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2024 (8) TMI 10 - AT - Central Excise


Issues Involved:
1. Marketability of the product Low Sulphur Heavy Stock (LSHS).
2. Applicability of Excise Duty on LSHS used for electricity generation.
3. Allegation of suppression and time-barred demand.

Issue-wise Detailed Analysis:

1. Marketability of the Product Low Sulphur Heavy Stock (LSHS):

The appellant contended that the LSHS produced did not meet the Bureau of Indian Standards (BIS) specifications, making it non-marketable. Key parameters such as Flash Point and water content did not conform to BIS standards, as evidenced by a Test Report from the Quality Control Department of IOCL. The Flash Point of the LSHS was between 50-64^0C against the BIS minimum requirement of 76^0C, and the water content was 1.5-5%, exceeding the maximum permissible limit of 1%. The appellant argued that since the product could not be legally sold in the market, it was not marketable and thus not excisable. This argument was supported by the precedent set in Mangalore Refinery & Petrochem, Ltd. Vs. CCE & Cus., Bangalore-2006 (203) ELT 591 (Tri.-Bang.), where a similar issue was adjudicated, and it was held that non-marketable products are not liable for Excise Duty.

2. Applicability of Excise Duty on LSHS Used for Electricity Generation:

The Department's position was that the electricity generated using LSHS was used not only for manufacturing purposes but also for non-manufacturing purposes such as the appellant's township and hospital. Therefore, they argued that the exemption under Notification No. 67/95-CE and 11/97-CE was not applicable for LSHS used in generating electricity for non-manufacturing purposes. However, the Tribunal found that the LSHS in question was not marketable due to non-conformance to BIS standards, and thus, following the rationale in the Mangalore Refinery case, the LSHS was not excisable. The Tribunal also distinguished the present case from Indian Oil Corporation Ltd. Vs. Collector of C. Ex., Baroda-2006 (202) E.L.T. 37 (S.C.), where the product was sold to third parties, which was not the case here.

3. Allegation of Suppression and Time-barred Demand:

The appellant argued that they had been transparent in their declarations and filings since 1997, and the Department was aware of the usage of LSHS for electricity generation. Consequently, the Show Cause Notice issued on 6 May 2008, for the period January 2007 to March 2007, was argued to be non-sustainable due to being time-barred. The Tribunal agreed with this argument, noting that the Department had all the necessary information but failed to act in a timely manner. Thus, the demand for the period January 2007 to March 2007 was held to be time-barred.

Conclusion:

The Tribunal allowed the appeal on merits, finding that the LSHS was not marketable and thus not excisable. Additionally, the demand for the period January 2007 to March 2007 was set aside on account of being time-barred. The appellant was granted consequential relief as per law.

 

 

 

 

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