1985 (3) TMI 274 - AT - Central Excise

Tribunal rules calcium carbide & acetylene gas excisable despite quality, highlights excise duty on production.

The Tribunal rejected the appeals by M/s. ILAC Limited, holding that the calcium carbide and acetylene gas produced, even if of inferior quality and not ... - Issues Involved:1. Excisability of Calcium Carbide and Acetylene Gas.2. Marketability and Commercial Purity.3. Interpretation of Central Excise Rules and Indian Standards.4. Captive Consumption and Removal from Factory.5. Legal Precedents and Judicial Interpretations.Summary:1. Excisability of Calcium Carbide and Acetylene Gas:The Tribunal examined whether calcium carbide and acetylene gas produced by M/s. ILAC Limited are excisable commodities. The factory argued that their calcium carbide is of inferior commercial purity and not marketable, thus not excisable under item 14AA of the central excise tariff. However, the Tribunal concluded that even sub-standard products that are used as calcium carbide and acetylene are excisable. The Tribunal stated, 'The calcium carbide may be sub-standard or may not meet Indian Standards specification but it was calcium carbide and was used as calcium carbide.'2. Marketability and Commercial Purity:M/s. ILAC contended that their products were not marketable due to their inferior quality and did not meet the Indian Standards. The Tribunal referred to various judgments, including the Supreme Court ruling in South Bihar Sugar Mills v. Union of India, which stated, 'The fact that the gas so generated has carbon dioxide below 99 per cent and does not conform to the specification of the Indian Standard also would not matter for the gas may be sub-standard, provided what is produced is carbon dioxide.' Thus, the Tribunal held that the products' lack of marketability did not exempt them from excise duty.3. Interpretation of Central Excise Rules and Indian Standards:The Tribunal examined the Carbide of Calcium Rules, 1937, and Indian Standards IS: 1040-1978 and IS: 308-1977. M/s. ILAC argued that their products did not conform to these standards, thus should not be excisable. The Tribunal clarified that the standards are for ensuring quality and safety, not for determining excisability. It stated, 'The Indian Standards are only specifications on what a quality, that is, a desirable quality, should be.'4. Captive Consumption and Removal from Factory:M/s. ILAC argued that since their products were used within the factory and not removed, they should not be liable for excise duty. The Tribunal referred to the retrospective amendment to Rule 9 and Rule 49 of the Central Excise Rules, 1944, which made goods consumed within the factory liable to duty. The Tribunal stated, 'There are as many judgments which have ruled that non-removal outside the factory would not make any difference to the excisability of the goods.'5. Legal Precedents and Judicial Interpretations:The Tribunal considered several legal precedents, including judgments from the Supreme Court and High Courts, which supported the excisability of intermediate products used within the factory. It highlighted, 'Excise duty was a duty on the production and manufacture of goods and not on sale,' and concluded that the products in question were excisable despite their inferior quality and lack of marketability.Conclusion:The Tribunal rejected the appeals by M/s. ILAC Limited, holding that the calcium carbide and acetylene gas produced, even if of inferior quality and not marketable, are excisable under the Central Excise Act. The Tribunal stated, 'We see no reason to interfere and so we reject both these appeals.'