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2023 (1) TMI 6 - HC - Central ExciseMaintainability of appeal - appropriate forum - Ethanol Blended Motor Spirit (EBMS) - exemption under N/N. 62/2002-CE, No. 63/2002-CE dated 31.12.2002 - blending of MS and Ethanol is a manufacturing process amounting to manufacture or not - HELD THAT - In the decision rendered by Hon ble Supreme Court in the case of NAVIN CHEMICALS MFG. TRADING CO. LTD. VERSUS COLLECTOR OF CUSTOMS 1993 (9) TMI 107 - SUPREME COURT , the Hon ble Supreme Court while deciding the appeal in relation to classification of goods and as to whether or not they are covered by exemption notification directly and proximately to the rate of duty, held that A dispute as to the classification of goods and as to whether or not they are covered by an exemption notification relates directly and proximately to the rate of duty applicable thereto for purposes of assessment. Whether the value of goods for purposes of assessment is required to be increased or decreased is a question that relates directly and proximately to the value of goods for purposes of assessment. The statutory definition of the said expression indicates that it has to be read to limit its application to cases where, for the purposes of assessment, questions arise directly and proximately as to the rate of duty or the value of the goods. The dispute in the present appeal, is in relation to whether the assessee was covered by the exemption notification, where the exemption notification was related directly and proximately to rate of duty applicable and, therefore as held by the Hon ble Supreme Court in case of Navin Chemicals MFG Trading Co. Ltd, appeal on the question of law before the High Court would not be maintainable and an appeal under section 35 L of the Central Excise Act, 1944, would be maintainable before the Hon ble Supreme Court. Appeal dismissed.
Issues Involved:
1. Whether the blending of 5% Ethanol with 95% Motor Spirit amounts to "manufacture." 2. Whether the product "5% Ethanol Blended Petrol" is identified as excisable goods and if specific exemptions apply. 3. Whether Motor Spirit used in Ethanol Blended Motor Spirit (EBMS) can be treated as an intermediate product. 4. Whether the Tribunal's interpretation of exemption notifications under Section 5A of the Central Excise Act, 1944, is proper. Issue-wise Detailed Analysis: 1. Whether the blending of 5% Ethanol with 95% Motor Spirit amounts to "manufacture." The department argued that blending Motor Spirit (MS) with Ethanol constitutes a manufacturing process, as per CBEC Circular No. 366/5/2002-TRU dated 02.01.2003, which states that a new product emerges from this process. The Tribunal, however, found that the blending process does not amount to "manufacture," relying on the CBEC Circular No. 83/83/94 dated 13.12.1994, which had continuing effect, stating that blending of Ethanol with Motor Spirit does not amount to manufacture. Consequently, the Tribunal held that the respondent was not required to pay duty on the Motor Spirit used in EBMS. 2. Whether the product "5% Ethanol Blended Petrol" is identified as excisable goods and if specific exemptions apply. The department issued Show Cause Notices and confirmed demands based on the withdrawal of exemption notifications (No. 62/2002-CE, No. 63/2002-CE) for the period from 01.07.2004 to 07.08.2004. The Tribunal, however, set aside these orders, emphasizing that the draft Circular dated 13.12.1994, which was relied upon by the department, was never issued, and thus, the blending of Ethanol with Motor Spirit does not amount to "manufacture." Therefore, the product was not subject to excise duty as per the earlier circular. 3. Whether Motor Spirit used in Ethanol Blended Motor Spirit (EBMS) can be treated as an intermediate product. The Tribunal held that the Motor Spirit cannot be treated as an intermediate product. The department's reliance on exemption notifications to claim excise duty on Motor Spirit used in EBMS was found to be improper by the Tribunal. The Tribunal concluded that since the respondent had already paid duty on EBMS, there was no requirement to pay duty again on the Motor Spirit used in the blending process. 4. Whether the Tribunal's interpretation of exemption notifications under Section 5A of the Central Excise Act, 1944, is proper. The Tribunal's interpretation was that the exemption notifications under Section 5A of the Central Excise Act, 1944, did not apply to the blending process of Ethanol and Motor Spirit, as it did not amount to "manufacture." The Tribunal relied on the earlier circular dated 13.12.1994, which was still in effect, and thus, the respondent was eligible for the exemption. The Tribunal's decision was based on the principle that merely listing a product in a notification or tariff entry does not automatically classify it as a manufactured good. Conclusion: The High Court dismissed the department's appeal, affirming the Tribunal's decision that the blending of 5% Ethanol with 95% Motor Spirit does not amount to "manufacture," and therefore, the product was not subject to excise duty. The court also held that the appeal should be filed before the Supreme Court, as it involved the determination of the rate of duty and the value of goods for the purposes of assessment, which falls under Section 35L of the Central Excise Act, 1944.
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