2018 (2) TMI 1673 - AT - Central Excise

Reversal of cenvat credit - Sale of Carbon Di Oxide (Co2) without payment of duty - case of appellant is that they are not engaged in the manufacture of Carbon Di Oxide (Co2) inasmuch as the same came into existence as a byproduct during the course of manufacture of Denatured Spirit - Held that - Hon ble Supreme Court decision in the case of Union of India Vs. Hindustan Zinc Ltd. 2014 (5) TMI 253 - SUPREME COURT , laying down that unintended byproduct, which emerge during the course of manufacture of the final product, would not call for payment of any particular percentage of the value of the same in terms of erstwhile Rule 57CC - the present provision of Rule 6(3) are pari metere to Rule 57CC of erstwhile Central Excise Rule and as such, ratio of law declared in the said decisions would fully apply - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability of duty on sale of Carbon Di Oxide (Co2) by the appellant without payment.
2. Interpretation of Rule 6 of Central Excise Rule regarding payment of duty on exempted byproducts.
3. Applicability of judicial precedents in determining duty liability on unintended byproducts during manufacturing.

Detailed Analysis:
1. The appellant was involved in the manufacture of Sugar, Molasses, and Denatured Alcohol, during which Carbon Di Oxide Gas (Co2) was produced as a byproduct. The appellant sold Co2 without paying duty during a specific period. The authorities initiated proceedings against the appellant, resulting in a demand notice for ?3,46,206 on the Co2 sold. The Original Adjudicating Authority confirmed the demand, along with interest and penalty, which was upheld by the Commissioner (Appeals).

2. The appellant contended that they were not engaged in the manufacture of Co2 as it was a byproduct of Denatured Spirit production. The demand was confirmed at 10% of the sale value of Co2 as per Rule 6 of the Central Excise Rule. Citing the decision of the Hon’ble High Court of Bombay in Rallis India Ltd. Vs. Union of India and the Hon’ble Supreme Court decision in Union of India Vs. Hindustan Zinc Ltd., it was argued that the payment of a percentage of the value of exempted byproducts does not apply. The Tribunal noted that Rule 6(3) is similar to the erstwhile Rule 57CC, and the legal principles from the mentioned cases are applicable.

3. In light of the judicial precedents and the interpretation of Rule 6, the Tribunal set aside the impugned order, allowing the appeal and granting consequential relief to the appellant. The decision was made following the legal principles established by the higher courts regarding the duty liability on unintended byproducts during manufacturing processes.