1997 (10) TMI 185 - AT - Central Excise

Carbon dioxide under Tariff Item 14H deemed dutiable, duty upheld, exemption denied, benefit granted.

MANGALORE CHEM. & FERT. LTD. Versus COLLECTOR OF C. EX., MANGALORE

MANGALORE CHEM. & FERT. LTD. Versus COLLECTOR OF C. EX., MANGALORE - 1998 (98) E.L.T. 490 (Tribunal) Issues Involved:1. Classification of impure carbon dioxide under Tariff Item 14H.2. Applicability of duty liability under Rule 56B.3. Eligibility for exemption under Notification No. 40/85.4. Eligibility for exemption under Notification No. 235/85.5. Marketability and dutiability of semi-finished goods.Issue-wise Detailed Analysis:1. Classification of Impure Carbon Dioxide under Tariff Item 14H:The primary issue was whether impure carbon dioxide (CO2) manufactured by the appellants was classifiable under Tariff Item (T.I.) 14H of the erstwhile tariff. The appellants argued that the impure CO2 was a mixture of gases and not classifiable under T.I. 14H. The Assistant Collector and the Collector (Appeals) held that impure CO2, being sold and having a market, qualifies as 'goods' for Central Excise purposes and is classifiable under T.I. 14H. The Tribunal upheld this classification, stating that the tariff description under T.I. 14H did not distinguish between pure and impure CO2, thus confirming the department's claim.2. Applicability of Duty Liability under Rule 56B:The appellants had removed impure CO2 to M/s. Mahalasa Gases under Rule 56B, which allows the removal of semi-finished goods for further processing without payment of duty. The Assistant Collector and the Collector (Appeals) held that the appellants were liable to pay duty on the impure CO2 as the goods were not returned to the appellants after processing. The Tribunal agreed, stating that the duty liability remained with the appellants since the goods were not brought back after processing.3. Eligibility for Exemption under Notification No. 40/85:The appellants claimed exemption under Notification No. 40/85, which provides benefits for goods used for industrial purposes. The Collector (Appeals) and the Tribunal held that the notification did not apply as the goods were not removed under Chapter X procedure and were not used for industrial purposes in the factory but were instead sold in cylinders for other uses. Thus, the exemption was denied.4. Eligibility for Exemption under Notification No. 235/85:The Vice President allowed the benefit of Notification No. 235/85, which exempts CO2 not conforming to ISI specifications when used in a bottling plant for manufacturing liquid or solid CO2. The Tribunal held that the benefit of this notification was available prospectively from the date of its issue (15-11-1985) and not for the period prior to it.5. Marketability and Dutiability of Semi-finished Goods:The Tribunal discussed the marketability of semi-finished goods, stating that semi-finished goods are marketable if they are capable of being bought and sold. The Tribunal upheld the findings of the lower authorities that the impure CO2 was marketable and thus dutiable. The argument that semi-finished goods are not marketable was rejected, and the appellants' liability to pay duty on the semi-finished impure CO2 was confirmed.Separate Judgments:The Vice President (S.K. Bhatnagar) and Member (Judicial) (S.L. Peeran) had differing views on the applicability of Rule 56B and Notification No. 235/85. The Vice President allowed the benefit of Notification No. 235/85, while Member (Judicial) did not express an opinion on this notification. The matter was referred to a third member, who confirmed that the benefit of Notification No. 235/85 was available prospectively, and the classification under T.I. 14H was upheld.Final Order:In view of the majority opinion, the item was classifiable under T.I. 14H (old tariff) as it stood during the relevant period, but the benefit of Notification No. 235/85 (and not 40/85) was available prospectively from the date of issue of the said notification. The appeal was disposed of in these terms.