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TMI Blog2022 (12) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... n of beer and used for its carbonation. Earlier, the Deputy Commissioner by order dated 16 March, 2017 had also confirmed the demand of Central Excise duty with interest and penalty. 2. The appellant is engaged in the manufacture of beer on which no excise duty is payable. However, during the process of manufacture of beer, carbon dioxide gas is generated. The dispute relates to interpretation of the notification dated 16.03.1995 that exempts the goods manufactured in the factory, particularly to the proviso that provides that nothing in the notification shall apply to inputs used in or in relation to the manufacture of final products which are exempt from the whole of duty of excise leviable thereon or are chargeable to nil rate of duty. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture of beer. The Kerala High Court observed that carbon dioxide may be an independent product mentioned in the central excise tariff but it was a product that arose in the manufacturing process and would only be seen as an efficient process for manufacture of beer. The High Court, therefore, held that in such a situation central excise duty would not be payable. The relevant portion of the judgment is reproduced below:- " 6. The Central Excise Act is a Central legislation enacted pursuant to the legislative power conferred on the Parliament in terms of Article 246 read with Entry 84 of List I of the VIIth Schedule to the Constitution. Entry 84 of List I as is stood during the relevant time read as follows: "84. Duties of excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res that there is a payment of Central Excise duty on every dutiable product that emerges in the factory of a manufacturer of an excisable final product even though the manufacturer may not clear the said product outside his factory but chooses to use the said product in the manufacture of the excisable final product. In such cases, the manufacturer is said to resort to a captive consumption of the first product to manufacture the ultimate final product, which is then cleared from his factory. While, prior to the introduction of the MODVAT/CENVAT Scheme under the Central Excise Act, the requirement of payment of Central Excise duty on each dutiable product manufactured in the factory of the manufacturer led to an increase in the cost of man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f duty by the manufacturer on account of his final product being non-excisable is not a situation covered by the notification. In my view, this is yet another indication that the levy of duty on a product, at the captive consumption stage, was not envisaged in circumstances where the final product cleared from the factory was non- excisable. 8. In the instant case, it is not in dispute that the carbon dioxide that is generated in the factory of the petitioner manufacturer is a byproduct that arises in the fermentation process leading to the production of alcoholic liquor for human consumption. While carbon dioxide may be an independent product mentioned under the Central Excise Tariff, in the instant case, it is a product that arises in a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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