2012 (8) TMI 825 - AT - Central Excise

Exemption from Excise Duty for Released Gases Upheld by Tribunal

The Tribunal held that gases vented out by the respondent were exempt from excise duty due to technological constraints and the absence of consideration ... Duty demand - Whether duty of excise was leviable on Oxygen, Nitrogen and Argon gases vented out to the atmosphere during the periods of disputes - Held that:- respondent was constrained, by the technology adopted by them for continuous manufacture of the gases, to allow some volume of the three gases to escape into the air to prevent damage of the pipeline due to accumulation of high pressure that might arise in the event of the consumers inability to ensure steady consumption of the gases supplied by the respondent. After noting this factual situation unique to the manufacture of gaseous products like Oxygen, Nitrogen and Argon, this Bench, in the respondent’s own case, held against leviability of excise duty on the gases which were vented out to the atmosphere. gases which were vented out in the atmosphere are exempted from excise duty. The show cause notice admits the facts of venting out of the gases in the air. The Revenue has not produced any evidence that the appellants have collected any consideration of price for the gases which have been vented out in the atmosphere. The appellants have established that they have not received any consideration for the gases which have been vented out in the air. The Revenue is bound by the Board’s Circular as held by the Apex Court in the case of Dhiren Chemical Industries [2001 (12) TMI 3 - SUPREME COURT OF INDIA] - Decided against Revenue. Issues:- Whether duty of excise was leviable on Oxygen, Nitrogen, and Argon gases vented out to the atmosphere during the periods of disputes.Analysis:The judgment involves appeals by the Department against orders of the Commissioner(Appeals) favoring the assessee regarding the levy of excise duty on gases vented out to the atmosphere. The respondent, engaged in manufacturing Oxygen, Nitrogen, and Argon gases, faced duty demands from the Department due to technical reasons causing the release of gases into the air. Show-cause notices were issued, some adjudicated in favor of the assessee, and others against them. The appeals arose from these adjudications, all of which were decided in favor of the assessee by the Commissioner(Appeals), leading to the Department's appeals.The primary issue for consideration was whether the gases vented out by the respondent during the dispute periods were subject to excise duty. The Tribunal noted the unique technological constraints faced by the respondent in allowing some gases to escape to prevent pipeline damage. Referring to a previous decision in the respondent's case, the Tribunal held against the levy of excise duty on gases released to the atmosphere. The decision cited a Board's Circular exempting gases vented out from excise duty, emphasizing that no consideration was received for the gases released. The Department accepted the cited decision, and based on this, the Tribunal upheld the impugned orders and dismissed the Department's appeals.In conclusion, the Tribunal relied on the precedent and the Board's Circular to decide that gases vented out by the respondent were exempt from excise duty. The judgment highlighted the absence of consideration received for the released gases and the Department's acceptance of the cited decision. Consequently, the appeals by the Department were dismissed, affirming the orders in favor of the assessee.