2005 (7) TMI 271 - AT - Central Excise

Summary

Issues:
1. Confirmation of demand of duty against M/s. Vinati Organics Ltd.
2. Imposition of personal penalties on the appellants under Rule 209A of the Central Excise Rules, 1944.
3. Classification of waste gases as excisable items.
4. Dispute regarding supply of waste gases to a neighbouring unit without consideration.

Analysis:

1. The judgment addresses the confirmation of a duty demand against M/s. Vinati Organics Ltd. and the imposition of personal penalties on the appellants. The impugned order confirmed a duty of Rs. 4,68,608 against M/s. Vinati Organics Ltd., along with identical personal penalties on other appellants. The Tribunal considered the facts on record, where the appellants were manufacturing Isobutyl Benzene IBB and its by-products using propylene and toluene as raw materials. The waste gases generated during the manufacturing process were the subject of dispute. The appellant argued that the gases were hazardous and needed to be flared or used for fuel, not classified as excisable items. The Tribunal found that the demand of duty on these waste gases for a longer period was not justified, especially considering the gases were either flared or used as fuel, not treated as excisable.

2. Regarding the personal penalties imposed under Rule 209A of the Central Excise Rules, 1944, the Tribunal noted the appellant's contention that the waste gases were not marketable and were supplied to the neighbouring unit solely for disposal purposes. The Tribunal considered precedent decisions and found that unless a requisite market for the waste gases was shown, they could not be classified as excisable items. The major portion of the waste gases was being flared or used by the appellants themselves, with only the surplus supplied to the neighbouring unit. The Tribunal concluded that the waste gases did not qualify as excisable items, leading to the setting aside of the impugned order and allowing all the appeals with consequential relief to the appellants.

3. The classification of waste gases as excisable items was a crucial issue in the judgment. The appellant argued that the waste gases were not excisable as they were hazardous and not intended for commercial use. The Tribunal considered the CBEC Circular and precedent cases, emphasizing that waste gases allowed to escape in the atmosphere were not considered excisable. The Tribunal found that the waste gases supplied to the neighbouring unit without consideration did not become excisable merely due to this act, especially when most of the gases were being flared or used as fuel, not for commercial purposes.

4. Lastly, the dispute regarding the supply of waste gases to a neighbouring unit without consideration was examined. The Tribunal highlighted that the waste gases were being disposed of or used as fuel, with only the excess supplied to the neighbouring unit. The Tribunal referenced a case where waste gases used for generating heat were not considered excisable. The act of supplying surplus waste gases without any commercial consideration did not render the gases excisable. Therefore, the Tribunal set aside the impugned order and granted relief to the appellants based on the non-excisability of the waste gases supplied to the neighbouring unit.