2022 (12) TMI 47 - AT - Central Excise

Levy of Central Excise duty - carbon dioxide generated during the process of fermentation of beer and used for its carbonation - captive consumption of carbon dioxide - interpretation of the notification dated 16.03.1995 - case of the Department is that since no excise duty is payable on the final products, the exemption notification would not be applicable to the appellant - HELD THAT - It is seen from the perusal of the judgment of the Kerala High Court in SABMILLER INDIA LTD. VERSUS UNION OF INDIA 2019 (11) TMI 558 - KERALA HIGH COURT that the period involved was from July 2009 to January 2014 and the dispute was with regard to carbon dioxide produced in the factory and captively consumed in the course of manufacture of beer. The Kerala High Court observed that carbon dioxide may be an independent product mentioned in the central excise tariff but it was a product that arose in the manufacturing process and would only be seen as an efficient process for manufacture of beer. The High Court, therefore, held that in such a situation central excise duty would not be payable. The order passed by the Commissioner (Appeals) cannot be sustained and is set aside - Appeal allowed.

Summary

Issues:
Interpretation of exemption notification for excise duty on carbon dioxide generated during beer manufacturing process.

Analysis:
The appellant, a beer manufacturer, filed an appeal challenging the Commissioner (Appeals) order holding them liable to pay Central Excise duty on carbon dioxide generated during beer fermentation. The dispute centered around the interpretation of a notification exempting goods manufactured in the factory, particularly concerning inputs used in the manufacture of final products exempt from excise duty. The Department argued that since no excise duty was payable on the final products, the exemption did not apply to the appellant, necessitating Central Excise duty payment on captively used carbon dioxide. A show cause notice was issued for recovery of Central Excise duty due to non-payment during the manufacturing process.

The appellant relied on a Kerala High Court judgment involving a similar case to contest the duty demand on carbon dioxide. The High Court ruled that Central Excise duty was not applicable as the carbon dioxide generated was an efficient process for manufacturing beer, a non-excisable product. The judgment highlighted the significance of captive consumption in the context of Central Excise duty payment, emphasizing that duty exemption on captively consumed products was intended for manufacturers paying duty on final products cleared from their factory premises. The judgment concluded that levy of duty on a byproduct like carbon dioxide, used for efficiently manufacturing a non-excisable product, was not warranted. Consequently, the Commissioner (Appeals) order was set aside, and the appeal was allowed based on the Kerala High Court's reasoning.

In summary, the judgment addressed the issue of Central Excise duty on carbon dioxide generated during beer manufacturing, emphasizing the applicability of duty exemptions for captively consumed products in the context of non-excisable final products. The decision aligned with the Kerala High Court's interpretation, ruling in favor of the appellant and overturning the Commissioner (Appeals) order.