Manufactured flue gas not taxable as nitrogen under Central Excise Tariff

M/s. Tata Steel Limited Versus Commissioner of Central Excise, Haldia

M/s. Tata Steel Limited Versus Commissioner of Central Excise, Haldia - TMI Issues Involved:
1. Whether flue gas generated during the manufacture of metallurgical coke is a manufactured product.
2. Whether flue gas is marketable and thus subject to central excise duty.
3. Correct classification of flue gas under the Central Excise Tariff.
4. Applicability of the extended period of limitation and imposition of penalty.

Summary:

1. Manufactured Product:
The Tribunal examined whether flue gas generated during the manufacture of metallurgical coke could be considered a manufactured product. The appellant argued that flue gas is not manufactured but is a waste by-product arising inevitably during the coke manufacturing process. The Tribunal referenced the decision in *Hindalco Industries Ltd. v. UOI* and the Supreme Court's rulings in *CCE v. Indian Aluminium Co. Ltd.* and *UOI v. Indian Aluminium Co. Ltd.*, concluding that flue gas is not a manufactured product as it is not intentionally produced but arises as an inevitable waste.

2. Marketability:
The Tribunal addressed the issue of whether flue gas is marketable. The appellant contended that the mere mention of goods in the First Schedule does not automatically mean they are marketable. The Tribunal noted that the burden of proof to establish marketability lies with the revenue, which failed to conduct a market survey or provide evidence that flue gas is marketable. The Tribunal cited the Supreme Court's decision in *Hindustan Zinc Ltd. v. CCE, Jaipur*, emphasizing that marketability implies a regular market for the product, which was not demonstrated in this case.

3. Classification:
The Tribunal evaluated the classification of flue gas under the Central Excise Tariff. The revenue classified flue gas as 'Nitrogen' under CTH 28043000, arguing that it contained more than 80% nitrogen. However, the Tribunal found no evidence supporting that flue gas could be marketed as nitrogen. The Tribunal held that applying Rule 3(b) of the General Rules of Interpretation without evidence was incorrect and that flue gas could not be classified as nitrogen.

4. Extended Period of Limitation and Penalty:
The appellant argued that the extended period of limitation was not invocable and that the penalty was not imposable. The Tribunal did not specifically address this issue in the summary provided but ultimately set aside the impugned order, which implies that the demands and penalties were not upheld.

Conclusion:
The Tribunal concluded that flue gas generated during the manufacture of metallurgical coke is neither a manufactured product nor marketable. Consequently, it cannot be classified as nitrogen, and duty is not payable. The appeal was allowed with consequential relief, setting aside the impugned order.