2021 (8) TMI 114 - AT - Central Excise

Demand of National Calamity Contingent Duty (NCCD) - classification of goods - heavier hydrocarbons - intermediate product in the manufacture of Mixed Fuel Oil/ Naphtha or not - burden to prove - Board Circular dated 09.01.2004 - extended period of limitation - interest - penalty - HELD THAT - In the present case, the product described in the show cause notices is heavier hydrocarbons which is an intermediate product in the production of Naphtha. The Department has classified it under Heading 2709, which classification has not been disputed by the respondent in this Excise Appeal filed by the Department. It is, therefore, clear that a contrary stand has been taken by the Department in the show cause notices, which were the subject matter of the earlier Excise Appeal and the show cause notices which are the subject matter of the present Excise Appeal. The Department had previously issued multiple show cause notices to the respondent alleging that the product was classifiable as NGL under Tariff Item No. 2710 12 20 of the Tariff Act. However, the present show cause notices have been issued by the Department claiming classification of NGL under Chapter Heading No. 2709 of the Tariff Act. It is, therefore, not possible to accept the contention of the learned Authorized Representative appearing for the Deparmtment that the product should be classified as NGL under the same Heading as was classified in the order of the Tribunal passed in the earlier Excise Appeal. The show cause notices, in the present Excise Appeal, proceed on the footing that the heavier hydrocarbons (gas condensate) should be classified under Heading 2709 of the Tariff Act. The Department cannot, in this Excise Appeal, be permitted to take a stand that is contrary to the stand taken in the show cause notices. The aforesaid discussion leads to the inevitable conclusion that the product heavier hydrocarbons described as gas condensate is classifiable under Heading 2709 but NCCD would not be leviable because the product is not marketable. Extended period of limitation - suppression of facts or not - HELD THAT - From the reply filed by the respondent in response to the show cause notices it is seen that the contention that is now being raised in regard to the extended period of limitation was not raised by the respondent, though the show cause notices had invoked the extended period of limitation - It would, therefore, not be appropriate to examine the contentions now sought to be raised in this appeal, more particularly when the respondent has not filed any cross appeal for supporting the order of the Commissioner on this ground. Penalty and Interest - HELD THAT - Once it is held that the demand cannot be sustained, the imposition of penalty or recovery of interest cannot also be sustained. Appeal dismissed.

Issues Involved:
1. Demand of National Calamity Contingent Duty (NCCD) on "heavier hydrocarbons."
2. Classification of the intermediate product as Natural Gasoline Liquid (NGL) or gas condensate.
3. Marketability and excisability of the intermediate product.
4. Applicability of exemption notifications and CBEC Circular.
5. Invocation of the extended period of limitation.
6. Imposition of penalty and recovery of interest.

Detailed Analysis:

1. Demand of NCCD on "Heavier Hydrocarbons":
The Department issued six show cause notices demanding NCCD amounting to ?3,03,36,274/- on the mixture of heavier hydrocarbons, described as NGL by the Department and as gas condensate by the respondent. The respondent argued that this intermediate product is not marketable and thus not excisable, and hence, NCCD is not payable.

2. Classification of the Intermediate Product:
The show cause notices classified the intermediate product under Chapter Heading 2709 of the Central Excise Tariff Act, 1985, which pertains to "Petroleum oils and oils obtained from bituminous minerals, crude." The respondent did not dispute this classification but contended that the product is not marketable. The Tribunal upheld that the product is classifiable under Heading 2709, aligning with previous judgments in similar cases involving the respondent and Oil India Ltd.

3. Marketability and Excisability:
The respondent argued that the intermediate product is not marketable due to its volatile nature and lack of evidence of its sale in the market. The Department failed to provide evidence of marketability. The Tribunal agreed with the respondent, citing Supreme Court judgments that emphasize the need for the Department to prove marketability. The product was found to be non-marketable and thus not excisable.

4. Applicability of Exemption Notifications and CBEC Circular:
The respondent claimed exemption under the Notification dated 14.05.2003 and relied on a CBEC Circular dated 09.01.2004, which stated that NCCD on crude petroleum oil should be charged only on the total quantity produced and supplied from the oil field to refineries. The Tribunal did not find it necessary to examine these contentions in detail, given the conclusion on marketability.

5. Invocation of the Extended Period of Limitation:
The respondent argued against the invocation of the extended period of limitation, citing the absence of suppression, fraud, or misstatement. The Tribunal noted that this contention was not raised in the initial response to the show cause notices and thus did not examine it further. The Tribunal also noted that the respondent did not file a cross-appeal on this ground.

6. Imposition of Penalty and Recovery of Interest:
Since the demand for NCCD was not sustainable due to the non-marketability of the product, the imposition of penalty and recovery of interest were also deemed unsustainable.

Conclusion:
The Tribunal dismissed the Department's appeal, upholding the Commissioner's order that dropped the NCCD demand. The product "heavier hydrocarbons" (gas condensate) is classifiable under Heading 2709 but is not marketable and hence not excisable. Consequently, no NCCD is leviable, and no penalty or interest is recoverable.

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