ORDER
S.L. Peeran, Member (J)
1. These misc. applications have been filed by the Revenue seeking to consider the Revenue’s prayer for classifying the Corex Gas as “Carbon Monoxide (CO)” in composition and meriting classification as Oxides of Carbon under heading No. 2811.90 requiring the appellants to discharge Excise duty at 16% ad valorem.
2. The learned JCDR submits that the appellants had mis-classified the said gas under Chapter No. 2705.00 and hence this matter requires to be “re-looked from the point of view of new findings of the investigations carried out by the department” and from the point of classification of the same under CSH 28.11.90.
3. The prayer raised by the Commissioner in the misc. application is seriously opposed by the learned Counsel on the ground that this Bench cannot proceed to adjudicate a matter which was not the subject matter of the Show Cause Notice and the impugned order. In this regard, he relies on the Apex Court judgments rendered in the case of Gujarat State Fertilizers Co. v. CCE wherein the Apex Court has clearly laid down that the Tribunal cannot adjudicate on a matter which was not the subject matter of the proceedings before the original authority.
4. On our careful consideration, we notice that the ground now raised in the misc. application was not the subject matter of Show Cause Notice or the adjudication order. As the issue now raised is not the subject matter of the impugned order, the prayer made in the misc. application cannot be considered in the light of the Apex Court judgments referred to by the learned Counsel. The misc. applications are, therefore, rejected.
5. In all these four appeals, the issue is common arising from four adjudication orders viz. (i) 29/2005, dated 8-12-2005; (ii) 28/2005, dated 16-11-2005; (iii) 18/2005, dated 6-7-2005; and (iv) 10/2004, dated 30-7-2004.
6. The Revenue has proceeded against the appellants for levying duty in respect of a by product viz., Corex Gas which, the appellant claim to be an Off gas which arises as a technological necessity and is a by product, which cannot be subjected to the provisions of erstwhile Rule 57CC of CE Rules equivalent to Rule 57AD of CE Rules read with Rule 6(3) of Cenvat Credit Rules, 2002, for demanding 8% of amount equivalent to the price. The Revenue’s contention is that since the goods had been cleared at NIL rate of duty, they are required to discharge 8% equal to the price in terms of the said provision.
7. The learned Counsel has filed a list of citations and the gist of the order to show that the issue is covered in their favour. Further reference is made to the Final Order No. 1036/2006, dated 8-6-2006, 2006 (205) E.L.T. 896 (Tribunal) passed by this Bench in their own case wherein this Bench has held that non-granulated slag is a by product emerging in the course of manufacture of HR Coils. Therefore, the provisions of Rule 57CC or Rule 6(3) would not be applicable to the by products. The Board’s Circular dated 3-4-2000 was also relied. The citations referred to by the Counsel and the gist/ratio of the judgments is given in the tabulated column as extracted.
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Sl. Case Law Citation/Particulars Gist/Ratio of the decision No.
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1. Gas Authority of India Limited v. Lean gas is a by-product. Demand CCE - 2001 (136) E.L.T. 1019 (T- under erstwhile Rule 57CC is not sus- Mum.) tainable. [paras 9,10 of the decision]
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2. Hi-tech Carbon v. CCE – Lean gas/off gas emerge as a by-
product. Rule 57C and Rule 57CC is
not applicable to emergence of by-
product, [para 6 of the decision].
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3. Phillips Carbon Black Ltd. v. CCE – Lean gas/Off gas emerging during
manufacture of carbon black is not
excisable merely because the Appel-
lant is compelled to burn the Off gas
due to environmental laws, [paras 12-
14 of the decision].
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4. Rudra Bilns Kisan Sahakari Chini Bagasse arising in the course of manu-
Mill Ltd. v. CCE - facture of sugar is not a final product.
Demand under Rule 57CC is not
called for. [paras 5, 7 of the decision]
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5. Aarti Drugs Ltd. v. CCE - Mother liquor emerging in the process
of manufacture of methyl nitro imida-
zole is a by-product and Rule 57CC is
not applicable to by-product, [para 11
of the decision].
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6. Alcobex Metals Ltd. v. CCE – dust arising during manu-
. facture of brass and copper are not
excisable, [para 4 of the decision].
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7. Madras Aluminium Co. Ltd. v. CCE - Red mud emerging as a waste during
- 2005 manufacture of aluminium from
(126) ECR 317 (T) Bauxite and sold for a price. Since ac-
cumulation would cause environ-
mental pollution, the Tribunal held
that Red mud is not excisable, [paras 4
& 5 of the decision].
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8. EID Parry (India) Limited v. CCE – Chemicals used as inputs in manufac-
2004 (176) E.L.T. 734 (T-Che.) ture of sugar viz. a dutiable product
and not in the manufacture of bio-
compost, an exempted product. Rule 6
is not applicable, [paras 5 & 6 of the
decision].
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9. Dalmia Magnesite Corporation v. Furnace oil used as fuel in the manu-
CCE- 2003(107) ECR 298 (T-SZB) facture of exempted intermediate
product, demand of amount under
Rule 57CC is not sustainable.
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10. CCE v. Dharani Sugars & Chemicals Bagasse emerging during manufac-
- 2002 (102) ECR 590 (T) ture of sugar and molasses is not a
final product and hence Rule 57CC is
not applicable.
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11. BOC India Limited v. CCE - Carbon di-oxide free air emerging as
by-product during manufacture of
nitrogen and oxygen, Rule 57CC is
not applicable [para 6 of the decision].
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12. UOI v. Ahmedabad Electricity Co. Mere listing of an item in Schedule to
Ltd. - CETA, 1985 is not sufficient to make it
excisable since it has to pass further
test of being manufactured or pro-
duced.
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13. Collector v. Tata Iron & Steel Co. Mere selling of a commodity does not
Ltd. – mean it is marketable since a com-
modity can also be sold as rubbish.
Everything which is sold is not neces-
sarily a marketable commodity
known to commerce which it may be
worthwhile to trade in.
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14. ECE Industries Ltd. v. Commissioner Limitation-Extended period of limita-
- tion not invokable in subsequent pro-
ceedings when earlier proceedings on
same subject matter is pend-
ing/decided.
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15. Hyderabad Polymers (P) Ltd. v. Limitation - Earlier Show Cause No-
Commissioner - tice raising demand on similar issue
and for identical amount dropped,
subsequent Show Cause Notice can-
not allege suppression of fact.
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16. Civil Appeal filed by the Depart- The Tribunal held that bagasse is a
ment dismissed by the Supreme waste and residue of sugar industries
Court as and cannot be termed as ‘final prod-
maintaining the deci- uct.’ The provisions of Rule 57CC are
sion of the Tribunal in Rudra Bilas not applicable in respect of clearance
Kisan Sahakari Chini Mills Ltd. v. of bagasse and press mud.
CCE –
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17. CCE v. Shakumbari Sugar & Allied Bagasse arising in the course of manu-
Industries Ltd. - 2004 (176) E.L.T. facture of sugar is a waste which can-
819 (T) maintained by the Supreme not be regarded as final product. Rule
Court by dismissing Civil Appeal 57CC is not applicable, [para 4]
filed by the Department as re-
ported in
(S.C.)
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18. Kerala Chemicals & Proteins Ltd. v. Inputs used in the process wherein
CCE – 2006 (73) RLT 687 (T-Bang.) by-product emerged cannot be said to
be used both in exempted and duti-
able products and the erstwhile Rule
57CC or Rule 6 is not applicable
[paras 3 & 5]
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19. Sterlite Industries India Ltd. v. Sulphuric acid emerging during
CCE -2005 (191) E.L.T. 401 (T-Che.) manufacture of copper anode is a by-
product. Even if the by-product
emerging is exempted from duty, the
Cenvat credit is not demandable as
per Rule 57D. The benefit of Rule 57D
cannot be taken away with the intro-
duction of Rule 57AD/57CC or Rule 6
of the Cenvat Credit Rules, 2004.
[para 29]
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20. Narang Plastics Pvt. Ltd. v. CCE – When the appellant had reversed
2006 (200) E.L.T. 548 (Tri.) : 2006 credit on inputs, there is no require-
(134) ECR 449 (T.-Bang.) ment to insist on payment of 8% of the
price of the exempted goods.
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21. Jindal Vijayanagar Steel Limited v. Non-granulated slag is a by-product
CCE, Belgaum Final Order No. emerging in the course of manufac-
1036/2006, dated 8-6-2006 passed ture of HR Coils and the provisions of
by this Honourable bench in Ap- Rule 57CC or Rule 6(3) would not be
peal No. E/535/2005 in the appel- applicable to by-products. Board Cir-
lant's own case. cular dated 3-4-2000 was relied on.
[para-6]
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22. Copies of permissions dated
19-1-2001 and 6-3-1995 given by
the Ministry of Environment &
Forests, Government of India, New
Delhi
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8. In sum, the learned Counsel’s submission is that in the light of the above cited judgments, the appellants are not required to discharge 8% equivalent to the price in respect of a by-product in terms of the said provisions. It is his submission that in terms of the ratio of the above judgments, the said provisions are not applicable to the by-product as in the present case Corex Gas is a byproduct. Therefore, the demands are not sustainable.
9. The learned JDR opposes the prayer and submits that detailed investigations were carried out by the Revenue and it was disclosed and the investigation has lead to the discovery of facts that the item Corex Gas is nothing but a final product, which is required to be classified under CSH 2811.90 as Oxides of Carbon. The learned JDR refers to the grounds taken by the Revenue in the misc. applications and prays for an order of classification in the light of the Rules of Interpretation for classification and HSN Notes.
10. The learned Counsel submits that this plea for taking up these grounds has already been rejected and an order has already been dictated. He submits that this plea to consider Corex Gas as a Carbon Monoxide cannot be considered in this proceedings.
11. The learned JDR further submits that the appellants have declared in their declarations that the item Corex Gas is a final product and its end use is a fuel. The appellants have utilized a separate technology for its manufacture and it is distinct from blast furnace technology. Therefore, it cannot be considered as a by-product. The item, although has arisen during the course of manufacture, but it has to be considered as akin to molasses which arises in the manufacture of sugar. Molasses is dutiable. Therefore, on the same analogy, Corex Gas has to be considered under heading 2811.90 and should be made excisable at 16% ad valorem. The learned JDR further submits that even proceeding on the basis of the appellants’ submission that Corex Gas is required to be classified under heading 2705.00 at Nil rate of duty, yet common inputs are being used for its manufacture. Some of the goods are exempted and some are discharged duty. Therefore, Rule 57CC read with Rule 6(3) and amended Rule 57AD of CE Rules is attracted in this matter.
12. The learned Counsel submits that the appellants’ contention is that the item Corex Gas is a by-product. He submits that merely because they have filed declaration that by itself will not dis-entitle them from raising a plea that Corex Gas is by-product. The learned Counsel refers to the letter dated 19-1-2001 issued by the Ministry of Environment & Forests, Government of India, addressed to the appellants, who have considered the off gases from Corex plant to be treated as an Off gas. He further refers to the letter dated 6-3-1995 issued by the same Ministry treating the item to be an off gas. He submits that off gas has to be treated as a by-product in the light of the cited judgments. Since the judgments of Gas Authority of India Ltd; Hi-tech Carbon, Phillips Carbon Black Ltd. (cited supra), deals with the emergence of an off gas/slag/lean gas and the same has been treated as a by-product, therefore, the ratio of these three judgments would clearly apply to the facts of the case. It is his submission that the Ministry of Environment & Forests has accepted the proposition that the gas which arises in the manufacture of the final product is nothing but an ‘off gas’.
13. The learned Counsel submits that the demands are barred by time as there was no suppression and all the facts were known to the department and the issue was being adjudicated on 1-10-1999. He submits that the period involved in the matter is 1-10-1999 onwards to September, 2004. He submits that although the notices have been issued within time, the Revenue’s contention of suppression raised in the Show Cause Notice is not sustainable, as there was no suppression of facts.
14. On a careful consideration, we notice that the issue involved in the present case does not deal with the excisability of the Corex Gas. Therefore, the contention raised by the learned JCDR that the excisability of the Corex Gas has to be considered by this Bench cannot be considered as already the misc. applications raising fresh grounds on this point have been rejected. The only question that is required to be considered in these appeals is as to whether Corex gas is an Off gas and an Off Gas can be treated as a by-product and the benefit of the cited judgments is required to be extended to the assessees.
15. The learned Counsel has referred to the two letters issued by the Ministry of Environment & Forests who have treated the gas as an off gas. The Paper Book carries a flow chart of manufacture of Hot Rolled Coils. During the manufacture of these items, Corex Gas comes into existence. The appellants’ contention is that the Corex Gas arises as a technological necessity and there is no intention to manufacture it separately while manufacturing Hot Rolled Coils. The flow chart indicates that the inputs, raw materials, pellets, iron ore oxygen, nitrogen etc. are fed in the Corex furnace. In the furnace, these items are all melted at a very high temperature and the liquid hot iron is made to pass through another set of steel mix. The liquid steel passes through slab making and the slabs are hot rolled into coils making and the final product Hot Rolled Coils comes into existence. In terms of the flow chart, it is seen that these gases arise when all the raw materials are put in the furnace and melted. Therefore, on a careful consideration of the flow chart, the plea raised by the assessees that the Corex Gas arises as a technological necessity is required to be accepted. The Ministry of Environment & Forests also has treated the Corex Gas as an ‘off gas’ and as an environmental hazard. The off gases have been treated as by-products in all the three cited judgments viz. (i) GAIL; (2) Hi-tech Carbon and (3) Phillips Carbon Black. Therefore, these three judgments would clearly apply to the facts of the case. Furthermore, we notice that in the appellants’ own case, this Bench, by Final order No. 1036/2006, dated 8-6-2006, 2006 (205) E.L.T. 896 (Tri.) has considered Non-granulated Slag arising during the course of manufacture of HR Coils as a by-product. The flow chart shows the emergence of slag at the same stage where Corex Gas has come into existence. Therefore, the analogy drawn by the learned Counsel that the Non-granulated Slag, which has been treated as a byproduct should be applied to the Corex Gas arising in the same stage, is required to be accepted by following the ratio in the Final Order No. 1036/2006, dated 8-6-2006. In sum, the ratio of the cited judgments would apply to the facts of the case. The plea of the learned JDR that investigation has led to a different conclusion is not the subject matter of these appeals. As there is no estoppel in statute, Revenue can continue with their investigation. At this stage, the learned Counsel refers to Shri Vallabh Glass Works Ltd. and Anr. v. UOI and Ors. case, which refers to the law of estoppel. It is for the appellants to raise their objection before the pending proceedings. In so far as these proceedings are concerned, the issue is covered by the cited judgments. Therefore, the appeals are allowed with consequential relief, if any.
(Pronounced and dictated in open Court)