2017 (5) TMI 744 - AT - Central Excise

Manufacturing loss of liquid oxygen gas deemed waste under Rule 57D.

The Tribunal determined that the loss incurred during the manufacturing process of liquid oxygen gas constituted waste under Rule 57D of the Central ... CENVAT credit - Loss by spillage or leakage - manufacture of liquid oxygen gas - whether the loss by spillage or leakage during the course of manufacturing process of liquid oxygen gas can be considered as waste, residue or by-product in terms of Rule 57D of the erstwhile CER, 1944? - Held that: - in the appellant's own case COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD-I Versus BOC (INDIA) PVT. LTD. [2003 (12) TMI 111 - CESTAT, MUMBAI] on an identical issue the Tribunal dismissed the revenue's appeal and held that It is clearly incorrect to say because a product has no visible identity it cease to exist. A simple example would be metal lost in burning during manufacturing operations. There has been a consistent practice of extending the provisions of Rule 57A to such loss - credit of the duty paid on entire quantity of used by the assessee would be taken notwithstanding some quantity was not actually contained in the finished product - appeal allowed - decided in favor of appellant. Issues involved:Whether loss by spillage or leakage during the manufacturing process of liquid oxygen gas can be considered as waste, residue, or by-product in terms of Rule 57D of the erstwhile Central Excise Rules, 1944.Analysis:The issue in this case revolves around determining whether the loss incurred during the manufacturing process of liquid oxygen gas qualifies as waste, residue, or by-product under Rule 57D of the Central Excise Rules. The appellant relied on various case laws to support their argument, highlighting precedents such as CCE v. BOC (India) Pvt. Ltd. and CCE v. Jindal Praxair Oxygen Co. (P) Ltd. The Tribunal referred to a previous decision where it was established that gases escaping during the filling process were considered waste under Rule 57D. The Commissioner's decision was based on the interpretation that the escaped gases constituted waste, aligning with the Tribunal's earlier stance. The Tribunal dismissed the revenue's appeal, emphasizing that the gases lost during the manufacturing process were indeed waste and fell under the purview of Rule 57D.The Tribunal further delved into previous cases to provide a comprehensive analysis. In the case of Adhesive and Chemicals v. CCE, it was clarified that the loss by evaporation during storage did not fall under Rule 57D as it occurred before the manufacturing process. This distinction was crucial in determining the applicability of the rule. Additionally, in Guljag Chemicals Pvt. Ltd. v. CCE, it was established that spillage of sulphuric acid during the manufacturing of detergent was not considered waste under Rule 57D. However, the Tribunal reasoned that goods lost due to spillage or evaporation still retained physical existence and should be considered under the rule. The judgment emphasized that substances, even if lost through spillage or evaporation, continued to exist and were subject to the provisions of Rule 57D.The Tribunal highlighted the importance of physical existence in determining the classification of lost goods as waste, residue, or by-product. The decision underscored that substances like spilled milk or evaporated petrol retained their identity and physical presence, making them eligible for consideration under Rule 57D. The judgment rejected the notion that lack of visible identity equated to non-existence, citing examples like metal lost during manufacturing operations. Ultimately, the Tribunal upheld the appellant's argument, setting aside the impugned order and allowing the appeal, based on the interpretation that the loss incurred during the manufacturing process qualified as waste under Rule 57D.In conclusion, the Tribunal's detailed analysis and reliance on precedents underscored the significance of physical existence in determining the classification of lost goods as waste under Rule 57D. The judgment provided a thorough examination of relevant case laws and established a clear interpretation regarding the treatment of loss by spillage or leakage during the manufacturing process of liquid oxygen gas.