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2010 (2) TMI 527 - AT - Central ExciseExport gas - The issue involved in these cases is whether the mixture of gases termed export gas emerging in the assessee s steel plant in the course of manufacture of HR coils is exigible to duty as carbon monoxide under the heading 2811 90 (CSH 2811 24 90 from 28-2-05) as held in the impugned orders. Appellant claiming classification under heading 2705. Held that certificate of experts indicating corex process is an iron making process and not common process for manufacture of carbon monoxide. Carbon mono oxide giving essential character as fuel and export gas classifiable under sub heading 2811 90 till 28.02.2005 and under tariff item 2811 24 90 thereafter. Bonafide belief on classification and mens rea absent. Demand confirmed. Penalties set aside.
Issues Involved:
1. Classification of 'export gas' as carbon monoxide under Chapter Heading 2811 or as a mixture under Chapter Heading 2705. 2. Exigibility of 'export gas' to excise duty. 3. Invocation of the extended period of limitation for duty demand. 4. Imposition of penalties under Rule 25 of CER, 2002. Issue-wise Detailed Analysis: 1. Classification of 'Export Gas': The primary issue revolves around whether the 'export gas' produced by JSW should be classified as carbon monoxide under Chapter Heading 2811 or as a mixture of gases under Chapter Heading 2705. JSW contended that 'export gas,' a by-product containing 47.02% carbon monoxide, should be classified under Chapter Heading 2705, which covers coal gas, water gas, producer gas, and similar gases. They argued that the gas is an inevitable technological accident in the production of HR coils and not a manufactured product by choice. They cited expert opinions and previous case law, including the Tribunal's decision in Philips Carbon Black Ltd. v. CCE, to support their claim that the gas is a non-excisable by-product. The Revenue, on the other hand, argued that 'export gas' should be classified as carbon monoxide under Chapter Heading 2811, citing that the gas has the essential character of carbon monoxide. They argued that the gas is a manufactured product with a market and is not similar to the gases covered under Chapter Heading 2705. The Revenue also relied on HSN notes and previous Tribunal decisions, such as Mangalore Chemicals & Fertilizers Ltd. v. CCE, to support their classification. The Tribunal held that 'export gas' is a manufactured product and has a market. It found that the gas fits the description in the relevant entry for carbon monoxide and upheld its classification under Chapter Heading 2811. 2. Exigibility of 'Export Gas' to Excise Duty: JSW argued that 'export gas' is a by-product and not a final product, and hence should not be subject to excise duty. They cited the Tribunal's decision in JSW Steel Ltd. v. CCE, which held that corex gas arose as a technological necessity during the manufacture of HR coils and was an off-gas. The Tribunal, however, noted that 'export gas' is excisable and has a market. It found that the gas is a manufactured product and is known to the trade dealing in it. Therefore, the Tribunal held that 'export gas' is exigible to excise duty. 3. Invocation of the Extended Period of Limitation: The Revenue contested the decision to drop the demand of duty beyond the normal period, pleading suppression and willful misrepresentation of facts by JSW. The Commissioner had dropped the duty demand for the period prior to May 2005 on the ground of limitation, finding no suppression or willful misrepresentation by JSW. The Tribunal upheld the Commissioner's decision, finding that JSW had declared the item in the classification list and there was no willful suppression of facts. The Tribunal held that the larger period could not be invoked, and the duty demand beyond the normal period was rightly dropped. 4. Imposition of Penalties under Rule 25 of CER, 2002: Penalties were imposed on JSW for the differential duty demanded. JSW argued that there was no mens rea on their part and that the failure to pay the duty arose from a bona fide belief regarding the correctness of the classification adopted. The Tribunal found that there was no dishonest or contumacious conduct by JSW and set aside the penalties imposed. It cited the Apex Court's decision in Hindustan Steel v. State of Orissa, which held that penalties cannot be imposed in the absence of dishonest conduct. Conclusion: The Tribunal upheld the classification of 'export gas' under Chapter Heading 2811 as carbon monoxide, confirmed its exigibility to excise duty, and set aside the penalties imposed on JSW. It also upheld the decision to drop the duty demand for the period prior to May 2005 on the ground of limitation, dismissing the Revenue's appeal.
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