1. This appeal is directed against the order-in-appeal dated 17-12-1987 passed by the learned Collector (Appeals), Madras. By this order the learned Collector has held that the Carbon-dioxide gas in its impure form is manufactured by the appellants, which is classifiable under T.I. 14H of the erstwhile tariff for the period 6-2-1985 to 31-3-1985, 1-6-1985 to 31-10-1985 and 1-11-1985 to 3-1-1986 and that the demands are liable to be confirmed under proviso of Section 11A of the Central Excises and Salt Act, 1944, except for the period 6-2-1985 to the end of the February, 1985 as being time barred, became the 'relevant dates' under the proviso to Section 11A is 7th of next month following the month in which the goods were cleared physically. The facts of the case are that the appellants are manufacturers of unhydrous Ammonia and Impure Carbon dioxide. The Carbon dioxide is partly consumed in the manufacture of Urea and partly sold to M/s. Mahalasa Gases and Chemicals Pvt. Ltd. who are holding L4 No. 1/79 (Gases), where the said carbon-di-oxide gas is purified, liquified and filled in cylinders, after certain processes and removed for home consumption on payment of duty. It is stated that earlier to the issue of trade notice No. 35/85, dated 28-2-1985, by the Collector of Central Excise, Belgaum, the impure carbon-di-oxide was classifiable under T.I. 68 and the same was being supplied to M/s. Mahalasa Gases and Chemicals & Fertilizers Ltd., Mangalore under Rule 56B procedure, in a modified form, as permitted by the Collector of Central Excise, Bangalore. Since, the impure carbon-di-oxide is supplied through pipeline to M/s. Mahalasa Gases and Chemicals Pvt. Ltd. by the appellant, hence M/s. Mahalasa Gases were permitted to pay duty under T.I. 68 on behalf of the appellant based on the quantity of carbon-di-oxide actually processed in cylinders by M/s.
Mahalasa Gases, as permitted by the department. After the issue of Tariff Advice No. 6/85, dated 6-2-1985, which was communicated in Trade Notice No. 35/85, dated 28-2-1985, issued by the Collector of Central Excise, Belgaum, both impure carbon-di-oxide manufactured by the appellants and pure carbon-di-oxide sold by M/s. Mahalasa Gases, after purification, was considered to fall under the same Tariff Item 14H.Therefore, the Superintendent of Central Excise, East Range, Mangalore issued three demands cum show cause notices for the period from 6-2-1985 to 3-1-1986 calling upon them to show cause as to why impure Carbon-di-oxide should not be re-classified under T.I. 14H (after the issue of Tariff Advice/Trade Notice) and duty liability recovered from the appellant, as they are the primary manufacturer of impure carbon-di-oxide falling under T.I. 14H.2. The appellant vide their reply dated 29-10-1985 stated among other things that liability to pay Central Excise Duty lies on M/s. Mahalasa Gases and that the Tariff Advice/Trade Notice suggesting levy of duty at higher rate at a latter date is not correct and not binding on them and that the proviso of Section 11A of Central Excise Act does not apply in this case, as the demands are time barred. It was further stated in another reply dated 20-5-1986, that subsequent to issue of show cause notice dated 4-12-1985, the Superintendent had approved the classification list of M/s. Mahalasa Gases with effect from 17-3-1985, 11-4-1985 and 15-11-1985 recognising their stand that carbon-dioxide fall under T.I. 14H and their eligibility for exemption under Notification No. 85/85, dated 17-3-1985 and Notification No. 40/85, dated 17-3-1985. In view of the above, it was urged by them that there is no cause to show and requested for dropping the show cause notice.
It was also submitted by them that the classification of goods on the basis of Trade Notice or Tariff Advice without application of mind by the assessing authority is wholly illegal. It was further stated by them that they had cleared the semi-finished goods (impure CO2) under Rule 56B without payment of duty and M/s. Mahalasa Gases have cleared the finished goods on payment of appropriate rate of duty against the approved classification list. Therefore, there is no further duty liability on either of them or on M/s. Mahalasa Gases. They also submitted that all the Collectorates were treating the bottling plants as manufacturers of carbon di-oxide falling under T.I. 14H and permitting them to remove finished goods i.e. liquid Carbon-di-oxide on payment of appropriate duty including removal to industrial purposes at Nil rate of duty and that they too had followed Rule 56B procedure in supplying semi-finished goods (Impure COa) to M/s. Mahalasa Gases and Chemicals since 25-6-1985.
3. The learned Assistant Collector after due consideration of their pleas rejected their arguments and confirmed the duty demanded in the show cause notice. The learned Assistant Collector has held that in order to classify impure carbon-di-oxide (CO2) under T.I. 14H, it may not be necessary for the goods to confirm to the ISI Specifications, so long as it could be considered to be the goods for C.E. purposes. He has held that impure CO2 is being sold by the appellant to the outside party, M/s. Mahalasa Gases, and since the product evidently had a market and was capable of being bought and sold, it could rightly be considered as goods for C.E. purposes. He has further held that tariff description under Tariff Item 14H of the said Schedule did not make any distinction between carbon-di-oxide conforming to ISI Specification, therefore, such impure carbon-di-oxide gas, would be correctly classifiable under Tariff Item No. 14H of the said Schedule and, therefore, has confirmed the claim on this aspect made by the department. He has also held that conversion of impure carbon-di-oxide to pure carbon-di-oxide amounts to manufacture. The other findings are not recorded here as the Central issue before us is with regard to the classification of impure COz. He has confirmed the demands on the appellants, as they have been held as the primary manufacturer of the impure carbon-di-oxide. The learned Collector (Appeals) has confirmed these findings and has held that what is carried out in the factory of M/s. Mahalasa Gases is nothing but manufacturing process. He has held that if it was not a manufacturing process then the question of granting permission under Rule 56B would not have been given to the appellants, to remove the impure carbon dioxide as finished goods to M/s. Mahalasa Gases for the purposes of purification. As the goods had not been returned to the appellants, but had been cleared by the M/s.
Mahalasa Gases independently, at their own price, therefore, appellants liability to pay duty on impure carbon dioxide has not been discharged.
He has held that: "if the contention of the appellants that semi-finished goods are not goods and therefore, they are not marketable is accepted, then there is no reason for incorporating the provisions of Rule 56B as stated by me above. Because they would be entitled to clear them free of duty. Why should they seek any permission? I do not hold that semi-finished goods are not marketable. Semifinished goods, are definitely marketable, because they are capable of being bought and sold whether through pipeline or put in containers. In fact appellants are charging M/s. Mahalasa Gases & Chemicals (P) Ltd., for their semifinished goods. Now coming to the other contention of the appellants that under Notification 235/85 the goods are to be transferred following the procedure under Chapter X and once Chapter X procedure is followed, the duty liability of the supplier ceases, as it is taken up by the receiver under Rule 192 of Central Excise Rules. I find that this argument is irrelevant in as much as no goods were supplied during the above mentioned period by the appellants following Chapter X procedure though it is another matter that the recipient may have been licensed as claimed by the appellants. Mere licence is not procuring goods under Chapter X. Therefore, the period when they have started availing of Chapter X procedure is not included in these three demands. Therefore, liability for paying duty on the goods transferred in semi-finished form under Rule 56B squarely rests with the manufacturer of the semi-finished goods who have transferred them for purpose of purifying of refining as the case may be, and clearance of the same upon payment of duty on their behalf. The liability is not transferred to the recipient under provisions of Rule 56B unlike that of Rule 192 and Chapter X procedure. Therefore, I do not find an}' merit in the argument of the appellant." As can be seen from the above impugned order, the learned Collector has rejected the case on merits, but has granted only the benefit of time bar only.
4. We have heard Sh. V. Sridharan, learned Advocate for the appellants and Shri Sharad Bhansali, learned SDR for the Revenue.
5. The learned Advocate submitted that the appellants were removing mixture of gases. It cannot be called as carbon-di-oxide and as it was not carbon-di-oxide as recognished under T.I. 14H. In this context, he relied on the write up appearing at pages 724 to 741 Volume 4 of Kirk-Othmer 'Encyclopedia of Chemical Technology'. He also relied on the rulings rendered by Hon'ble Supreme Court in the case of South Bihar Sugar Mitts Ltd. and Anr. v. Union of India and Anr. as reported in 1978 (2) E.L.T. 336. However, he admitted that the appellant had taken permission under Rule 56B of the C.E. Rules and the goods have been cleared as carbon dioxide. Further, his contention is thai: liability cannot be fixed on the appellant, as semi-finished goods have been removed for completing the process. After the completion of the process of purification, the goods have been removed by M/s. Mahalasa Gases, on behalf of the appellant and that they had discharged the duty and, therefore, the question of paying duty on the semi-finished goods does not arise. In this context, he relied on the ruling rendered in the case of Collector of Central Excise v. U. P. Twiga Fibre Glass Ltd. as reported in 1985 (22) E.L.T. 919. Pointing out to the Notification 40/85 he submitted that the Notification, exempted the benefit only for the following: 6. The learned Advocate pointing out to these exemptions in the notification submitted that the appellants were removing the semi-finished carbon dioxide for industrial purpose and not for use in the manufacture of beverages or aerated waters, which alone were excluded from the benefit of the Notification. He however, pointed out that the benefit would be still available to the party, even if the party had not followed the procedure, so long as there was substantive compliance with the Chapter X'. In this regard, he relied on the ruling rendered in the case of Gujarat Paints and Allied Products Co. v.Collector of Central Excise, Baroda as reported in 1993 (68) E.L.T. 644 (Tribunal). He submitted that in the circumstances of the present case i.e. the M/s. Mahalasa Gases being a neighbouring unit, the question of applicability of Chapter X would not apply to the present case and that by itself also would not make them disentitled from claiming the Notification.
7. The learned SDR argued that the goods were not pure carbon dioxide, which had varied uses and such uses can be put into, only if the gases were in a pure state. The pure carbon oxide was also used for refrigeration, as a raw material in the production of other chemicals, chiefly urea and methanol, for secondary oil recovery-solid carbon dioxide is used for Refrigeration of food stuffs, especially ice-cream, wheat products, and frozen foods. Liquid carbon dioxide is used as a source of power in certain applications, for operating remote signalling devices, spray painting and gas-operated fire arms, for inflating life rafts and jackets etc. (see pages 739 to 741 of Kirk-Othmer, 4th Edition). Pointing out to the literature produced by the learned Advocate, the learned SDR submitted that the literature itself was very clear about the various uses of carbon dioxide in its different forms. He pointed out from the T.I. 14H, and submitted that the impure carbon dioxide would rightly fall under this heading. He pointed out that the issue has been also dealt with in the case of Ugar Sugar Works Ltd. v. Collector of Central Excise, as reported in 1993 (68) E.L.T. 224. It has been held in this case that the process of manufacturing impure carbon dioxide is a process of manufacture and hence, it is rightly classifiable under T.I. 14H. Therefore, he submitted that the department's claim for change of classification is sustainable and duty is recoverable, for 6 months period from the date of show cause notice. Pointing out to the Rule 56B the Learned SDR submitted that the Collector has got a discretion to allow the clearances, without payment of duty only on the ground that the semi-finished goods should return to the assessee, after the process of manufacture. In this case, the semi-finished goods have been converted into pure carbon dioxide by several processes of manufacture and cleared by M/s. Mahalasa Gases, and as the goods have not returned to the appellants; the liability to pay duty on such semi-finished goods, will continue to remain with the appellant and therefore, the claim for duty made by the department is sustainable. He submitted that the notification in question is to apply to carbonic Acid, which is used for Industrial purpose only and which was totally utilised in the factory. He submitted that the Industrial use of Carbonic Acid in the factory, is well recognised in the trade and supported by literature.
He submitted that in this particular case, the pure carbon dioxide was not being utilised in the factory, for Industrial purposes but it was cleared in cylinders for vise in hospitals etc. hence, the notification was not applicable to the facts of the present case.
8. We have carefully considered the submissions made by both the sides and have perused the records.
9. The first question that has to be decided in this case is as to whether the goods removed by the appellants to M/s. Mahalasa Gases under Rule 56B is a semi-finished goods and impure carbon dioxide (COi) The learned Advocate has argued that what has been removed was not impure carbon dioxide but mixture of gases. In this context, he has relied on the ruling rendered in the case of South Bihar Sugar Mills and Anr.. This contention of the learned Advocate is totally belied in the context of the agreement entered into by the appellant and M/s.
Mahalasa Gases and also the entire correspondence in this aspect of the matter. The appellant has themselves, in their correspondence, admitted that they were clearing semi-finished carbon dioxide. The manufacturing process also discloses that what has emerged is impure carbon dioxide and, therefore, the contention of the appellant that the semi finished goods is a mixture of gases and not impure carbon dioxide is totally incorrect and not acceptable. In the cited case of South Bihar Sugar Mills Ltd. and Anr., the Hon'ble Supreme Court has held that kiln gas is not carbon dioxide. Therefore this citation is not at all applicable to the facts of the present case.
10. The question is as to whether this semi-finished carbon-dioxide is different from pure carbon dioxide and as to whether the duty is liable to be paid by the appellants at the time of removal of goods under Rule 56B of Central Excise Rules? The Tariff Item 14H reads as follows :----------------------------------------------------------------------Item No. Description of Goods Rate of duty----------------------------------------------------------------------14H Gases, including liquified (i) Oxygen Fifteen per cent ad valorem.
(ii) Chlorine Fifteen per cent ad valorem.
(iii) Ammonia Fifteen per cent ad valorem.
(iv) Carbonic acid Re. one per Kg.
(Carbon dioxide) (v) Refrigerant gases, Thirty per cent ad valorem.
not otherside specified, (vi) Acetylene (whether Fifteen per cent ad valorem." in dissolved condition or not) As can be seen, sub-item (iv) reads 'Carbonic Acid (CO2)'. This Tariff Item includes gases including liquified or solidified gases. In the instant case, the impure carbon-dioxide has been removed through pipelines to M/s. Mahalasa Gases. Admittedly, M/s. Mahalasa Gases are earring out several processes of manufacture to convert the impure gases into pure carbon dioxide and, they had cleared the same in liquified form and solidified form. The Tariff Item clearly lays down that the item can be both in gaseous state, as well as in liquified or solidified state. The impure carbon dioxide cannot be kept under liquified or solidified state, as can be seen from the literature. The literature also clearly mentions the uses of the impure carbon dioxide and pure carbon dioxide. It is admitted in appeal memo that M/s.
Mahalasa Gases are removing the pure carbon dioxide in cylinders for various users. As can be seen from the literature, the impure carbon dioxide will be dangerous and highly poisonous for use and it is only pure carbon dioxide in liquid state, which is used for various purposes as noted in the literature. Therefore, this conversion of impure carbon dioxide to pure carbon dioxide is admittedly a process of manufacture and that they are two different products, as has been held by the lower authorities. In that event of the matter, the appellants contention that the goods removed by them in semi-finished stage is not carbon dioxide, is not acceptable. We have arrived at this finding after thorough reading of the literature presented before us.
11. In Ugar Sugar Works Ltd. (supra) the Tribunal has held that ISI norm is only for quality control and it is not for finding on classification. It has been further held that the classification has to be decided according to the trade parlance and commercial understanding. It has been further held that the carbon dioxide (raw/impure) marketed by the assessee itself as carbon dioxide, arid known in trade as carbon dioxide is classifiable under T.I. 14H of erstwhile Central Excise Tariff. It has also been held, that duty is not restricted to technically pure carbon dioxide gases alone.
Therefore, the contention before us by the ld. Advocate is no longer res-integra and we find that the Tribunal has already settled the issue as in the case of Ugar Sugar Works Ltd. We respectfully follow this ruling and hold that the semi-finished carbon dioxide, removed by the appellant to M/s. Mahalasa Gases through pipelines is a separate goods, on which duty is chargeable under T.I. 14H of erstwhile Central Excise Tariff.
12. The other question that arises for our consideration is with regard to the applicability of the Notification No. 40/85. This notification is applicable only if the carbonic acid (CO2) is removed under Chapter X for industrial use only. In this case the goods had not been removed under Chapter X but Rule 56B. The Rule 56B is of postponment of Rules 9 and 49, in other words, the duty recoverability on the goods gets postponed. In this case the goods are semifinished which were sent for processing and should have come back to the assessee. The duty which was required to have been discharged by the appellant was postponed, under this Notification on the condition that the goods should be returned, after completion of processing from the job worker. As the goods had not returned to the appellants, the demands of duty made on the semi-finished impure carbon dioxide is justifiable. As the duty liability of appellants continued, the goods had not come back and no duty had been discharged at the time of its removal, therefore, the demands of duty by the department is sustainable. The goods removed by the M/s. Mahalasa Gases are different goods, as it is pure carbon dioxide, having different uses, and known differently in the Trade.
They are liable to pay duty in respect of pure carbon dioxide as per Tariff Item. The notification in question does not apply to the facts of the present case, as has been rightly held by the lower authorities, as the goods are not being removed for industrial use. The term Industrial use has a specific meaning and connotation. Carbonic Acid (CO2) has different Industrial uses, as can be seen from the technical literature produced before us. The M/s. Mahalasa Gases are not utilising carbonic acid in their factory, but they are carrying out a process of manufacture, to convert impure carbon dioxide to pure carbon dioxide and they are removing the same in cylinders and liquified state to the hospitals. Therefore, the use is clearly different then that of Industrial use, as laid down in the Notification. The department is justified in rejecting the benefit of the exemption, claimed under the said notification. The ruling cited by the learned Advocate in the case of U.P. Twiga Fibre Glass Ltd. is distinguishable and as goods had been removed on payment of duty under Rule 56C(2)(a) and, therefore, the issue is totally different and distinguishable one and it not applicable to the facts of the present case. The rulings of Gujarat Paints and Allied Products Co. relied by the learned Advocate refers to the non-compliance of the Chapter X procedure. This is also not applicable, as we have held that the Notification itself is not applicable to the present case. The learned Advocate also relied on the ruling rendered in the case of Thermax Private Limited v. Collector of Customs as reported in 1992 (61) E.L.T. 352. This ruling pertains to import case and levy of CVD duty on goods used for special industrial purposes. The preposition laid down in the ruling is totally different and not applicable to the facts of the present case.
13. In that view of the matter, there is no merits in this appeal and hence, it is rejected.
14. With due respects to Hon'ble Member (Judicial) my views and orders are as follows : 15. I find that as per Encyclopedia of Chemical Technology by Kirk-Othmer "Carbon dioxide (124-38-9), CO2 is a colorless gas with a fainty pungent odor and acid taste. Van Helmont (1577-1644) first recognized carbon dioxide as a distinct gas when he detected its presence as a by-product of both charcoal combustion and fermentation.
Today carbon dioxide is a by-product of many commercial processes : synthetic ammonia production, hydrogen production, substitute natural gas production, fermentation, limestone calcination, certain chemical syntheses involving carbon monoxide, and reaction of sulfuric acid with dolomite. Generally present as one of a mixture of gases, carbon dioxide is separated, recovered, and prepared for commercial use as a solid (dry ice), liquid, or gas.
"Carbon dioxide is also found in the products of combustion of all carbonaceous fuels, in naturally occurring gases, as a product of animal metabolism, and in small quantities, about 0.03 vol % in the atmosphere. Its many applications include beverage carbonation, chemical manufacture, fire fighting, food preservation, foundry-mold preparation, greenhouses, mining operations, oil well secondary recovery, rubber tumbling, therapeutical work, and welding." "Sources of carbon dioxide for commercial carbon dioxide recovery plants are (a) flue gases resulting from the combustion of carbonaceous fuels; (b) synthetic ammonia and hydrogen plants in which methane or other hydrocarbons are converted to carbon dioxide and hydrogen (CH4 + 2 HzO -COa + 4 HI); (c) fermentation in which a sugar such as dextrose is converted to ethyl alcohol and carbon dioxide (CeHnOf, - 2 C2HsOH + 2 CO2); (d) lime-kiln operation in which carbonates are thermally decomposed (CaCOs - CaO + COa); (e) sodium phosphate manufacture (3 NaaCOs + 2 HsPO4 - 2 NasPO4 + 3 CO;?); and (f) natural carbon dioxide gas wells." "Accordingly, there are many methods by which commercial carbon dioxide could be obtained. Obviously the degree of purity will differ from source to source and process to process and the requirement for use; And even in cases where the carbon dioxide produced and recovered by various methods "has a high purity, it may contain traces of hydrogen sulfide and sulfur dioxide which cause a slight odor or taste." Therefore, it may be required to be further purified. Thus, for instance " the fermentation gas recovery process includes a purification stage, but carbon dioxide recovered by other methods must be further purified before it is acceptable for beverage, dry ice, or other uses. The most commonly used purification methods are treatments with (a) potassium permanganate, (b) potassium dichromate, and (c) active carbon." As mentioned under the methods of purification at page 736 of Kirk-Othmer Encyclopedia. Similarly depending upon the requirement, the carbon dioxide may be liquified or soldified by various methods.
16. "A large number of portion of carbon dioxide recovered is used at or near the location where it is generated as an ingredient in a further processing step. In this case, the gaseous form is most often used. Low temperature liquid and solid carbon dioxide are used for refrigeration (qv). Where the producer and the consumer are distant, carbon dioxide may be liquified to reduce transportation cost and revaporized at the point of consumption. About 40% of the carbon dioxide recovered is used as a raw material in the production of the chemicals, chiefly urea and methanol." 17. In the instant case the appellant is a manufacturer of chemicals and fertilizers and obtains impure carbon dioxide gas as a by-product in the course of manufacture of ammonia, a part of which is used captively for the manufacture of urea fertilizer and a small portion is sold to M/s. Mahalasa Gases & Chemicals Pvt. Ltd. through a pipe-line and the remaining is vented to atmosphere.
18. The impure carbon dioxide gas sold to M/s Mahalasa Gases & Chemicals Pvt. Ltd. was used by the firm for the manufacture of liquid carbon dioxide, which in turn was filled into high pressure cylinders and was disposed of or cleared to units which produce aerated waters, beverages or which used the product for industrial purposes, according to the appeal memo.
19. The Central Excise Tariff as it stood at the relevant time included a Tariff Entry 14H reproduced at page 11 of this order. This Entry covers gases including liquified or solidified gases, and, Carbonic Acid (Carbon dioxide) is one of the items specifically covered by it (by name so to say).
20. Obviously, once the appellant had obtained carbon dioxide as a by-product and sold it to another party and carbon dioxide figured under 14H, therefore, in the normal course, it was required to bear the incidence of duty as marketable goods under this heading.
21. The appellant had taken permission under Rule 56B which prescribes a special procedure for removal of finished or semi-finished goods for certain purposes, subject to certain conditions. This Rule reads as under : "Rule 56B. Special procedure for removal of finished excisable goods or semi-finished goods for certain purposes. - The Collector may, by special order and subject to such conditions as may be specified by the Collector, permit a manufacturer to remove - (i) excisable goods which are in the nature of semi-finished goods, for carrying out certain manufacturing processes, or (ii) excisable goods for carrying out tests, to some other premises of his or to the premises of another person and to bring back such goods to his factory, without payment of duty, or to some other licensed premises of his or to the premises of another assessee and allow these goods to be removed on payment of duty or without payment of duty for export from such other licensed premises of his or from the premises of such assessee to whom the goods have been sent: Provided that this rule shall not apply to the goods known as "prototypes" which are sent out for trial or development test." To judge the applicability or otherwise of this rule, we have to go back to the Tariff Entry, the condition of the product or the stage of manufacture and the purpose for which it was sent out and the procedure followed.
22. As far as I can see, the entry relating to carbon dioxide mentioned under 14H does not distinguish between carbon dioxide of various degrees of purity and therefore, the issue of impure and pure is of no relevance. The carbon dioxide, irrespective of percentage of purity was classifiable under Tariff Item 14H.23. The word "purification" is used in chemistry in different senses i.e. to connote and cover different processes which may or may not amount to process of manufacture and the situation may vary from case to case.
24. At the same time, merely because the carbon dioxide produced in the appellant's unit was required to be further purified, it cannot be said that it was in a 'semi-finished' state.
25. Further, it was neither sent out for carrying out test nor was it brought back to the factory after subjecting it to any other process.
As such, in my opinion, the request for permission to clear without payment of duty from the appellant's factory with reference to Rule 56B could not have been made and should not have been allowed and the permission was wrongly granted by the officers concerned.
26. Moreover, the technical literature in the case of carbon dioxide shows that purification is merely yet another step of processing and does not result into a new product or a new commodity by itself.
27. In these circumstances, the appellant was required to pay duty on the entire quantity which was sold.28. Even the quantity which was used for captive consumption was excisable but liability to duty was dependent upon showing as to whether such captive consumption was exempted under some notification during the relevant period or not.
29. Only the quantity which was vented out would not be chargeable to duty as that amounted to destruction (although the fact is not disputed but even this would require an advance intimation and remission in terms of Rule 49, in the normal course).
30. At the same time, insofar as Notification 235/85 is concerned, it 'exempts carbon dioxide not conforming to I.S. specification No.307-1966, falling under Item No. 14H and produced in a factory from the whole of duty when intended for use in a bottling plant for the manufacture of liquid carbon dioxide or solid carbon dioxide conforming to I.S. specification if carbon dioxide so manufactured is cleared on payment of duty, provided the procedure set out in Chapter X of Central Excise Rules, 1944 is followed. In the present the appellants have claimed that they had supplied the gas through a pipe-line to M/s Mahalasa for the manufacture of liquid carbon dioxide which was filled by the latter in high pressure cyclinders and cleared on payment of duty various purposes and this contention has not been contradicted or shown to be wrong. Even otherwise, it is not disputed that M/s.
Mahalasa have cleared the purified and liquified carbon dioxide on payment of duty; And it is apparent that the procedure prescribed under Chapter X has been substantially complied with and its purposes served.
In fact, it is the departmental officers who have erred in allowing clearances under Rule 56B whereas they ought to f have allowed the clearance under Chapter X. Since the appellants had brought if the facts to the notice of the officers and taken their permission, therefore, they could not be faulted if the officers granted them permission under the wrong rule instead of the right one. In any eventuality, it is well settled that substantive benefit should not be denied if otherwise due on account of minor procedural infractions. In the circumstances, I feel that the Department had virtually o cause for demanding duty.
32. In view of the above discussion, I find that the appellant's prayer is justified. I, therefore, set aside the impugned order and allow the appeal.
In view of the difference of opinion between Hon'ble Member Judicial and the Vice President, the matter is submitted to the President for reference to a third Member on the point of difference.
Whether in the facts and circumstances of the case, the product was classifiable as COz falling under Item 14H and if so, whether the appellants were liable to duty or they were entitled to the benefit of the exemption notification as claimed by them Sd/- Sd/-(S.K. Bhatnagar) (S.L. Peeran)Vice President Member (J) This is a miscellaneous application filed w.r.t. the orders of the bench indicating difference of opinion and forwarding the same to the President for reference to a Third Member. After the matter was heard by Third Member he referred the matter back to the original bench with his observations and suggestions for refraining the reference if necessary.
2. The matter was therefore listed again before this bench and after it had been heard opportunity was given to the appellants to move appropriate application seeking clarification, if necessary.
3. Accordingly the appellants have moved this application in which it has been mentioned inter-alia that there was a difference of opinion between the two Members in Para 24 on the question as to whether the impure carbon dioxide was a semi-finished or finished product; and so far as Notification No. 40/85 was concerned whereas the Member (J) had expressed his view and held that the appellants were not entitled for the same, the Vice President had allowed the benefit of 235/85, dated 15-11-1985.
4. Since the Member (J) had not expressed any opinion regarding Notification No. 235/85 and the Vice President has not stated anything w.r.t. Notification No. 40/85 a clarification was called for and rephrasing or modifying the reference may be considered.
6. As regards Para 24 is concerned it is correct that there was a difference of opinion between the two Members on the question as to whether the . impure carbon dioxide was a semi-finished or a finished product and therefore the issue has been rightly referred to the third member.
7. Since the alternate prayer for the benefit of Notification No.235/851 had been allowed by the Vice President it was felt that it was not necessary for him to have referred to the Notification No. 40/85.
8. As regards the Notification No. 40/85 Member (J)'s view is already on record. However, Notification No. 235/85 was also required to be considered and the Vice President had already expressed his view that benefit was available (obviously from the date it came into force).
Hon. Member (J) has also since considered the matter and is now of the same view.
9. At this stage both the Members feel that since an agreed opinion has now emerged and the benefit of Notification 235/85 is being allowed (w.e.f. the date it came in force) no difference of opinions survives insofar as this aspect is concerned and it is not necessary to refer to Notification No. 40/85. As such, the reference is required to be limited to only to the first part of the reference namely whether in the facts and circumstances of the case the product was classifiable as COa falling under Item 14H.10. In view of the above position, the matter now may be placed before the third Member for his opinion.
Sd/- Sd/- (S.K. Bhatnagar) (S.L. Peeran) Vice President Member (J) This matter arises from an order of 'C' Bench of this Tribunal, being Order No. 27/97-C, dated 17-3-1997 directing that the Miscellaneous Application No. 794/96-C in Appeal No. E/1270/88-C, read with Misc.
Order No. 130/95-C be placed before the Third Member for resolving a difference of opinion.
2. The matter was heard when Shri R. Nambirajan, Advocate appeared for appellants and Shri J. M. Sharma, JDR appeared for the Department.
3. The matter relates to difference of opinion between Members of the Bench which heard Appeal No. E/1270/88-C filed by M/s. Mangalore Chemicals & Fertilizers against the order-in-appeal passed by the Collector (Appeals), Madras dated 17-12-1987. This Tribunal by the said order considered two issues namely: (i) Whether impure Carbon-dioxide was a semi-finished or finished product; (ii) Whether benefit of Notification No. 40/85, dated 17-3-1985 and Notification No. 235/85, dated 15-11-1985 would be available to the appellants in respect of clearances between 1-3-1985 and 3-1-1986.
4. In the aforesaid order of the Tribunal, Member (Judicial) had held that the benefit of Notification No. 40/85 was not available to the appellants. Member (T) had not expressed any opinion on the point: As regards availability of benefits under Notification 235/85, Member (T) had held that the benefit of the said Notification will be available to the appellants. However, it was not made clear whether the benefit under Notification No. 235/85 which was notified on 15-11-1985 would be available for a period prior to the date of notification.
5. When the orders of the Bench indicating difference of opinion was heard by the Third Member, he referred the matter to the Original bench with his observations and suggestions for reframing the reference if necessary. On the said order, the appellants M/s. Mangalore Chemicals & Fertilizers filed Misc. Application No. E/794/96-C in which they have mentioned inter-alia that there was a difference of opinion between two Members on the question referred to above.
6. It was on the said Misc. application the Bench, after hearing both the sides passed Misc. Order No. 27/97-C, dated 17-3-1997 which is before me. The Bench had observed that as regards the benefit of Notification No. 235/85 the same had been allowed by the Vice President and Member (Technical) and it was not necessary for him therefore to have referred to Notification No. 40/85. As regards Notification 40/85, since Member (J) had already held that the benefit thereunder will not be available to the appellants and therefore, there was no need for him to express any view specifically as regards Notification 235/85 as the Vice President and Member (Technical) had expressed the view that benefit under the said Notification will be available. In their order dated 17-3-1997 (Paragraph 8), it has been clarified that the benefit would obviously be available only from the date of publication of Notification No. 235/85. It has also been recorded in the same paragraph that Member (Judicial) has since considered the matter and has confirmed the same view.
7. In view of the above findings of the Bench, I find that both Members are agreed that the benefit of the Notification 235/85 is to be allowed only prospectively. Therefore, no difference of opinion as to the scope of Notification 235/85 survives. On the question of benefit under Notification No. 40/85, Member (J) had expressed the view that the appellants are not entitled for the same. Member (T) and Vice President had not expressed any view contrary thereto. In view of this, it is to be held that the Tribunal has accepted the view expressed by Member (J) on the point.
8. Further, it is seen from Para 24 Misc. Order No. 130/95-C that Vice President and Member (Technical) had observed that merely because Carbon-dioxide produced in the appellant's unit was required to be further purified, it cannot be stated that it was a 'semi-finished product'. There is nothing in the order recorded by Member (J) contrary to the said finding of the Vice President. I am, therefore, of the view that this finding should be taken to be the view of the Bench. On a perusal of the order, it is observed that the discussion in the said order relates to availability of benefit of Notification No. 40/85 and 235/85. Though both these notifications are no doubt concerned with Carbon-dioxide falling under T.I. 14H, there was no discussion on the question as to whether the item was classifiable under T.I. 14H or not.
9. I find that the issue for consideration referred to the Third Member in terms of Para 9 of Misc. Order No. 27/97-C is the classification of COz. From a perusal of the Misc. order No. 130/95 and the submissions made before me by learned Counsel, I find that there is no finding against classifying the said item under T.I. 14H. Hence, I do not feel that there is any difference of opinion between Members on the question of classification of CO2 under T.I. 14H either. Classification of CO2 under T.I. 14H not being in dispute, the same is confirmed.
10. In the premises, I find that there is no difference of opinion surviving for resolution by the Third member. The present Misc.
Application is disposed of in the above terms.
11. Registry may place this order before the original Bench for further action, if considered necessary.