclusion: The tribunal concluded that blending 5% ethanol with 95% motor spirit does not amount to manufacture. Therefore, the appellant correctly paid duty on EBMS and is not required to pay duty on unblended motor spirit. The impugned order was set aside, and the appeal was allowed.
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