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TMI Blog2017 (5) TMI 1249X X X X Extracts X X X X X X X X Extracts X X X X ..... on closing the plant, which in turn has been sold and hence it would not attract any tax liability. It is stated that, in the Mercury Cell process, for production of Caustic Soda, Mercury acts only as a Cathode (in the process of Electrolysis) and by the end of the process, it is recovered without change; though minute quantity may disappear, which was being replenished by procuring Mercury, availing CENVAT Credit. It is also pointed out that the reliance sought to be placed on Rule 3(4) of the CENVAT Credit Rules,2001 and the law laid down in Indian Organic Chemicals Ltd. vs. Collector of Customs & Excise [1996 (88)E.L.T. 644(SC)] to fix the liability is not correct or applicable and further that Section 11 AC of the Central Excise Act, 1944 is not attracted to the case in hand. 3. The appellant is a Public Limited Company constituted under the relevant provisions of the Companies Act, 1956 and is engaged in the manufacture of Caustic Soda and such other products, falling under Chapter 28 of the Schedule to the Central Excise Tariff Act, 1985. Infact, the appellant was adopting the 'Mercury Cell Process' for manufacture of Caustic Soda, which is by way of 'Electrolysi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Annexure E order dated 25.01.2016. This in turn is under challenge in the present appeal preferred under Section 83 of the Finance Act r/w. Section 35G of the Central Excise Act. 6. Heard Mr. P.Gopinath Menon, the learned counsel appearing for the appellant and Mr. P.R. Sreejith for the respondent/Department. 7. The learned counsel for the appellant submits that the original as well as the appellate/second appellate authorities have gone wrong in noting that there was manufacturing of Mercury by the appellant Company. The use of Mercury was only as a Cathode in the process of Electrolysis in connection with the manufacture of Caustic soda, by way of 'Mercury Cell Process'. The Sodium ions in the process of Electrolysis get associated with Mercury used as a Cathode and forms an Amalgam, which on treatment with water (Hydrolysis) will give rise to Sodium Hydroxide, liberating Mercury, which again is used as Cathode in the process to be repeated. Mercury was reclaimed with some impurities and it was the said Mercury, that was sold in the year 2004, pursuant to closure of the Mercury Cell Processing Plant, on switching over to 'Membrane Cell Process' for production of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above the initial quantity of Mercury, the appellant had purchased Mercury at different points of time, availing CENVAT Credit and on closure of the Plant in the year 2004, there was a stock of 42262.5 kg of Mercury, which was sold by them on 22.09.2004 without payment of duty and without raising any invoice. This clearly amounts to suppression of material facts and it was in the said circumstance, that duty was mulcted in accordance with the provisions of law; also realising interest and penalty to the requisite extent. It is pointed out that the matter finalised by the Joint Commissioner, by passing Annexure C order, was after completing all procedural formalities and no prejudice has been caused to the appellant under any circumstance. The said order has been passed in conformity with the factual and legal position, which has been upheld by the appellate authority and also by the Tribunal by way of Annexures D and E orders respectively, which do not warrant any interference. 10. As a matter of fact, the appellant is engaged in the manufacture of Caustic Soda and its by-products falling under Chapter 28 of First Schedule to Central Excise Tariff Act, 1985. The dispute is whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by the appellant is discernible from Annexure B reply. The only contention is with reference to utilisation of Mercury only as a Cathode in the process of Electrolysis and that Mercury is unaffected in the whole process and retains its character as Mercury throughout. The 'penultimate paragraph' of the said reply is very relevant and hence it is extracted below : "The scheme of the Act contemplating the levy of duty of central excise on the manufacture and clearance of marketable goods from the factory of the manufacturer and in the instant case, there being no manufacture of mercury, no duty is payable at the time of removal of the said used mercury in accordance with the provisions of Central Excise Act. Also, though it may be a fact that credit of the mercury purchased periodically to make up for the quantitative losses in the electrolytic cell is taken by the company, the item removed is not the input as such, but used inputs which is in a different form from the input as it was at the time of taking credit. Therefore, it is amply discernible that no duty is payable at the time of the removal of the said used mercury". Since an opportunity of hearing was sough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the relevant rules is clearly made out in Annexure A Show-Cause notice. There was no case for the appellant ( on getting such notice and while submitting Annexure B reply) that the appellant had not availed CENVAT Credit on the input Mercury. On the other hand, as rightly pointed out by the respondent and as clearly discernible from the contents of the 'penultimate paragraph' of Annexure B (extracted above), the contention of the appellant was that "though it may be a fact that credit of the mercury purchased periodically to make up for the quantitative losses in the electrolytic cell is taken by the company, the item removed is not the input as such, but used inputs which is in a different form from the input as it was at the time of taking credit." 14. It is quite evident that the contention of the appellant was that the cleared Mercury was something different from the input Mercury and that availing of CENVAT Credit on the input Mercury was having no significance. Having admitted that the Company had availed the CENVAT credit on the input Mercury, by virtue of the categoric stipulations in the provisions of law, the appellant was bound to reverse the credit on s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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