Inevitable venting of gases during manufacture was not subject to excise duty where no clearance or consideration existed

Oxygen, nitrogen and argon gases that escaped into the atmosphere as an inevitable incident of manufacture were not liable to excise duty because there was no commercial clearance or receipt of consideration. A prior decision in the assessee's own case had already taken the same view, and a binding departmental circular required the Revenue to follow that position. The assessee's orders were sustained and the Department's challenge failed.

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Issues: Whether oxygen, nitrogen and argon gases vented out to the atmosphere during manufacture were liable to excise duty.

Analysis: The gases were released into the atmosphere only because the continuous manufacturing process and pipeline constraints made such venting inevitable to prevent pressure build-up and damage. A prior decision in the respondent's own case had already held that gases vented out in this manner were not exigible to duty. The Board's circular also clarified that gases allowed to escape into the atmosphere were not to be treated as manufactured products or as clearance attracting duty. The record did not show receipt of any consideration for the vented gases, and the Revenue remained bound by the circular.

Conclusion: The gases vented out to the atmosphere were not liable to excise duty, and the Department's appeals failed.

Final Conclusion: The impugned orders in favour of the assessee were sustained, and the Department's challenge was rejected.

Ratio Decidendi: Gases that escape into the atmosphere as an inevitable incident of the manufacturing process, without any commercial clearance or consideration, are not liable to excise duty, and a binding departmental circular supporting that view must be followed by the Revenue.

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