2024 (1) TMI 395 - HC - Central Excise

Levy of Excise Duty - Marketability/Excisability - lean gas/waste gas containing carbon monoxide is used in the generation of electricity, which is subject to Nil rate of duty and non-excisable and/or exempted goods under Central Excise Act - HELD THAT - Taking into consideration a very vital unignorable aspect that initial subject matter of challenge in this writ petition was impugned show cause notice which culminated into impugned ex-parte final adjudication order which has been passed during pendency of this writ petition and though it appears from record that several opportunities were given to the petitioner to file objection/reply to the impugned show cause notice and for hearing before passing the impugned adjudication order, but since it is the case of the petitioner that it had immediately filed this writ petition against the impugned show cause after receipt of same, petitioner thought it proper to not to give any reply to the same or to participate in the impugned proceeding and all the legal and factual points in challenging the impugned show cause and adjudication order it has taken in this writ petition, supplementary affidavit, and in course of hearing of the same against the impugned show cause notice and order-in-original could not be taken before the adjudicating authority. The aforesaid impugned ex parte adjudication order dated 30th November, 2017 set aside and matter remanded back to the adjudicating authority concerned to pass fresh adjudication order by allowing the petitioner to file objection against the impugned adjudication order by treating the same as show cause notice and to take all the points raised in this writ petition and supplementary affidavit, the judgments and relevant circulars and notifications petitioner intends to rely in support of its case and after giving opportunity of hearing to the petitioner or its authorised representatives within two weeks from date and final adjudication order shall be passed within four months from the date of receipt of such objection/reply by observing principles of natural justice. Petition allowed by way of remand.

Issues Involved:
1. Excisability of lean gas/waste gas containing carbon monoxide.
2. Marketability and transportability of the said gas.
3. Legality of the show cause cum Demand Notice and Order-in-Original.
4. Invocation of extended period of limitation under Section 11A of the Central Excise Act, 1944.
5. Applicability of relevant circulars and previous judgments.

Summary:

1. Excisability of Lean Gas/Waste Gas:
The primary issue is whether lean gas/waste gas containing carbon monoxide, which is neither marketable nor stable nor transportable, and generated during the manufacture of carbon black, is excisable. The petitioner argues that the gas, incinerated to prevent pollution, generates heat used for electricity, which is partly consumed and partly sold. The respondents claim the gas is marketable and excisable as it is used to generate electricity, an excisable product.

2. Marketability and Transportability:
The petitioner contends that the gas is not marketable, storable, or transportable and has no alternative use. The respondents argue that the gas has significant energy value and can be used as fuel, making it marketable and excisable. The petitioner relies on Circular No. 35/88 and previous judgments, asserting that the gas should not be subject to excise duty.

3. Legality of Show Cause Notice and Order-in-Original:
The petitioner challenges the validity of the show cause notice and the Order-in-Original, arguing that the adjudicating authority proceeded with the adjudication despite requests for adjournments. The petitioner also contends that the order does not establish that the gas satisfies the twin tests of manufacture and marketability. The respondents argue that the petitioner did not respond to the show cause notice or attend hearings, leading to an ex parte order.

4. Invocation of Extended Period of Limitation:
The petitioner argues that the extended period of limitation under Section 11A of the Act should not have been invoked, as there was no suppression of facts or intent to evade duty. The respondents claim that the petitioner suppressed material facts and failed to disclose information, justifying the invocation of the extended period.

5. Applicability of Circulars and Previous Judgments:
The petitioner cites various circulars and judgments, including the Supreme Court's judgment in DSCL Sugar and the Tribunal's judgment in Philips Carbon Black, to support their case that the gas is not excisable. The respondents argue that these judgments and circulars are not applicable, as the petitioner used the gas to generate electricity, which was sold commercially.

Conclusion:
The court, considering the facts, submissions, and relevant judgments, sets aside the ex parte adjudication order dated November 30, 2017, and remands the matter back to the adjudicating authority. The petitioner is allowed to file objections and present their case, and the adjudicating authority is directed to pass a fresh order within four months, observing principles of natural justice. The writ petition is disposed of with no order as to costs.

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