2023 (7) TMI 716 - HC - Central Excise

Waiver of duty under Section 11D of the Central Excise Act, 1944 - duty attributable to Ethanol is not shown and recovered separately in the invoice and it s composite cum duty price - HELD THAT - On the plain reading of section 11D of the C.E. Act, it is clear that sub-section (1) of Section 11D ordains that notwithstanding anything to the contrary contained in any order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made thereunder, every person who is liable to pay duty under C.E. Act or the rules made thereunder, has collected any amount in excess of the duty, assessed or determined and paid on any excisable goods under C.E. Act or the rules made thereunder from the buyer of such goods, in any manner as representing duty of excise, shall forthwith pay the amount so collected to the credit of the Central Government. Whether any of the ingredients of the provision are attracted in the present case? - HELD THAT - It is clear that in the present case, the blending was undertaken in the licensed premises and the blended goods were cleared from the licensed premises. The product was subjected to strict control and orders issued by Central and State Government from time to time under the Motor Spirit and High Speed Diesel (Regulation of Supply Distribution and Prevention of Malpractices) Order, 1998 where under the quality and specification of the Motor Spirit was to strictly monitored and complied. Also at the Vashi Terminal where the duty paid Motor Spirit and Ethanol were received and where after blending the same, EBP was generated, the respondent had carried out the tests and 9 out of 15 tests which indicted that it conformed to the BIS 2796 2000 specification and the Control Order, 1998. Only after such procedure as to verification of the compliance under Control Order 1998, the respondent had cleared/sold the said goods to their customers similar to what other Refineries/terminals did. The Tribunal has also rightly observed that it could not lost sight of the fact that the respondent was a Public Sector Undertaking and on many occasions, in absence of facilities at Government Laboratories, the tests conducted in well equipped laboratories are accepted by the department for classification purposes under the Tariff Act. For such reason, the test reports on EBP at Vashi Terminal could not be brushed aside unless contrary test result was produced by the revenue is the observation of the Tribunal. Insofar as the applicability of Section 11D of the C.E. Act to the facts of the present case are concerned, admittedly the Vashi terminal of the respondent received duty paid Motor spirit from its Refinery and also duty paid ethanol, which was blended in the ratio of 95 5 at the time of clearance from the Vashi unit to the customers in tankers. The price per kilolitre of EBP was similar to the price charged by the respondent for unblended motor spirit to the customers. In the invoice the duty paid on motor spirit (EBP) was not shown separately attributable to Motor spirit and Ethanol, but the sale price of EBP was a composite inclusive of duty. Thus, the price charged was inclusive of duty, and the duty attributable to Ethanol was not shown and recovered separately in the invoice, the same could not be recoverable under Section 11D of C.E. Act. This is a case in which the revenue could not show that the respondent after blending ethanol with duty paid motor spirit collected amounts separately, mentioning the duty on ethanol in the invoices, but the same was not credited to the Government. In such situation, Section 11D of C.E Act was certainly not attracted as the crucial requirement to attract Section 11D was certainly not being fulfilled for the revenue to invoke Section 11D of the C.E. Act. There are no merit in the appeal - appeal dismissed.

Summary

Issues Involved:
1. Whether the CESTAT was right in setting aside the demand of duty under Section 11D of the Central Excise Act, 1944.
2. Whether the CESTAT considered all the findings of the adjudicating authority who confirmed the demand of duty under Section 11D of the Central Excise Act, 1944.

Summary:

Issue 1: Setting Aside Demand of Duty under Section 11D
The appeal challenges the CESTAT's decision which set aside the demand of duty under Section 11D of the Central Excise Act, 1944. The respondent cleared Ethanol Blended Petrol (EBP) at a concessional rate of duty based on certain notifications. The Central Excise Department alleged non-compliance with the Bureau of Indian Standard's (BIS) specification 2796:2000 and issued show cause notices demanding duty. The adjudicating authority confirmed the demand, but on appeal, the CESTAT remanded the matter, and upon re-adjudication, the demand was again confirmed. The CESTAT eventually set aside the demand, noting that tests conducted at the respondent's Vashi Terminal indicated compliance with BIS specifications and that the revenue failed to prove otherwise. The Tribunal also observed that the respondent, being a Public Sector Undertaking, had conducted tests in well-equipped laboratories, which were acceptable in the absence of government facilities.

Issue 2: Consideration of Adjudicating Authority's Findings
The revenue contended that the CESTAT overlooked the findings of the adjudicating authority, which confirmed the demand under Section 11D, asserting that the respondent collected amounts as excise duty but did not deposit them with the government. The High Court noted that Section 11D mandates depositing any collected amount representing excise duty with the Central Government. However, in this case, the price charged for EBP was inclusive of duty, and the duty attributable to Ethanol was not shown separately in the invoice. Therefore, the crucial requirement to attract Section 11D was not fulfilled, and the CESTAT was correct in setting aside the demand.

Conclusion:
The High Court found no merit in the appeal, affirming the CESTAT's decision that the respondent's actions did not attract Section 11D of the Central Excise Act, 1944. The appeal was rejected, and no costs were awarded.