2020 (5) TMI 199 - AT - Central Excise

Excisability/dutiability/marketibility - by-product - captive consumption - Carbon dioxide generated during the process of fermentation of beer, and used inhouse for carbonation of beer - HELD THAT - The issue herein is squarely covered by the precedent decision of Division Bench of this Tribunal in the appellant s own case COMMISSIONER OF CENTRAL EXCISE-LUDHIANA VERSUS M/S UNITED BREWERIES LTD. 2015 (6) TMI 262 - CESTAT NEW DELHI where it was held that just because, the respondent were purchasing carbondioxide from other suppliers, it cannot be presumed that the carbondioxide generated in their unit was of the same character and properties as the gas being purchased from outside and hence, would be marketable. Appeal allowed - decided in favor of appellant.

Summary

Issues involved: Whether carbon dioxide generated during the fermentation of beer and used in-house for carbonation is dutiable.

Analysis:
The issue in this appeal revolves around the dutiability of carbon dioxide generated during the fermentation of beer and utilized in-house for carbonation. The appellant did not have a separate plant for the purification of carbon dioxide, which arose as an impure by-product during the beer manufacturing process. The impure carbon dioxide was stored, liquefied, and then used for carbonation of beer. It was argued that since beer, a product containing alcohol, is not subject to Central Excise duty, the carbon dioxide generated in-house should also not attract duty. The Revenue contended that the appellant should pay duty on the in-house generated carbon dioxide as they also purchased carbon dioxide from external sources. A show cause notice was issued demanding duty on the carbon dioxide generated and used by the appellant. The Commissioner (Appeals) upheld the duty demand, leading to the appellant's appeal before the Tribunal.

Upon hearing the parties, the Tribunal considered a precedent decision of a Division Bench in a similar case involving the appellant. The Division Bench had held that for carbon dioxide to be marketable, it needed purification through a separate plant, which was not present in the appellant's unit. The Tribunal also noted that the carbon dioxide purchased by the appellant from manufacturers differed in character and properties from the in-house generated gas. Therefore, the Tribunal concluded that the in-house generated carbon dioxide was not marketable and hence not dutiable. Relying on this precedent decision, the Tribunal allowed the appeal, setting aside the impugned order and granting consequential benefits to the appellant.

In conclusion, the Tribunal's decision was based on the principle that for a product to be dutiable, it must be marketable, and the in-house generated carbon dioxide, lacking purification facilities and differing from purchased gas, was not considered marketable. The appellant's appeal was allowed, and the duty demand on the in-house generated carbon dioxide was set aside in line with the precedent decision of the Tribunal.