2015 (10) TMI 2398 - AT - Central Excise

Tribunal rules mixing UDMH and HH doesn't create new product for rocket fuel, appellant's duty liability discharged.

The Andhra Sugars Ltd Versus Commissioner of Customs, Central Excise and Service Tax Guntur

The Andhra Sugars Ltd Versus Commissioner of Customs, Central Excise and Service Tax Guntur - 2015 (324) E.L.T. 591 (Tri. - Bang.) Issues Involved:- Interpretation of Central Excise duty exemption notifications for rocket fuel/propellant used in satellite projects- Classification of UDMH and UH25 as distinct products for duty impositionAnalysis:1. Interpretation of Central Excise Duty Exemption Notifications:The appeals involved a common issue regarding the duty demand and penalty imposed on the appellant for the period from June 2002 to August 2011. The appellant was supplying modified Unsymmetrical Di-Methyl Hydrazine (UDMH) mixed with Hydrazine Hydrate (HH) in a 75:25 ratio to the Indian Space Research Organisation (ISRO) for rocket fuel/propellant. The dispute arose when the department considered the UDMH used for mixing as an intermediary product, making the appellant ineligible for exemption under Notification No.67/95. The Commissioner contended that the process amounted to manufacture, leading to a duty demand on the captively used UDMH.2. Classification of UDMH and UH25 as Distinct Products:The appellant argued that the mixture of UDMH and HH, termed UH25, did not result in a new product as it retained the same character and use as propellant/fuel. They compared it to blending diesel/petrol with additives for improved versions while remaining fundamentally the same product. The Commissioner, however, considered the process as manufacturing based on the definition under Chapter Note-11 of Chapter 29 of the Tariff, concluding that UH25 was a newly manufactured product distinct from UDMH. The Tribunal analyzed whether the process resulted in a new product with a distinct name, character, and use, as required by the Hon'ble Supreme Court's decision. It was observed that no evidence was presented to demonstrate a change in the character or use of the product, leading to the conclusion that no new product emerged from mixing UDMH and HH.3. Conclusion:Ultimately, the Tribunal found in favor of the appellant, ruling that the Revenue's stand and the impugned order were not sustainable. It was held that no new product emerged from the mixing process, and therefore, the duty liability on UDMH used within the factory was discharged by the appellant. The appeals were allowed with consequential relief granted to the appellants, highlighting the importance of demonstrating a change in character or use to classify products as distinct for duty imposition.