High Court rules Section 35G appeal not maintainable, Tribunal decision upheld on non-marketability of LSHS, duty dismissed.

The High Court determined that the appeal under Section 35G of the Central Excise Act was not maintainable before it and should have been filed before the Supreme Court. The court upheld the Tribunal's decision that the impugned goods (LSHS) are not excisable due to their non-marketability, leading to no duty payable. The court dismissed the appeal accordingly.

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Issues Involved:
1. Maintainability of the appeal under Section 35G of the Central Excise Act before the High Court.
2. Whether the impugned goods (LSHS) are excisable.
3. Applicability of the exemption notification to the impugned goods.
4. Marketability of the impugned goods.
5. Use of the impugned goods for purposes other than manufacturing.

Issue-wise Detailed Analysis:

1. Maintainability of the Appeal under Section 35G:
The primary issue was whether the appeal by the Revenue against the CESTAT order is maintainable under Section 35G of the Central Excise Act before the High Court. The court examined Sections 35G and 35L of the Act, which delineate the jurisdiction of the High Court and the Supreme Court, respectively. It was determined that matters involving the determination of the rate of duty or the value of goods for assessment purposes fall under the exclusive jurisdiction of the Supreme Court as per Section 35L(b). The court concluded that since the appeal involves questions relating to the excisability and marketability of goods, which are directly related to the rate of duty, the High Court does not have jurisdiction, and the appeal should be filed before the Supreme Court.

2. Whether the Impugned Goods (LSHS) are Excisable:
The court analyzed whether LSHS, used captively for generating steam and electricity, is excisable. The Tribunal had held that since the impugned product is not marketable, it is not excisable. The Revenue argued that the product satisfies the requirements of LSHS and is excisable. However, the court referred to previous judgments, emphasizing that for a product to be excisable, it must be marketable. Since the Tribunal found the product not marketable, the court upheld the Tribunal's decision that the product is not excisable.

3. Applicability of the Exemption Notification:
The assessee claimed exemption from duty under Notification No. 67/95 C.X. for captive consumption of LSHS. The Revenue contended that the exemption does not apply to the portion of electricity used for non-manufacturing purposes such as construction and lighting residential colonies. The Tribunal had ruled that since the product is not excisable, the exemption notification's applicability is moot. The court agreed with this view, stating that if the product is not excisable, the question of exemption does not arise.

4. Marketability of the Impugned Goods:
The court delved into the concept of marketability, which is crucial for determining excisability. The Tribunal had concluded that the product, although termed LSHS, was not marketable. The court referred to various precedents, reiterating that for goods to be excisable, they must be capable of being bought and sold in the market. Since the impugned product did not meet this criterion, the court upheld the Tribunal's finding that it is not marketable and, therefore, not excisable.

5. Use of the Impugned Goods for Purposes Other than Manufacturing:
The Revenue argued that a portion of the electricity generated using LSHS was used for non-manufacturing purposes, thus attracting duty. The court noted that the Tribunal had already addressed this issue by stating that since the product is not excisable due to its non-marketability, the use of electricity for other purposes does not alter the non-excisable nature of the product. Consequently, the court found no merit in the Revenue's argument on this point.

Conclusion:
The High Court concluded that the appeal under Section 35G of the Central Excise Act was not maintainable before it and should have been filed before the Supreme Court under Section 35L(b). The court dismissed the appeal, upholding the Tribunal's decision that the impugned goods are not excisable due to their non-marketability and, therefore, no duty is payable.

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