2016 (2) TMI 201 - AT - Central Excise

Duty liability of mercury - Excisability - Held that - Mercury obtained through manufacture of caustic soda and cleared as such is liable to duty of Central Excise. In this regard, CESTAT Delhi s decision in the case of Modi Alkalies & Chemicals Ltd. (2005 (4) TMI 113 - CESTAT, NEW DELHI ) also aptly reinforces Revenue s stand that the mercury cleared as such is liable to duty of Central Excise. - Decided against assessee

Summary

Issues involved:
1. Liability of Central Excise duty on clearance of mercury.
2. Applicability of penalty under Section 11AC of the Central Excise Act.

Analysis:

Issue 1: Liability of Central Excise duty on clearance of mercury
The appellant, a chemical company, shifted its manufacturing process from Mercury Cell Processing to Membrane Cell Process, resulting in the clearance of 42262.5 kg of mercury without payment of duty or raising an invoice. The Revenue contended that duty was payable on the cleared mercury as it was used in the manufacturing of caustic soda. The appellant argued that since the mercury was used as an input and not sold as a separate product, duty liability did not arise. However, the Tribunal found that the appellant had cleared the mercury, which could be in a contaminated form, without paying duty, contrary to the provisions. The Tribunal emphasized that if the appellant had taken CENVAT credit for the purchase of the mercury, they could be entitled to the benefit of Rule 3(4) of CENVAT Credit Rules, 2001 for payment of Central Excise duty on the cleared mercury, provided there was documentary evidence of such credit. The Tribunal cited precedents, including the case of Lord Chloro Alkali Ltd., to support the Revenue's position that duty was indeed payable on the cleared mercury.

Issue 2: Applicability of penalty under Section 11AC of the Central Excise Act
The appellant challenged the imposition of a penalty equal to the duty liability under Section 11AC of the Central Excise Act. They argued that while the penalty was mandatory under Section 11AC, the quantum should be discretionary. The appellant cited the case of Indian Organic Chemicals Ltd. to support their argument. However, the Tribunal upheld the penalty, stating that the facts of the case aligned with precedents like Modi Alkalies & Chemicals Ltd. and Lord Chloro Alkali Ltd., where duty liability and penalty were confirmed. The Tribunal emphasized that the mandatory penalty provision under Section 11AC applied in this case, dismissing the appellant's plea for discretionary quantum.

In conclusion, the Tribunal rejected the appeal, affirming the duty liability on the cleared mercury and upholding the penalty under Section 11AC of the Central Excise Act.