COMMISSIONER OF CENTRAL EXCISE, BOLPUR Vs. INDIAN IRON AND STEEL COMPANY LIMITED, BURNPUR WORKS, BURNPUR

JUDGEMENT

(1.) This appeal by the revenue filed under Sec. 35G of the Central Excise Act, 1944 (the Act for brevity) is directed against the order dated November 21, 2008 passed by the Customs Excise and Service Tax Appellate Tribunal, East Regional Bench, Kolkata (Tribunal) in Excise Appeal No. EDM-716 of 2004 in Order No. A-254/Kol/2008. The revenue has raised the following substantial questions of law for consideration:

(2.) The respondent assessee is an integrated steel plant engaged in the manufacture of various excisable goods falling under Chapters 26 to 29, 70 to 73 and 84 of the Schedule of the Central Excise Tariff Act, 1985 (Tariff Act). Show-cause notice dtd. 23/5/2001 was issued to the assessee stating that it has come to the notice of the department that the assessee are also manufacturing and clearing another excisable product namely, coal gas falling under Chapter sub-heading 2705.00 which is chargeable to Nil rate of duty. It was stated that initially coke and crude coke oven gas were manufactured by destructive distillation process through high temperature carbonization of Bituminous Coal in a separate unit called coke oven battery. The crude coke oven gas containing important by-products comes out as exhaust gas from the coke oven unit. The crude gas as such cannot be used as fuel as it consists of coal tar and other organic compounds which would disrupt the supply system. The crude coke oven gas is taken to another unit called product recovery plant where the crude gas is cleansed from the other major by-products namely, Naphthalene, Ammonia, Motor Spirit, Light Oil etc. and waste (coal tar) through use of MODVAT Inputs, namely, Sulphuric Acid, Wash Oil etc. The pure coal gas thus manufactured in a marketable stage portion of which is consumed by the assessee within their factory and a portion is also sold outside without payment of duty as the product was chargeable to Nil rate of duty under Chapter sub-heading 27.05.

(3.) After mentioning about the above manufacturing process, it was stated in the show-cause notice that coal gas was the only manufactured product of by-product recovery plant where other important products namely, Ammonium Sulphate, Naphthalene, Benzene, Toluene, LS Naphtha, Coal Tar were also manufactured. Further, they were purified through use of Sulphuric Acid, Wash Oil (MODVAT Inputs) in the recovery plant on which credit was taken by the assessee. The coal gas has been cleared without payment of duty as it was chargeable to Nil rate of duty. Hence, it was alleged that the assessee had taken credit of duty on those inputs, utilized the inputs in the manufacture of dutiable as well as Nil duty final products without debiting an amount equal to 20% or 8% of the price of the final products at the time of their clearance during the period from 1/9/1996 to 31/3/2000 from the factory in terms of Rule 57CC(1) of the said Rule. The show-cause notice stated that the total amount which ought to have been paid by the assessee come to Rs.67,32,348.00. After referring to Rule 57C(1),(5) and (9) it was stated that a reading of the rules would lead to the conclusion that a manufacturer engaged in the manufacture of both dutiable and exempted final products can neither avail of the credit of duty of inputs and pay the prescribed amount at the time of clearance of the exempted/ chargeable to Nil rate of duty final product or not both the credit of duty on inputs used in or in relation to the manufacture of exemptible/ chargeable to Nil rate of duty final produce. After referring to Rule 57CC of the said Rules it was stated that whether or not any of the said MODVAT Inputs contained in the final product, coal gas, an amount of 8% of the price of such fuel gas would be chargeable on the quantity cleared outside on sale without payment of duty. It was further alleged that the assessee had not maintained separate inventory and accounts in respect of the said inputs which were used in or in relation to manufacture of the said Nil rate of duty final product and have availed the credit of inputs used in the manufacture of both the aforesaid categories of final product; that the assessee had neither debited an amount equal to 20% or 8% of the price of the said exempted final product at the time of its clearance from the factory in terms of Rule 57CC(1) of the said Rules and thus violated Rule 57C(1) and consequently are required to pay the amount quantified. Further, it was alleged that the assessee had knowingly and wilfully with intent to avoid payment of duty adopted such process and the assessee was called upon to submit their reply to the show-cause notice.