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TMI Blog2002 (11) TMI 419X X X X Extracts X X X X X X X X Extracts X X X X ..... c Ltd. has a plant at Chittorgarh where they manufacture Zinc and lead. Both these metals are liable to Central Excise duty. For the manufacture of zinc and lead the appellants plant required oxygen gas, nitrogen gas and liquid nitrogen. These are produced in a separate plant located in the premises of the zinc and lead manufacturing plant. The gases produced are fully consumed in the manufacture of zinc and lead. These gases were being consumed by M/s. Hindustan Zinc Ltd. without payment of Central Excise duty on the basis that they were exempt under Notification No. 217/86-C.E., dated 2-4-86 and subsequently under Notification No. 67/95-C.E., dated 16-3-95. In the order impugned in the present appeal, the learned Commissioner of Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is M/s. Industrial Gases Ltd. who manufactured and cleared the gases without payment of duty. The substance of the charge against M/s. Hindustan Zinc is that they have knowingly purchased tainted goods which was liable to confiscation. Therefore, the test is whether they knew or had reason to belief that the industrial gases which they used in the production of Zinc and lead were liable to confiscation. 5. The appellants have completely refuted the allegations. Their contention is that they were the manufacturers of the industrial gases and had, therefore, rightly claimed and availed themselves of the exemption under the notifications. The contention of M/s. Hindustan Zinc Ltd. all through was that they were manufacturing the gases in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approval of classification list exempting the goods in question. For the goods in question supplied through the pipeline from the plant producing the said goods in question, the Appellants have to pay rental charges to IGL. As per the contract, IGL had to supply specified quantity of the goods in question. The payment is made for the goods in question supplied upto a particular quantity per day. For example in respect of oxygen gas supplied upto 6000 cubic meter per day a fixed rent of Rs. 4,62,600/- per month was to be paid in accordance with the agreement dated 10-9-96. In respect of the oxygen gas supplied beyond 6000 cubic meter per day based on actual consumption, the additional rent of Rs. 2.57 per cubic meter is to be paid by the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellants were eligible for exemption under Notification No. 217/86. The appellants submit that once the Commissioner had held that the goods were exempt under the Notification, a charge of the appellant having reason to believe that gases were liable to confiscation could not arise at all. It is further pointed out that even otherwise the appellant had no reason to seek to avoid the effect of central excise duty on the gases, since they could avail themselves of Modvat credit in respect of any duty of excise paid on their inputs including the gases in question. 7. As against the aforesaid submissions the learned SDR has pointed out that the appellant had obtained the central excise license by concealing the fact that the plant and machin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion were industrial input for M/s. Hindustan Zinc Ltd. and they were entitled to Modvat credit equivalent to the duty paid on the gases. Thus, by following the route of Modvat credit they could have neutralized the effect of central excise duty on the gases. This aspect of the matter also goes against a finding that the appellant received and made use of the gases with the knowledge that the gases in question were liable to confiscation. It takes quite a convincing to establish that a Public Sector Unit (as M/s. Hindustan Zinc Ltd. then was) would prefer to procure offending goods as inputs to procuring them legitimately and availing themselves of Modvat credit. We are not convinced about the Revenue s allegation that the appellant is M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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