2003 (12) TMI 111 - AT - Central Excise

Summary

Issues:
1. Recovery of credit on gases escaping during filling in cylinders.
2. Interpretation of Rule 57D regarding escaped gases as waste.
3. Applicability of previous tribunal decisions on similar cases.
4. Consideration of physical existence of goods lost by evaporation.

Analysis:

1. The case involved the recovery of credit taken on gases that escaped into the atmosphere during the process of filling cylinders with medical and industrial grade oxygen and argon. The issue was whether these escaped gases could be considered as used in the manufacture of the final product, leading to the liability to reverse the credit taken on them.

2. The Commissioner (Appeals) relied on a previous unreported decision of the Tribunal, which held that the escaped gases would be considered waste within the meaning of Rule 57D. The Tribunal emphasized that the decision of the Tribunal in a previous case, where oxygen lost during cylinder filling was not considered waste, did not affect the current case's judgment. The Tribunal clarified that goods lost due to evaporation or spillage still have physical existence and are covered by Rule 57D.

3. The Tribunal also discussed two other decisions to support its interpretation of Rule 57D. In one case, it was held that the loss by means of evaporation during storage was not covered by Rule 57D as it did not occur during the manufacturing process. In another case, it was determined that goods lost by spillage during manufacturing were not considered waste under Rule 57D. However, the Tribunal distinguished these cases from the current situation where the loss occurred during the filling of cylinders.

4. The Tribunal further emphasized that goods with physical existence, even if lost by evaporation, are covered by Rule 57D. It referred to a judgment of the Allahabad High Court, which held that credit of duty paid on the entire quantity of a substance used by the assessee should be allowed, even if some quantity was not contained in the finished product. The Tribunal concluded that the escaped gases in this case should be considered waste under Rule 57D, and the appeal was dismissed accordingly.