TaxTMI 
TaxTMI 
2024 (1) TMI 395
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....location and which is generated during the process of manufacture of carbon black, after incineration of the same, in observing pollution laws and to prevent the atmosphere being polluted and not being subjected to excise duty, can be made excisable on the ground that in course of incineration of the said lean gas considerable amount of heat is generated which is used in generation of electricity which is partly for captive consumption and is partly sold? 3. Facts involve in brief, in the instant case according to the petitioner, are as hereunder: 4. Petitioner is a manufacturer of "Carbon Black" since March 27, 2009. During the process of manufacture of Carbon Black, a Waste Gas/Off Gas/Tail Gas (hereinafter referred to as the said gas) emerges as a by-product and having regard to the environmental norms and pollution laws, petitioner incinerates the said gas so as to prevent emission of toxic materials, i.e., Carbon Monoxide (hereinafter referred to as CO) and other hydrocarbons. Considerable amount of heat is generated in incinerating the said gas which is used in generation of electricity partly for captive consumption and is partly sold. 5. A spot memo dated 24th June....
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....e Central Excise Act read with Section 174 (2) of the CGST Act along with a penalty of Rs. 20,61,27,457/- under Section 11AC of the Act read with Rule 25 of the Rules read with Section 174 (2) of the CGST Act. 9. After passing of the order-in-original, petitioner made an application for amendment of the present writ petition seeking to challenge the said order-in-original. By an order dated July 5, 2018, this Court allowed the said amendment application. Affidavits were exchanged by the parties. It is pertinent to note that the Respondent Authorities did not oppose the said amendment application. 10. Case made out by the adjudicating authority in the impugned order-in-original is as hereunder. 11. Electricity being manufactured and also being capable of being bought and sold for a consideration would fall in the category of "goods". So far it is exempted as it is chargeable to Nil rate of duty. Petitioner is engaged in the manufacture of dutiable goods "Carbon Black" as well as exempted goods "Electricity". The activity of generating electricity is not an ancillary activity. It is an intentional activity. The said gas is nothing but a mixture of gases and a composite goods....
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....ion of jurisdiction under Section 11A of the Act stood satisfied in the present case. 18. Petitioner submits that the said gas was generated as a by-product which the petitioner had to incinerate to comply with environmental norms and the heat so generated in the process of incineration was used for the purpose of production of electricity which was partially used to captive consumption and partially sold to the grid was known to the Department as would be evident from the Audit Proceedings stated hereinabove. 19. Petitioner submits that it is no longer res integra that the expression "suppression" used in Section 11A of the Act being accompanied by strong words like "fraud" or "collusion" would have to be construed strictly. Mere omission to give correct information is not suppression of facts. The burden to prove suppression of facts is cast upon the Revenue. The department cannot take a view contrary to the Circular being No. 35/88 dated December 22, 1988 wherein it was clearly held that the said gas is not excisable. 20. On the said issue whether the said gas is excisable in view of the amended definition of excisable goods contained in Section 2 (d) of the Act, Sectio....
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....e Act as would be evident from paragraph 6 of the judgment and also the definition of 'manufacture' as would be evident from paragraph 7 of the said judgment. The Supreme Court clearly held in the said case that it could not be pointed out whether any process in respect of bagasse has been specified in the Section or in the Chapter notes and in the absence thereof, the deeming provision could not be attracted. 25. Petitioner submits that similarly, in the present case, respondent authority concerned has not been able to point out any relevant provision contained in the Section or in the Chapter notes wherefrom it could be established that any process in respect of the said gas has been specified. 26. Petitioner submits that the Respondent authority concerned proceeded to levy excise duty on the said gas after ascertaining the taxable value with regard to electricity captively consumed and sold to the grid. This approach of respondent authority concerned makes it manifestly clear that the focal point of adjudication is the production of electricity for captive consumption and sale to the grid and since electricity was subject to Nil rate of duty, respondent authority concerned....
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....f Philips Carbon Black (supra) has attained finality and the facts in Philips Carbon Black (supra) and Hi-tech Carbon (supra) are similar to the facts and circumstances of the present case. 34. Petitioner submits that the department cannot take a stand contrary to the Circular in view of the Hon'ble Supreme Court's judgment in the case of Ranade Micronutrients -Vs- CCE, (1996) 10 SCC 387. Petitioner submits that the said gas is not capable of being bought and sold for a consideration which is a condition precedent for excisability of goods. 35. Learned counsel representing the respondents, in opposing the writ petition submits as hereunder. 36. Respondents submit that the writ petitioner challenged the show cause cum Demand Notice dated 28th March, 2016 and the order-in-original dated 30th November, 2017 without filing any reply to the said show cause notice and without participating or attending the hearing before the adjudicating authority despite several opportunities were given and as such the said order-in-original dated 30th November, 2017 was accordingly passed ex parte and the writ petitioner did not prefer any appeal against the said order-in-original and on that ....
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.... "For the purpose of this clause, "goods" includes any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable." Thus the electricity being manufactured and also being capable of bought and sold for a consideration will fall under the category of Goods. (c) The terms 'rate of duty' is a numeric term specified in tariff for the purpose of arriving at quantum of duty. In case of ad-valorem rate, duty is determined as a percentile of value of the goods in terms of Section 4 or 4A of the Central Excise Tariff Act, 1985. 40. Respondents submit that undisputedly, the electricity is a tariff item as specified in the first schedule to Central Excise Tariff and the same is chargeable to duty. Therefore, electricity is excisable goods in items of Section 2(d) of the Central Excise Act, 1944. Further the electricity manufactured by the petitioner is their intentional activity and therefore this activity cannot be termed as an ancillary activity. 41. Respondents further submit that the petitioner was requested by the audit team as well as by Rang formation repeatedly to ascertain ....
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....enalty. 45. Respondents submit that in 3rd paragraph of the circular dated 22/12/1988 of CBEC (Page - 130 of the writ petition) specifically said that even if they are held to be excisable then by virtue of notification dated 20/06/1987 the gases in question are exempted from the duty provided such gases are allowed to escape into the atmosphere by flared system or otherwise while in the present case petitioner did not allow to escape the off gas into the atmosphere by flared system or otherwise but manufactured electricity and commercially sold to the WBSEDCL on valuable consideration and earned a huge amount without paying anything to the Department of Revenue. It has been mentioned in the last two lines of paragraph no. 2 of that circular that no product is obtained out of incineration of carbon monoxide and released into the atmosphere. Therefore, the said circular will not help the petitioner since the petitioner used the said off gas for manufacturing/producing electricity being an excisable goods within the meaning of Section 2(d) of the Central Excise Act, 1944 and sold the same to the WBSEDCL on consideration and thus the petitioner is liable to pay excise duty to the d....
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....dgment by the said Hon'ble Court is related to the period before 2008. It has been further held that as per explanation "goods" in 2(d) of Central Excise Act, 1944 introduces the deeming fiction by which certain kind of goods are treated as marketable and thus excisable. But Bagasse is not capable of being bought and sold for a consideration. 51. Respondents submit that similar view was also taken by the Hon'ble Apex Court in the case of (Gularia Chini Mills Vs Union of India) reported in 2015 (322) ELT 769 (SC). Therefore, the said judgment is not applicable in the facts of the present case because the petitioner herein is manufacturing electricity and sold the part of the same on consideration and earning a huge amount without paying duty on such excisable goods to the revenue. 52. Respondents further submit that the unreported judgment of the Division Bench of this Court in the case of (Principle Commissioner of CGST & CX Vs M/s Himadri Speciality Chemical Ltd.) in CEXA. No. 01 of 2022 is relating to the case of reversal of cenvat credit availed on inputs services though the assessee has already reversed the proportionate credit attributable to sale of electricity without ....