2014 (9) TMI 685 - AT - Central Excise

Manufacture - intermediate goods - Captive consumption of Sulphuric Acid - Exemption Notification No.06/2002-CE dated 01.03.2002 - Held that - until the Sulphuric Acid finally manufactured comes out after attaining its required strength, the Sulphuric Acid utilized in the manufacturing system in the double contact (double absorption) process in a continuous process is neither segregated nor its quantity is ascertainable In fact, it is not a marketable commodity and hence not excisable. In recording the conclusion that Sulphuric Acid in the Circulation Tank, is not liable to duty, the adjudicating Commissioner has reasoned that there was manufacture of one product only, namely, Sulphuric Acid at the final stage, and also observed that the proposal to recover duty at two different stages - one at the intermediate stage, and thereafter, at the final stage, is incorrect, as there was no manufacture of any new excisable commodity at the intermediate stage, which is in the Circulation Tank and used repeatedly in the manufacture of Sulphuric Acid only. He also observed that Sulphuric Acid remains Sulphuric Acid at both intermediate and final stages, thereby, falling under the same Chapter Sub-Heading - Following decision of Ambalal Sarabhai Enterprise 1989 (8) TMI 72 - SUPREME Court , United Phosphorous 2000 (4) TMI 38 - SUPREME COURT OF INDIA , Bhor Industries 1989 (1) TMI 128 - SUPREME COURT OF INDIA and Moti Laminates 1995 (2) TMI 67 - SUPREME COURT OF INDIA - Decided against Revenue.

Summary

Issues:
1. Liability to pay Central Excise duty on Sulphuric Acid manufactured at the intermediate stage.
2. Liability to pay excise duty on removal of Sulphuric Acid manufactured, availing exemptions under specific notifications.

Analysis:

*Issue 1:*
The case involved the question of whether the Respondent was liable to pay Central Excise duty on the Sulphuric Acid manufactured at the intermediate stage. The Revenue contended that since the Sulphuric Acid in the Circulation Tank was used in the manufacture of finished goods and cleared without payment of duty, it should be considered excisable goods. The Department argued that the specific name and characteristics of the goods made them excisable. However, the Respondent argued that the Sulphuric Acid at the intermediate stage was not marketable and hence not excisable. The adjudicating authority analyzed the manufacturing process in detail and concluded that the Sulphuric Acid in the Circulation Tank, before being transferred to the Storage Tank, was not chargeable to duty as it was part of the continuous manufacturing process and not a marketable commodity. The Commissioner's reasoning was supported by various judgments, and the Tribunal upheld the Order, rejecting the Revenue's appeal.

*Issue 2:*
The second issue revolved around the liability to pay excise duty on the removal of Sulphuric Acid manufactured by the Respondent, availing specific exemptions. The Department argued that the Sulphuric Acid in the Circulation Tank was capable of being marketed and hence should be considered excisable goods. However, the Respondent contended that the Sulphuric Acid at the intermediate stage was not marketable and therefore not excisable. The Tribunal agreed with the Respondent's argument, distinguishing the case from a previous judgment concerning marketability. The Tribunal found that the judgments cited by the Respondent were applicable to the case at hand, supporting the adjudicating authority's decision. Consequently, the Tribunal upheld the Order and rejected the Revenue's appeal.

In conclusion, the Tribunal analyzed the manufacturing process, marketability of the goods at the intermediate stage, and relevant legal precedents to determine the liability for Central Excise duty on the Sulphuric Acid manufactured by the Respondent. The detailed examination led to the decision to uphold the adjudicating authority's Order, dismissing the Revenue's appeal.