Collector of Central Excise Vs. Travancore Electro - Court Judgment

Excerpt:
1. the assessees manufactured calcium carbide, which was captively consumed by them in the manufacture of acetylene black. the reaction of calcium carbide with water produce a mixture of gases, the major portion of which was acetylene gas. this mixture of gases was directly consumed for manufacture of acetylene black. acetylene gas was, at the material time excisable and dutiable under t.i. no. 14h(vi). a show cause notice dated 16-7-1982 was issued seeking to levy duty on the gas so produced and captively consumed from 28-2-1982. the assistant collector in his order dated 16-11-1982, dropped the proceedings on the following observa-ion: "i find that the acetylene gas manufactured and consumed in the firm does not conform to isi specification or trade nomenclature since the gas manufactured in the instant case is highly impure and explosive. this is amply proved by the certificate of analysis issued by m/s. essen & co., analytical chemists & assayers, bangalore to m/s. tecil. the gas produced by tecil is not available to be bought and sold. it is also not capable of being bought and sold. hence in the light of the definition of goods as given by the supreme court in delhi cloth mills case, i find that the acetylene gas produced in the firm cannot be termed as 'goods' classifiable under t.i. 14h".2. the jurisdictional collector caused an application under section 35e(iv) of the cesa, 1944 to be filed against this order. the collector (appeals) held that since the gas conformed to the description of acetylene gas under heading 14h(vi) duty was payable thereupon when used for captive consumption. in giving this ruling, he held that the isi specifications were not material nor was it necessary to determine the marketability of the goods. the assessees approached the kerala high court, which set aside the order and directed the collector to pass fresh orders in accordance with law. the collector, in de novo consideration, passed order dated 22-4-1988. in this order, the collector held that the impure acetylene gas manufactured by the respondents was not capable of being marketed and, therefore, could not be held to be excisable. the department then filed and appeal with the tribunal. in their final order no. 304/1994-c, dated 26-10-1994 [1994 (74) e.l.t. 936 (tribunal)], the tribunal observed that the acetylene gas, even if slightly impure, continued to be recognised as commercial acetylene. it was held by the tribunal that it could be marketed with due precautions. it was observed that the relevant entry did not limit itself to acetylene gas dissolved in water. it was held that the isi specifications were merely indicative of quality and not proof whether the commercial substances were goods or not. it was held that the purity or lack of it was not a criterion for classification. on these observations, the tribunal allowed the appeal. the assessees then filed a civil appeal no. 7542 of 1994 [1997 (94) e.l.t. 279 (s.c.)]. the supreme court in their order dated 24-7-1997 held that the tribunal had taken in account only the material that was placed on record by the departmental representative and not the material placed on record by the appellants to the effect that the extent of impurities in the acetylene gas made it highly explosive and dangerous for handling and transport rendering it not marketable. the supreme court, therefore, set aside the judgment and referred the matter back to the tribunal "for considering the question whether the acetylene gas that is produced in the factory of the appellants during the course of manufacture and was, therefore, 'goods' on which excise duty is payable under tariff item 14h(vi) of the central excise tariff." the present proceeding before us are in pursuance of this order.3. shri s. ganesh, ld. advocate, arguing for the appellants placed reliance upon the report of the department's chemical examiner dated may, 1979. in this report, it was specifically claimed that since the impure gas contained impurities like phosphine, ammonia, arsenic, hydrogen sulphides, etc., it could not be marketed without purification. from the indian standards available, which gave specifications of dissolved acetylene gas, he drew the conclusion that no acetylene gas was marketed in the undissolved condition. he, recommended market enquiries to decide this issue. he, however, gave the opinion that in the impure state, the acetylene gas did not fall within the purview of item 14h cet. shri ganesh placed reliance on the certificate from essen co. showing that the sample of acetylene gas contained moisture as well as impurities. he, further, referred to the tariff advice 68 of 1981, dated 15-7-1981 (f. no. 105/5/80-cx-ni) issued by the cbec in which the field formations were advised that no impure gas could be covered under t.i. 14h in terms of the judgment of the supreme court in the case of south bihar sugar mills. thereafter, in fact, the jurisdictional officers had advised the assessee vide letter dated 2-9-1981 that such goods were not excisable. he further relied upon the instructions of the board dated 1-5-1982 (f. no.202/30/82 cx-vi) which dealt with the amendment to rules 9 and 49; in which it was held that intermediate products could not be regarded as 'goods', and, therefore, no duty could be charged when such products were captively consumed.4. citing from the text books, the ld. advocate claimed that the acetylene gas was highly unstable tending strongly to decompose into its constituent elements, namely, carbon and hydrogen. such decomposition could result in intense heat and explosion. to avoid such risk, the gas is dissolved in acetone and packed in specially constructed tanks. citing from reigal handbook of industrial chemistry by james a. kent he stated that except where the gas was transported by pipeline it could only be transported after being dissolved with acetone or other solvents 5. ld. advocate relied upon the judgment of the supreme court in the case of u.o.i. v. delhi cloth & general mills reported in 1997 (92) e.l.t. 315. in this case, it was held that calcium carbide manufactured and used captively in the factory for manufacture of acetylene gas was not pure, therefore, not marketable and was, therefore, not excisable.he also relied upon the judgment of the supreme court in the case of dharangadhra chemical works ltd. v. union of india reported in 1997 (91) e.l.t. 253 (s.c.). reference was also invited to the judgment of the tribunal in the case of collector v rishi gases (p) ltd. reported in 1989 (42) e.l.t. 423 (tribunal). in this judgment, it has been observed that the dissolved acetylene is marketed only in cylinders and that acetone is used as solvent. ld. advocate also relied upon the tribunal's judgment in the case of best liquifiable gases ltd. v collector reported in 1997 (95) e.l.t. 228, which follows the ratio of the rishi gases (p) ltd. case.7. the single issue for consideration is whether acetylene gas produced in the factory of the appellants during the course of manufacturing of calcium carbide and acetylene black was marketable or not. if the answer is in the affirmative, then only such gas would become 'goods' leviable to duty to excise under t.i. 14h(vi).8. the tribunal in their order dated 19-26/ 10-1994 (para 40) had observed that acetylene, even slightly impure continued to be recognised as commercial acetylene and that the presence of other ingredients in minuscule quantities or traces was not material. it was, further, observed that such impure gas was capable of transport and marketed. the material, which was before the tribunal in making this observation was not produced before us. we have, however, seen the substantial technical literature produced before us by the assessees.the fact that the gas produced by the assessees and captively consumed, was in an impure state, stands established by the certificate of m/s.essen & co., which has not been contested. in fact, in the earlier order also, the tribunal had accepted this fact. the extract from encyclopaedia of chemical technology (ii edition) by kirk othmer describes the explosive behaviour of acetylene. the paragraphs read as under: "acetylene is an unstable compound with a strong tendency to decompose into its constituent elements, carbon and hydrogen, with the evolution of a considerable amount of heat. unlike any other industrial gas, acetylene can decompose either slowly or with explosive violence, even in the absence of oxygen, and detonates at pressures as low as 0 to 1 psig. the character, course, and ultimate force of an acetylene decomposition are dependent on a number of factor the initial pressure and temperature of the acetylene containing system, its size and shape, the amount and nature of diluents such as water vapour or other gases, the itensity of the initiation energy which triggered the decomposition, and the size of the initiation source. the handling of acetylene presents serious complications which are unique of a gas so widely used in industrial applications." 9. how is the explosive behaviour to be contained? the extract from dictionary of commercial chemical by foster dee snell (hi edn.), has the following to say: "the technical grade is sold as dissolved acetone in tanks. so dissolved, it does not have the unpredictable explosive properties of compressed acetylene gas".10. riegels's hand book of industrial chemistry (vii edn) by james a.kent describes two methods of distribution of acetylene as follows: "the only method of distribution, other than pipeline, is by means of portable steel tanks, containing a porous solid filter saturated with acetone, or other suitable solvent, in which the acetylene is dissolved by pressure. acetylene alone is not compressed to pressures higher than 2 atmospheres because of its tendency to decompose explosively into carbon and hydrogen; dissolved in acetone it may be under pressures of 10 to 15 atmospheres with safety. in order to fill the cylinders, the acetylene gas is dried over calcium chloride and compressed in a specially designed compressor. cylinders are connected to the compressor and occasionally shut oil to allow time for the dissolution in acetone." 11. the two pamphlets placed on record, issued by the compressed gas association inc. new york also show that the gas could be distributed either in pipelines or in specially designed cylinders after being dissolved in acetone. however, the distribution of gas through a pipeline is extremely hazardous. the extract from kirk othmer reads as follows: "the practice, established during the last decade, of transporting large volumes of compressed acetylene through pipelines from a central producing station to industrial users, as well as the growing use of pressure acetylene in chemical manufacturing operations, has intensified the usual handling problems encountered with this gas. detailed studies of the explosive behaviour of acetylene under varying conditions of temperature and pressure have been published and the explosion limits of mixtures of acetylene with other gases have been determined (40-46)." 12. the ld. advocate made a categorical statement before us that there is no single instance where such acetylene gas is marketed or distributed through a pipeline. what the literature listing the unstable and explosive behaviour of the gas would indicate that the only way to market the gas is in specially designed tanks after being dissolved in acetone.13. at this stage, we pointed out to the ld. advocate that the gas was admittedly being consumed captively by the appellants in the impure state also. his reply was two fold. relying upon the cited judgment of the supreme court in the case of delhi cloth & general mills co. ltd., the ld. advocate stated that this judgment follows the ratio of the moti laminates judgment in which it was held that the goods which are sought to be taxed must be usable, move-able, saleable and marketable.the impure acetylene gas did not satisfy these conditions. it was his claim that since they were using impure acetylene gas, the resultant product, namely, the acetylene black was also of an inferior grade. we find that the same claim was made before the chemical examiner also when he visited their factory. in his opinion, he had reproduced the claim of the appellant that the acetylene black manufactured from impure acetylene gas, did not meet the specifications of the dry cell manufacturers. the second claim made by shri ganesh was that the certificate of analysis shows the presence of toxic compounds such as arsenic. it was his claim that no buyer would purchase acetylene gas which was not safely packed and which in addition had arsenic and other toxic contents. we have examined the documents and extracts, referred to by the ld. advocate. we find that his contention that no acetylene gas, whether pure or impure, is marketed via a pipeline has to be accepted in the absence of any contest from the revenue. we also find substance in his claim that the impure gas, which admittedly had (even though minute) admixture of toxic gases, would hardly meet with customer approval even when marketed in the appropriate containers with appropriate security. in the cited judgment of moti laminates reported in 1995 (76) e.l.t. 241, it was held by the supreme court that intermediate goods produced and used for captive consumption were not liable to duty if they were not marketable irrespective of the fact that they figured in the tariff.14. we find that the collector (appeals) in his order, which was challenged by the revenue before the tribunal, had the following observations about the marketability of the contested goods: "the respondents have stated specific reasons and produced test report or analysis report to indicate that the impure acetylene gas produced by them cannot be marketed, within the meaning of the decision of the honourable supreme court in south bihar sugar mills' case. as against this evidence, no evidence was brought in the application stating either that similar gases viz. inputs acetylene gas is marketed by any manufacturer or that such impure acetylene gas is capable of being marketed for any reason stated in the application." 15. the facts of this case are such as to make the judgment of the supreme court in the case of south bihar sugar mills ltd. reported in 1978 (2) e.l.t. j 336 very relevant. in paragraph 13, the supreme court made the following observations: "it is true as the revenue contended that the gas produced through the kiln can be made marketable in the sense that it can be sold in the very same condition in which it is produced to concerns interested in the carbonation process through for example, pipes. but, apart from such a method of disposal being uneconomic and hardly likely to be employed by the trade, though it is possible in theory, what would be transported is that which is produced through the kiln, viz., the kiln gas containing among other things a certain quantity of carbon dioxide." 16. the court further observed that the gas was not known as carbon dioxide to trade. the supreme court held that such gas was not the goods and, therefore, not excisable. this judgment has been followed or has been quoted with approval in a number of subsequent judgments including that of moti laminates pvt. ltd. v. c.c.e. reported in 1995 (76) e.l.t. 241 (s.c.). this judgment was followed by the supreme court in their cited judgment in the case of delhi cloth & general mills co.ltd. the goods involved in this case were calcium carbide used for the manufacture of acetylene gas where the calcium carbide itself was impure in form. in the case before us also what is first manufactured is calcium carbide which is admittedly not of a purity rendering it marketable and is, therefore not subjected to duty by the authorities.when such impure calcium carbide is not excisable, it has to follow that the impure acetylene gas manufactured therefrom cannot be treated on a different footing. the perusal of these three judgments establishes the point of the appellants that the impure acetylene gas manufactured by them is not excisable.17. on examination of the material placed before us and on consideration of the submissions made, we hold that the acetylene gas manufactured by the assessees was not marketable in view of the impurities and also in view of the fact that it was not packed in the manner in which it is generally safely marketed, and was, therefore, not excisable. we hold that the mere fact that it was captively consumed, does not make it dutiable. we up-hold the order of the collector and dismiss this appeal from the revenue.

Judgment:
1. The assessees manufactured calcium carbide, which was captively consumed by them in the manufacture of Acetylene Black. The reaction of calcium carbide with water produce a mixture of gases, the major portion of which was acetylene gas. This mixture of gases was directly consumed for manufacture of Acetylene Black. Acetylene gas was, at the material time excisable and dutiable under T.I. No. 14H(vi). A show cause notice dated 16-7-1982 was issued seeking to levy duty on the gas so produced and captively consumed from 28-2-1982. The Assistant Collector in his order dated 16-11-1982, dropped the proceedings on the following observa-ion: "I find that the Acetylene gas manufactured and consumed in the firm does not conform to ISI specification or trade nomenclature since the gas manufactured in the instant case is highly impure and explosive. This is amply proved by the certificate of analysis issued by M/s. Essen & Co., Analytical chemists & Assayers, Bangalore to M/s. TECIL. The gas produced by TECIL is not available to be bought and sold. It is also not capable of being bought and sold. Hence in the light of the definition of goods as given by the Supreme Court in Delhi Cloth Mills case, I find that the Acetylene gas produced in the firm cannot be termed as 'goods' classifiable under T.I. 14H".

2. The jurisdictional Collector caused an application under Section 35E(iv) of the CESA, 1944 to be filed against this order. The Collector (Appeals) held that since the gas conformed to the description of acetylene gas under heading 14H(vi) duty was payable thereupon when used for captive consumption. In giving this ruling, he held that the ISI specifications were not material nor was it necessary to determine the marketability of the goods. The assessees approached the Kerala High Court, which set aside the order and directed the Collector to pass fresh orders in accordance with law. The Collector, in de novo consideration, passed order dated 22-4-1988. In this order, the Collector held that the impure acetylene gas manufactured by the respondents was not capable of being marketed and, therefore, could not be held to be excisable. The department then filed and appeal with the Tribunal. In their Final Order No. 304/1994-C, dated 26-10-1994 [1994 (74) E.L.T. 936 (Tribunal)], the Tribunal observed that the acetylene gas, even if slightly impure, continued to be recognised as commercial acetylene. It was held by the Tribunal that it could be marketed with due precautions. It was observed that the relevant entry did not limit itself to acetylene gas dissolved in water. It was held that the ISI specifications were merely indicative of quality and not proof whether the commercial substances were goods or not. It was held that the purity or lack of it was not a criterion for classification. On these observations, the Tribunal allowed the appeal. The assessees then filed a Civil Appeal No. 7542 of 1994 [1997 (94) E.L.T. 279 (S.C.)]. The Supreme Court in their order dated 24-7-1997 held that the Tribunal had taken in account only the material that was placed on record by the departmental representative and not the material placed on record by the appellants to the effect that the extent of impurities in the acetylene gas made it highly explosive and dangerous for handling and transport rendering it not marketable. The Supreme Court, therefore, set aside the judgment and referred the matter back to the Tribunal "for considering the question whether the acetylene gas that is produced in the factory of the appellants during the course of manufacture and was, therefore, 'goods' on which Excise duty is payable under Tariff Item 14H(vi) of the Central Excise Tariff." The present proceeding before us are in pursuance of this order.

3. Shri S. Ganesh, ld. Advocate, arguing for the appellants placed reliance upon the report of the Department's Chemical Examiner dated May, 1979. In this report, it was specifically claimed that since the impure gas contained impurities like phosphine, ammonia, arsenic, hydrogen sulphides, etc., it could not be marketed without purification. From the Indian Standards available, which gave specifications of dissolved acetylene gas, he drew the conclusion that no acetylene gas was marketed in the undissolved condition. He, recommended market enquiries to decide this issue. He, however, gave the opinion that in the impure state, the acetylene gas did not fall within the purview of Item 14H CET. Shri Ganesh placed reliance on the Certificate from Essen Co. showing that the sample of acetylene gas contained moisture as well as impurities. He, further, referred to the Tariff Advice 68 of 1981, dated 15-7-1981 (F. No. 105/5/80-CX-ni) issued by the CBEC in which the field formations were advised that no impure gas could be covered under T.I. 14H in terms of the judgment of the Supreme Court in the case of South Bihar Sugar Mills. Thereafter, in fact, the jurisdictional officers had advised the assessee vide letter dated 2-9-1981 that such goods were not excisable. He further relied upon the instructions of the Board dated 1-5-1982 (F. No.202/30/82 CX-VI) which dealt with the amendment to Rules 9 and 49; in which it was held that intermediate products could not be regarded as 'goods', and, therefore, no duty could be charged when such products were captively consumed.

4. Citing from the text books, the ld. Advocate claimed that the acetylene gas was highly unstable tending strongly to decompose into its constituent elements, namely, carbon and hydrogen. Such decomposition could result in intense heat and explosion. To avoid such risk, the gas is dissolved in acetone and packed in specially constructed tanks. Citing from Reigal Handbook of Industrial Chemistry by James A. Kent he stated that except where the gas was transported by pipeline it could only be transported after being dissolved with acetone or other solvents 5. Ld. Advocate relied upon the judgment of the Supreme Court in the case of U.O.I. v. Delhi Cloth & General Mills reported in 1997 (92) E.L.T. 315. In this case, it was held that calcium carbide manufactured and used captively in the factory for manufacture of acetylene gas was not pure, therefore, not marketable and was, therefore, not excisable.

He also relied upon the judgment of the Supreme Court in the case of Dharangadhra Chemical Works Ltd. v. Union of India reported in 1997 (91) E.L.T. 253 (S.C.). Reference was also invited to the judgment of the Tribunal in the case of Collector v Rishi Gases (P) Ltd. reported in 1989 (42) E.L.T. 423 (Tribunal). In this judgment, it has been observed that the dissolved acetylene is marketed only in cylinders and that acetone is used as solvent. Ld. Advocate also relied upon the Tribunal's judgment in the case of Best Liquifiable Gases Ltd. v Collector reported in 1997 (95) E.L.T. 228, which follows the ratio of the Rishi Gases (P) Ltd. case.

7. The single issue for consideration is whether acetylene gas produced in the factory of the appellants during the course of manufacturing of calcium carbide and acetylene black was marketable or not. If the answer is in the affirmative, then only such gas would become 'goods' leviable to duty to excise under T.I. 14H(vi).

8. The Tribunal in their order dated 19-26/ 10-1994 (para 40) had observed that acetylene, even slightly impure continued to be recognised as commercial acetylene and that the presence of other ingredients in minuscule quantities or traces was not material. It was, further, observed that such impure gas was capable of transport and marketed. The material, which was before the Tribunal in making this observation was not produced before us. We have, however, seen the substantial technical literature produced before us by the assessees.

The fact that the gas produced by the assessees and captively consumed, was in an impure state, stands established by the certificate of M/s.

Essen & Co., which has not been contested. In fact, in the earlier order also, the Tribunal had accepted this fact. The extract from Encyclopaedia of Chemical Technology (II Edition) by Kirk Othmer describes the explosive behaviour of acetylene. The paragraphs read as under: "Acetylene is an unstable compound with a strong tendency to decompose into its constituent elements, carbon and hydrogen, with the evolution of a considerable amount of heat. Unlike any other industrial gas, acetylene can decompose either slowly or with explosive violence, even in the absence of oxygen, and detonates at pressures as low as 0 to 1 psig. The character, course, and ultimate force of an acetylene decomposition are dependent on a number of factor the initial pressure and temperature of the acetylene containing system, its size and shape, the amount and nature of diluents such as water vapour or other gases, the itensity of the initiation energy which triggered the decomposition, and the size of the initiation source. The handling of acetylene presents serious complications which are unique of a gas so widely used in industrial applications." 9. How is the explosive behaviour to be contained? The extract from Dictionary of Commercial Chemical by Foster Dee Snell (HI Edn.), has the following to say: "The technical grade is sold as dissolved acetone in tanks. So dissolved, it does not have the unpredictable explosive properties of compressed acetylene gas".

10. Riegels's Hand Book of Industrial Chemistry (VII Edn) By James A.Kent describes two methods of distribution of acetylene as follows: "The only method of distribution, other than pipeline, is by means of portable steel tanks, containing a porous solid filter saturated with acetone, or other suitable solvent, in which the acetylene is dissolved by pressure. Acetylene alone is not compressed to pressures higher than 2 atmospheres because of its tendency to decompose explosively into carbon and hydrogen; dissolved in acetone it may be under pressures of 10 to 15 atmospheres with safety. In order to fill the cylinders, the acetylene gas is dried over calcium chloride and compressed in a specially designed compressor.

Cylinders are connected to the compressor and occasionally shut oil to allow time for the dissolution in acetone." 11. The two pamphlets placed on record, issued by the Compressed Gas Association Inc. New York also show that the gas could be distributed either in pipelines or in specially designed cylinders after being dissolved in acetone. However, the distribution of gas through a pipeline is extremely hazardous. The extract from Kirk Othmer reads as follows: "The practice, established during the last decade, of transporting large volumes of compressed acetylene through pipelines from a central producing station to industrial users, as well as the growing use of pressure acetylene in chemical manufacturing operations, has intensified the usual handling problems encountered with this gas. Detailed studies of the explosive behaviour of acetylene under varying conditions of temperature and pressure have been published and the explosion limits of mixtures of acetylene with other gases have been determined (40-46)." 12. The ld. Advocate made a categorical statement before us that there is no single instance where such acetylene gas is marketed or distributed through a pipeline. What the literature listing the unstable and explosive behaviour of the gas would indicate that the only way to market the gas is in specially designed tanks after being dissolved in acetone.

13. At this stage, we pointed out to the ld. Advocate that the gas was admittedly being consumed captively by the appellants in the impure state also. His reply was two fold. Relying upon the cited judgment of the Supreme Court in the case of Delhi Cloth & General Mills Co. Ltd., the ld. Advocate stated that this judgment follows the ratio of the Moti Laminates judgment in which it was held that the goods which are sought to be taxed must be usable, move-able, saleable and marketable.

The impure acetylene gas did not satisfy these conditions. It was his claim that since they were using impure acetylene gas, the resultant product, namely, the acetylene black was also of an inferior grade. We find that the same claim was made before the chemical examiner also when he visited their factory. In his opinion, he had reproduced the claim of the appellant that the acetylene black manufactured from impure acetylene gas, did not meet the specifications of the dry cell manufacturers. The second claim made by Shri Ganesh was that the certificate of analysis shows the presence of toxic compounds such as arsenic. It was his claim that no buyer would purchase acetylene gas which was not safely packed and which in addition had arsenic and other toxic contents. We have examined the documents and extracts, referred to by the ld. Advocate. We find that his contention that no acetylene gas, whether pure or impure, is marketed via a pipeline has to be accepted in the absence of any contest from the revenue. We also find substance in his claim that the impure gas, which admittedly had (even though minute) admixture of toxic gases, would hardly meet with customer approval even when marketed in the appropriate containers with appropriate security. In the cited judgment of Moti Laminates reported in 1995 (76) E.L.T. 241, it was held by the Supreme Court that intermediate goods produced and used for captive consumption were not liable to duty if they were not marketable irrespective of the fact that they figured in the tariff.

14. We find that the Collector (Appeals) in his order, which was challenged by the revenue before the Tribunal, had the following observations about the marketability of the contested goods: "The respondents have stated specific reasons and produced test report or analysis report to indicate that the impure acetylene gas produced by them cannot be marketed, within the meaning of the decision of the honourable Supreme Court in South Bihar Sugar Mills' case. As against this evidence, no evidence was brought in the application stating either that similar gases viz. inputs acetylene gas is marketed by any manufacturer or that such impure acetylene gas is capable of being marketed for any reason stated in the application." 15. The facts of this case are such as to make the judgment of the Supreme Court in the case of South Bihar Sugar Mills Ltd. reported in 1978 (2) E.L.T. J 336 very relevant. In paragraph 13, the Supreme Court made the following observations: "It is true as the Revenue contended that the gas produced through the kiln can be made marketable in the sense that it can be sold in the very same condition in which it is produced to concerns interested in the carbonation process through for example, pipes.

But, apart from such a method of disposal being uneconomic and hardly likely to be employed by the trade, though it is possible in theory, what would be transported is that which is produced through the kiln, viz., the kiln gas containing among other things a certain quantity of carbon dioxide." 16. The Court further observed that the gas was not known as carbon dioxide to trade. The Supreme Court held that such gas was not the goods and, therefore, not excisable. This judgment has been followed or has been quoted with approval in a number of subsequent judgments including that of Moti Laminates Pvt. Ltd. v. C.C.E. reported in 1995 (76) E.L.T. 241 (S.C.). This judgment was followed by the Supreme Court in their cited judgment in the case of Delhi Cloth & General Mills Co.

Ltd. The goods involved in this case were calcium carbide used for the manufacture of acetylene gas where the calcium carbide itself was impure in form. In the case before us also what is first manufactured is calcium carbide which is admittedly not of a purity rendering it marketable and is, therefore not subjected to duty by the authorities.

When such impure calcium carbide is not excisable, it has to follow that the impure acetylene gas manufactured therefrom cannot be treated on a different footing. The perusal of these three judgments establishes the point of the appellants that the impure acetylene gas manufactured by them is not excisable.

17. On examination of the material placed before us and on consideration of the submissions made, we hold that the acetylene gas manufactured by the assessees was not marketable in view of the impurities and also in view of the fact that it was not packed in the manner in which it is generally safely marketed, and was, therefore, not excisable. We hold that the mere fact that it was captively consumed, does not make it dutiable. We up-hold the order of the Collector and dismiss this appeal from the Revenue.