2023 (12) TMI 1103 - AT - Central Excise

Exemption under N/N. 67/95-CE - Clearances of acetylene gas for captive consumption - benefit denied merely on the ground that the acetylene gas is not used in the repair and maintenance of machinery directly, rather the same is being used via intermediate products - HELD THAT - Notification 67/95 exempts from payment of duty all goods specified therein manufactured in a factory and used within the factory of production in or in relation to manufacture of final products. The scope of this notification is wide enough to cover the acetylene gas manufactured by the Appellant and used in the traffic department for repair and maintenance of railway track, wagons etc., and the acetylene gas used in 30 shops/departments for repair and maintenance of machineries. The issue of whether railway tracks used in the plant form a part of manufacture is no longer res-integra since the Hon ble Supreme Court in the case of Jayaswal Neco Limited v. Commissioner of Central Excise, Raipur 2015 (4) TMI 569 - SUPREME COURT held It is clear from the above that the use of railway tracks inside the plant not only form the process of manufacturing, but it is inseparable and integral part of the said process inasmuch as without the aforesaid activity for which railway tracks are used, there cannot be manufacturing of pig iron. Thus, the use of railway tracks are meant for production of goods. The acetylene gas used in 30 shops/departments for repair and maintenance of machineries was also used in connection with the manufacture of the finished goods for the Appellant - the Appellant is eligible for the benefit of exemption notification no. 67/95-CE. Hence, the demand confirmed in the impugned order by denying the benefit of exemption notifications 65/95 or 67/95 is not sustainable - appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are the denial of exemption under Notification No. 65/95-CE and 67/95-CE for acetylene gas consumed within the factory for repair and maintenance of railway track, wagons, and machinery.

Issue 1: Denial of exemption under Notification No. 65/95-CE:
The Appellant produced acetylene gas for various activities in the factory, claiming exemption under Notification No. 65/95-CE. The Commissioner confirmed the demand for acetylene gas used in the traffic department for repair and maintenance, citing that the gas was not directly used in the repair of machinery. The Appellant argued that the gas was indeed manufactured in the workshop and the denial was beyond the scope of the show cause notices. The Appellant relied on a Supreme Court decision to support their claim.

Issue 2: Denial of exemption under Notification No. 65/95-CE for railway track activities:
The Commissioner denied the exemption for acetylene gas used in the traffic department for repair and maintenance of railway track, wagons, and loco, stating that these were not considered machinery installed in the factory for manufacturing final goods. The Appellant contended that the railway network was integral to their production process and dispatch of goods, claiming eligibility for exemption under Notification No. 67/95. They highlighted the importance of rail traffic for production and cited a Supreme Court decision supporting their argument.

Judgment:
The Appellate Tribunal observed that the Appellant was eligible for exemption under Notification No. 67/95-CE for the acetylene gas used in the traffic department and 30 shops/departments for repair and maintenance activities. They emphasized the integral role of railway tracks in the manufacturing process, following a Supreme Court decision that affirmed the use of railway tracks for production of goods. Consequently, the Tribunal set aside the impugned order and allowed the appeal filed by the Appellant.