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TMI Blog1997 (10) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 11A is 7th of next month following the month in which the goods were cleared physically. The facts of the case are that the appellants are manufacturers of unhydrous Ammonia and Impure Carbon dioxide. The Carbon dioxide is partly consumed in the manufacture of Urea and partly sold to M/s. Mahalasa Gases and Chemicals Pvt. Ltd. who are holding L4 No. 1/79 (Gases), where the said carbon-di-oxide gas is purified, liquified and filled in cylinders, after certain processes and removed for home consumption on payment of duty. It is stated that earlier to the issue of trade notice No. 35/85, dated 28-2-1985, by the Collector of Central Excise, Belgaum, the impure carbon-di-oxide was classifiable under T.I. 68 and the same was being supplied to M/s. Mahalasa Gases and Chemicals & Fertilizers Ltd., Mangalore under Rule 56B procedure, in a modified form, as permitted by the Collector of Central Excise, Bangalore. Since, the impure carbon-di-oxide is supplied through pipeline to M/s. Mahalasa Gases and Chemicals Pvt. Ltd. by the appellant, hence M/s. Mahalasa Gases were permitted to pay duty under T.I. 68 on behalf of the appellant based on the quantity of carbon-di-oxide actually pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. They also submitted that all the Collectorates were treating the bottling plants as manufacturers of carbon di-oxide falling under T.I. 14H and permitting them to remove finished goods i.e. liquid Carbon-di-oxide on payment of appropriate duty including removal to industrial purposes at Nil rate of duty and that they too had followed Rule 56B procedure in supplying semi-finished goods (Impure CO2) to M/s. Mahalasa Gases and Chemicals since 25-6-1985. 3. The learned Assistant Collector after due consideration of their pleas rejected their arguments and confirmed the duty demanded in the show cause notice. The learned Assistant Collector has held that in order to classify impure carbon-di-oxide (CO2) under T.I. 14H, it may not be necessary for the goods to confirm to the ISI Specifications, so long as it could be considered to be the goods for C.E. purposes. He has held that impure CO2 is being sold by the appellant to the outside party, M/s. Mahalasa Gases, and since the product evidently had a market and was capable of being bought and sold, it could rightly be considered as goods for C.E. purposes. He has further held that tariff description under Tariff Item 14H of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod by the appellants following Chapter X procedure though it is another matter that the recipient may have been licensed as claimed by the appellants. Mere licence is not procuring goods under Chapter X. Therefore, the period when they have started availing of Chapter X procedure is not included in these three demands. Therefore, liability for paying duty on the goods transferred in semi-finished form under Rule 56B squarely rests with the manufacturer of the semi-finished goods who have transferred them for purpose of purifying of refining as the case may be, and clearance of the same upon payment of duty on their behalf. The liability is not transferred to the recipient under provisions of Rule 56B unlike that of Rule 192 and Chapter X procedure. Therefore, I do not find any merit in the argument of the appellant." As can be seen from the above impugned order, the learned Collector has rejected the case on merits, but has granted only the benefit of time bar only. 4. We have heard Sh. V. Sridharan, learned Advocate for the appellants and Shri Sharad Bhansali, learned SDR for the Revenue. 5. The learned Advocate submitted that the appellants were removing mixture o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dioxide, which had varied uses and such uses can be put into, only if the gases were in a pure state. The pure carbon oxide was also used for refrigeration, as a raw material in the production of other chemicals, chiefly urea and methanol, for secondary oil recovery-solid carbon dioxide is used for Refrigeration of food stuffs, especially ice-cream, wheat products, and frozen foods. Liquid carbon dioxide is used as a source of power in certain applications, for operating remote signalling devices, spray painting and gas-operated fire arms, for inflating life rafts and jackets etc. (see pages 739 to 741 of Kirk-Othmer, 4th Edition). Pointing out to the literature produced by the learned Advocate, the learned SDR submitted that the literature itself was very clear about the various uses of carbon dioxide in its different forms. He pointed out from the T.I. 14H, and submitted that the impure carbon dioxide would rightly fall under this heading. He pointed out that the issue has been also dealt with in the case of Ugar Sugar Works Ltd. v. Collector of Central Excise, as reported in 1993 (68) E.L.T. 224. It has been held in this case that the process of manufacturing impure carbon diox ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbon dioxide and, therefore, the contention of the appellant that the semi finished goods is a mixture of gases and not impure carbon dioxide is totally incorrect and not acceptable. In the cited case of South Bihar Sugar Mills Ltd. and Another, the Hon'ble Supreme Court has held that kiln gas is not carbon dioxide. Therefore this citation is not at all applicable to the facts of the present case. 10. The question is as to whether this semi-finished carbon-dioxide is different from pure carbon dioxide and as to whether the duty is liable to be paid by the appellants at the time of removal of goods under Rule 56B of Central Excise Rules? The Tariff Item 14H reads as follows : "Item No. 14H-Gases Item No. Description of Goods Rate of duty 14H Gases, including liquified or solidified gases, the following, namely :- (i) Oxygen Fifteen per cent ad valorem. (ii) Chlorine Fifteen per cent ad valorem. (iii) Ammonia Fifteen per cent ad valorem. (iv) Carbonic acid (Carbon dioxide) Re. one per Kg. (v) Refrigerant gases, not otherside specified, such as sulphur dioxide and freon. Thirty per cent ad valorem. (vi) Acetylene (whether in dissolved condition or not) Fiftee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s ruling and hold that the semi-finished carbon dioxide, removed by the appellant to M/s. Mahalasa Gases through pipelines is a separate goods, on which duty is chargeable under T.I. 14H of erstwhile Central Excise Tariff. 12. The other question that arises for our consideration is with regard to the applicability of the Notification No. 40/85. This notification is applicable only if the carbonic acid (CO2) is removed under Chapter X for industrial use only. In this case the goods had not been removed under Chapter X but Rule 56B. The Rule 56B is of postponment of Rules 9 and 49, in other words, the duty recoverability on the goods gets postponed. In this case the goods are semi-finished which were sent for processing and should have come back to the assessee. The duty which was required to have been discharged by the appellant was postponed, under this Notification on the condition that the goods should be returned, after completion of processing from the job worker. As the goods had not returned to the appellants, the demands of duty made on the semi-finished impure carbon dioxide is justifiable. As the duty liability of appellants continued, the goods had not come back and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. I find that as per Encyclopedia of Chemical Technology by Kirk-Othmer "Carbon dioxide (124-38-9), CO2 is a colorless gas with a fainty pungent odor and acid taste. Van Helmont (1577-1644) first recognized carbon dioxide as a distinct gas when he detected its presence as a by-product of both charcoal combustion and fermentation. Today carbon dioxide is a by-product of many commercial processes : synthetic ammonia production, hydrogen production, substitute natural gas production, fermentation, limestone calcination, certain chemical syntheses involving carbon monoxide, and reaction of sulfuric acid with dolomite. Generally present as one of a mixture of gases, carbon dioxide is separated, recovered, and prepared for commercial use as a solid (dry ice), liquid, or gas. "Carbon dioxide is also found in the products of combustion of all carbonaceous fuels, in naturally occurring gases, as a product of animal metabolism, and in small quantities, about 0.03 vol % in the atmosphere. Its many applications include beverage carbonation, chemical manufacture, fire fighting, food preservation, foundry-mold preparation, greenhouses, mining operations, oil well secondary recovery, ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tains impure carbon dioxide gas as a by-product in the course of manufacture of ammonia, a part of which is used captively for the manufacture of urea fertilizer and a small portion is sold to M/s. Mahalasa Gases & Chemicals Pvt. Ltd. through a pipe-line and the remaining is vented to atmosphere. 18. The impure carbon dioxide gas sold to M/s Mahalasa Gases & Chemicals Pvt. Ltd. was used by the firm for the manufacture of liquid carbon dioxide, which in turn was filled into high pressure cylinders and was disposed of or cleared to units which produce aerated waters, beverages or which used the product for industrial purposes, according to the appeal memo. 19. The Central Excise Tariff as it stood at the relevant time included a Tariff Entry 14H reproduced at page 11 of this order. This Entry covers gases including liquified or solidified gases, and, Carbonic Acid (Carbon dioxide) is one of the items specifically covered by it (by name so to say). 20. Obviously, once the appellant had obtained carbon dioxide as a by-product and sold it to another party and carbon dioxide figured under 14H, therefore, in the normal course, it was required to bear the incidence of dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to clear without payment of duty from the appellant's factory with reference to Rule 56B could not have been made and should not have been allowed and the permission was wrongly granted by the officers concerned. 26. Moreover, the technical literature in the case of carbon dioxide shows that purification is merely yet another step of processing and does not result into a new product or a new commodity by itself. 27. In these circumstances, the appellant was required to pay duty on the entire quantity which was sold. 28. Even the quantity which was used for captive consumption was excisable but liability to duty was dependent upon showing as to whether such captive consumption was exempted under some notification during the relevant period or not. 29. Only the quantity which was vented out would not be chargeable to duty as that amounted to destruction (although the fact is not disputed but even this would require an advance intimation and remission in terms of Rule 49, in the normal course). 30. At the same time, insofar as Notification 235/85 is concerned, it exempts carbon dioxide not conforming to I.S. specification No. 307-1966, falling under I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders of the bench indicating difference of opinion and forwarding the same to the President for reference to a Third Member. After the matter was heard by Third Member he referred the matter back to the original bench with his observations and suggestions for reframing the reference if necessary. 2. The matter was therefore listed again before this bench and after it had been heard opportunity was given to the appellants to move appropriate application seeking clarification, if necessary. 3. Accordingly the appellants have moved this application in which it has been mentioned inter-alia that there was a difference of opinion between the two Members in Para 24 on the question as to whether the impure carbon dioxide was a semi-finished or finished product; and so far as Notification No. 40/85 was concerned whereas the Member (J) had expressed his view and held that the appellants were not entitled for the same, the Vice President had allowed the benefit of 235/85, dated 15-11-1985. 4. Since the Member (J) had not expressed any opinion regarding Notification No. 235/85 and the Vice President has not stated anything w.r.t. Notification No. 40/85 a clarification was ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difference of opinion. 2. The matter was heard when Shri R. Nambirajan, Advocate appeared for appellants and Shri J. M. Sharma, JDR appeared for the Department. 3. The matter relates to difference of opinion between Members of the Bench which heard Appeal No. E/1270/88-C filed by M/s. Mangalore Chemicals & Fertilizers against the order-in-appeal passed by the Collector (Appeals), Madras dated 17-12-1987. This Tribunal by the said order considered two issues namely : (i) Whether impure Carbon-dioxide was a semi-finished or finished product; (ii) Whether benefit of Notification No. 40/85, dated 17-3-1985 and Notification No. 235/85, dated 15-11-1985 would be available to the appellants in respect of clearances between 1-3-1985 and 3-1-1986. 4. In the aforesaid order of the Tribunal, Member (Judicial) had held that the benefit of Notification No. 40/85 was not available to the appellants. Member (T) had not expressed any opinion on the point. As regards availability of benefits under Notification 235/85, Member (T) had held that the benefit of the said Notification will be available to the appellants. However, it was not made clear whether the benefit und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndioxide produced in the appellant's unit was required to be further purified, it cannot be stated that it was a `semi-finished product'. There is nothing in the order recorded by Member (J) contrary to the said finding of the Vice President. I am, therefore, of the view that this finding should be taken to be the view of the Bench. On a perusal of the order, it is observed that the discussion in the said order relates to availability of benefit of Notification No. 40/85 and 235/85. Though both these notifications are no doubt concerned with Carbon-dioxide falling under T.I. 14H, there was no discussion on the question as to whether the item was classifiable under T.I. 14H or not. 9. I find that the issue for consideration referred to the Third Member in terms of Para 9 of Misc. Order No. 27/97-C is the classification of CO2. From a perusal of the Misc. order No. 130/95 and the submissions made before me by learned Counsel, I find that there is no finding against classifying the said item under T.I. 14H. Hence, I do not feel that there is any difference of opinion between Members on the question of classification of CO2 under T.I. 14H either. Classification of CO2 under T.I. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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