Final Order No. A-235/99/Cal. arising from in Appeal No. E-2/96. Case: Tata Iron & Steel Co. Ltd. Vs Commissioner of C. Ex., Jamshedpur. CEGAT (Customs, Excise & Gold (Control) Appellate Tribunal) & CESTAT (Customs, Excise and Service Tax Appellate Tribunal)
| Case Number | Final Order No. A-235/99/Cal. arising from in Appeal No. E-2/96 |
| Counsel | For Appellant: Dr. Samir Chakraborty, Advocate and For Respondents: Shri R.N. Das & Smt. Urmila Dutta (Sen), Advocates |
| Judges | Shri P.C. Jain, Member (T) and Smt. Archana Wadhwa, Member (J), Third Member on Reference : Shri G.N. Srinivasan, Member (J) |
| Issue | Central Excise Act, 1944 - Sections 2(d), 3 |
| Citation | 2000 (125) ELT 876 (Tribunal) |
| Judgement Date | April 20, 1999 |
| Court | CEGAT (Customs, Excise & Gold (Control) Appellate Tribunal) & CESTAT (Customs, Excise and Service Tax Appellate Tribunal) |
Order:
Smt. Archana Wadhwa, Member (J), (Eastern Bench At Calcutta)
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The issues involved in the present case are as follows:-
(i) Whether Crude Benzol which comes into existence at the intermediate stage of manufacture of Benzene, Benzol, Toluene, Toluol, Crude Naphthalene etc. can be said to be marketable and hence excisable;
(ii) If held to be excisable; whether exemption in terms of Notification No. 28/89-C.E., dated 1-3-1989 would be available to the same or not;
(iii) Whether the majority of the demand would be barred by limitation.
2.1 Briefly stated the facts of the case are as under:-
2.2 The appellants are engaged in manufacturing of various iron and steel products, in the manufacture of which they are utilising coking coal. For the purposes of utilisation of the said coking coal for the manufacture of iron and steel, use of coke ovens become necessary which during such use releases a gas known as "coke oven gas" which according to the appellants, is not permitted to be discharged in the atmosphere for ecological reasons and under the relevant provisions of the Pollution Control Laws. As a pollution control measure, the said gas is trapped by the appellants and scrubbed with wash oil. On such scrubbing, a product named Crude Benzol emerges. The wash oil absorbs the aromatics in the gas and from this oil, Crude Benzol is separated by what is known as steam stripping. Crude Benzol is then washed with concentrate Sulphuric Acid. The fractional distillation of washed Crude Benzol yields Benzene, Benzol, Toluene, Toluol, Light Solvent Naphtha and Crude Naphthalene. The said items so manufactured by the appellants are removed/sold by the Company on payment of appropriate rates of excise duty by classifying them under the various Heading & Sub-heading of Chapter 27 of the Central Excise Tariff Act, 1985. In their various classification lists filed for approval by the proper officer, the Crude Benzol was not shown as a product manufactured by the appellants inasmuch as, as per the appellants, Crude Benzol being an intermediary product arising during the process of manufacture of the aforesaid excisable goods, was not marketable and was not goods within the meaning of the Central Excises & Salt Act, 1944.
2.3 Enquiries were made by the jurisdictional Assistant Commissioner (Preventive) on or around 25/26th June, 1991 as regards the production of the said Crude Benzol. In furtherance of such enquiries, a sample of product in question was drawn and sent for chemical examination. The test report dated 30-7-1991 received from the chemical examiner, the Customs House, Calcutta, confirmed that the sample had the characteristics of Crude Benzol and it was other than Motor Benzol or Industrial Benzol.
2.4 On the above basis, a show-cause notice dated 23-8-1991, subsequently amended vide corrigendum dated 11-9-1991 was issued to the appellants alleging that the appellants manufactured Crude Benzol in their plant and stored the same in their storage tank and captively consumed the same for further manufacture of various product. It was alleged that the said Crude Benzol was classificable under heading 2707.90 of the schedule to Central Excise Tariff Act, 1985 in view of the test report of the Chemical Examiner and in view of Chapter Note 3 to Chapter 27 of the Central Excise Tariff Act, 1985. Accordingly, the notice called upon the appellants to show-cause as to why the demand of duty of Rs. 12,37,74,127.68 leviable on the said Crude Benzol consumed captively by the appellants during the period 1-9-1986 to 31-5-1991 should not be confirmed against and recovered from them under the provisions of Rule 9(2) of the Central Excise Rules read with under Section 11A of the Central Excises and Salt Act, 1944 by invoking the extended period of limitation and as to why penalty should not be imposed upon them. The said show-cause notice was challenged by the appellants before the Hon'ble High Court of Patna who vide their order dated 18-11-1991 directed the appellants to file reply before the departmental authorities.
2.5 The appellants took a stand before the authorities below that Crude Benzol being a non-marketable item was not excisable and as such no duty would be levied on the same. The appellants also challenged the report of the chemical examiner inasmuch as the laboratory in question was not equipped to estimate the P.C.T. of the constituents present and the literature relied upon by the chemical examiner was not supplied to them. It was also contended that Crude Benzol would not fall under sub-heading No. 2707.90 since the same does not arise in the process of distillation which is a pre-requisite for items sought to be brought under Chapter 27. Alternatively, it was pleaded that the said item would be exempted with effect from 1-3-1989 in terms of Notification No. 28/89. Submissions were made that the demand in question was barred by limitation inasmuch as the department was very well aware of the emerges of Crude Benzol at the intermediate stage. The Central Excise Officer had authenticated RG-16 Register for washing oil. The department was having its office within Company's factory premises. As such no allegation of suppression of facts can be levelled against them justifying the invokation of longer period of limitation.
2.6 The said show-cause notice culminated into the impugned order passed by the Commissioner of Central Excise, Jamshedpur vide which he has confirmed the demand of duty as proposed in the notice and also imposed the personal penalty of Rs. 5 lakhs on the appellants under Rule 173Q. The appellants were also directed to pay duty by classifying the same under Chapter sub-heading 2707.90.
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We have heard Dr. Samir Chakraborty, ld. advocate for the appellants and Shri R.N. Das, ld. advocate along with Smt. Urmila Dutta (Sen) for the Revenue in support of their cases.
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Drawing attention to the manufacturing process, ld. advocate submitted that Crude Benzol is a name given by them to the product in question. The said Crude Benzol contains so many impurities that it has no commercial value. It is not saleable as such and there is not offered (Sic) for sale or purchase thereof. There is no dealer of Crude Benzol nor does any person or party deal in or trade in Crude Benzol. The other manufacturers, similarly situate, are not paying any duty of excise on Crude Benzol which arises as an intermediary product. He contended that as the product does not qualify the test of marketability, no duty of excise can be levied upon the same. Alternatively, arguments as regards the product being exempted under Notification No. 28/89 with effect from 1-3-1989 was also made by stressing that the condition of the said notification is satisfied inasmuch as it is admitted in the show-cause notice itself that the same is being used captively for further manufacture of goods. As regards limitation, ld. advocate drew attention to the L-6 licence for wash oil in which it is declared that the same is to be used in the manufacture of Crude Benzol. The said L-6 licence was issued on 25th April, 1968 and has been renewed thereafter on various dates. Attention was also drawn to RG-16 Register maintained by the appellants for wash oil wherein Crude Benzol has been shown as the manufactured product in which the wash oil has been used. The said RG-16 bears the signature of Central Excise Officer. In the circumstances, he submitted that it cannot be said that the department was unaware of the emergences of Crude Benzol at the intermediate stage. Accordingly, he prayed that major portion of the demand is barred by limitation.
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Resisting the arguments, Shri R.N. Das, ld. advocate submitted that there is a clear fallacy in the arguments of the appellants that Crude Benzol is the name given by them to the product in question and it is, therefore, their invented product. Drawing attention to the L-6 licence, he submitted that the appellants had claimed therein under Rule 192 that the wash oil was required for manufacture of Crude Benzol. A record of the production of Crude Benzol is also being kept by the appellants. Drawing attention to the report of the Chemical Examiner, ld. advocate submitted that the same is to the effect that the aromatic content is more than 50% by weight. As such in terms of Chapter Note 3 to Chapter 27, Crude Benzol has been rightly held to be classifiable under heading 27.07. As regards the availability of notification, he submitted that the same was not claimed by the appellants before the adjudicating authority. In respect of limitation, ld. advocate submitted that the appellants had not taken L-4 licence. In respect of Crude Benzol, no price list was filed and no classification list was submitted by them. This reflects upon the malafide intention of the appellants to evade duty by contravening the provisions of law and the party's conduct is contumacious. The deliberate failure on the part of the appellants to take out a licence, has given a right to the department to invoke the larger period of limitation of five years. In respect of the above submissions, he relied on the Tribunal's decisions reported in 1997 (94) ELT 502, 1997 (94) ELT 560 & 1997 (96) ELT 57. Accordingly, he prayed for rejection of the appeal.
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We have considered the above submissions from both the sides. The first issue to be decided in the present case is the marketability and the resultant excisability and dutiability of the product, Crude Benzol. It is seen that the Crude Benzol emerges out of a process of manufacture known as "scrubbing of coke oven gas with wash oil" and "steam stripping". As observed by the adjudicating authority, the process of "steam stripping" is nothing but a process of `distillation' which in technical term is also called `destructive distillation'. The word "strip" means removal of a constituent from a substance by boiling, distillation, while the word "destructive distillation" means...
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