TaxTMI 
TaxTMI 
2026 (8) TMI 1591
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....excisable product and is not covered under the First Schedule to the Central Excise Tariff Act, 1985. During the course of manufacture of Beer, Carbon Di Oxide (CO2) is generated and the same is consumed by the appellant in further manufacture of Beer in their factory. CO2 is classifiable under Central Excise Tariff Item (CETI) No.2811 2190 of the Act of 1985. The Preventive officers of the department, visited the factory of appellant and recorded statements of persons concerned, about process of manufacture, storage and its use. 2.2 Further, department had found that besides CO2 generated in manufacture of Beer in their factory, the appellant also purchases CO2 from open market; further, both types of CO2 are stored in a tank together for further use in manufacture of beer. The department had found that CO2 generated in the course of manufacture and used within the factory of production of final products would be eligible for exemption from payment of Central Excise duty under Notification No.67/95-C.E. dated 16.03.1995 provided the final product is chargeable to excise duty. Since, the final product manufactured by the appellant i.e., Beer is non-excisable product for which no....
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....no requirement of paying central excise duty. Further, the burden to prove marketability lies on the department and the same has not been discharged by them. There was no ground specified for suppression of facts, misstatement, or intent to evade payment of duty on the part of the appellant. Since the appellant was on the bonafide belief that no excise duty was payable on CO2 as per the judicial pronouncements in force, particularly when the same is emerging as a byproduct during fermentation in manufacture of beer, he stated that the demand of duty by invoking extended period of limitation is not sustainable. Thus, penalty under section 11 AC ibid is also not sustainable. 3.3 He further stated that on the basis of case laws relied upon by them in the earlier paragraph, for the Show Cause Notice issued for demand of central excise duty for subsequent period viz., February, 2015 to June, 2017, the learned Commissioner (Appeals) had dropped the proceedings in their own case vide Order-in-Appeal No. NSK/EXCUS/000/APPL/362/2021-22 dated 23.09.2021. Therefore, he submitted that the impugned order is not sustainable and prayed that the appeal filed by them may be allowed. 4. Learne....
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....According to the said Section, to levy Duty of Central Excise it must satisfy two basic conditions; (i) the article should be 'goods'; and (ii) it should have come into existence as a result of manufacture. In the present case there is no dispute to fact that CO2 in the factory has resulted in process of manufacture. I have to therefore examine if the CO2 and processed in the factory of the Appellant satisfy the criteria of 'goods'. The term "excisable goods" has been defined in clause (d) of Section 2 of the Central Excise Act, 1944 which reads as under:- (d) "excisable goods" means goods specified in [the Fourth Schedule) as being subject to a duty of excise and includes salt; [Explanation. - For the purposes 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.] 10.11 I therefore find that the CO2 generated and processed in the factory of the Appellant falls under the category of "excisable goods". I also take support from the fact that CO2 generated during the course of fermentation is ....
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....uent process of Lagering, filtration, priming and adding preservatives longer shelf life is given to the Beer. Thus, it transpires that Carbon dioxide (CO₂) is a critical byproduct and essential resource in beer brewing. While traditionally CO2 could have been vented into the atmosphere, modern breweries increasingly adopt CO2 capture systems to reduce environmental impact, lower operational costs, and enhance product quality during the process of beer production. Since the by-product CO₂ emerges in the process of manufacture of beer, which is not purported to be manufactured, we are of the view that the requirements of Section 2(d) and 2(f) are not fulfilled in order to categorize the same as excisable goods. Therefore, it cannot be said CO2 was manufactured by the appellant for captive consumption or for sale in the market, in order to levy excise duty in terms of the central excise statute. 8.1 In this regard, we find that the issue involved in the present dispute is squarely covered by the decision of the Hon'ble High Court of Kerala in the case of Sabmiller India Limited (supra), wherein it was held as under: - "6. The Central Excise Act is a Central le....
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.... of payment of Central Excise duty on each dutiable product manufactured in the factory of the manufacturer led to an increase in the cost of manufacture of the final product (since the duty paid on the intermediate product had to be absorbed by the manufacturer into the cost of manufacture of the final product), with the introduction of the MODVAT/CENVAT Scheme that was designed to avoid the cascading effect of taxes on the various products that went into the manufacture of a final product, it became possible for a manufacturer to set off any duty paid on a captivelly consumed product in his factory, against the duty paid on the final product that was cleared from his factory. With a view to spare the manufacturer of the requirement of maintaining additional MODVAT/CENVAT records, Notification No. 67/95-C.E., dated 16-3-1995 was published which exempted manufacturers from the requirement of payment of duty on captivelly consumed products so long as they paid duty on the final product that was cleared from their factory premises. This intention can also be gathered from the proviso to the Notification itself, which clearly indicates that if the final product cleared from the factor....
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....O2 arising in the fermentation process of beer would not be dutiable for central excise as the same is not marketable. The relevant paragraphs of the said order are extracted as under: "11. On a careful consideration of the submissions made on and on perusal of the entire records, it is clear in this case that the appellants had not removed the CO2 gas in any form. The allegations itself clearly indicates that the said CO2 gas emerged during the process of fermentation of beer as a technological necessity. The appellants have produced evidence to show that to extract the said CO2 a separate plant was required to be installed. The same was done in the year 1995 by spending Rs. 40,00,000/-. This itself clearly shows that to make the said gas which emerged in the process of manufacture of beer required a separate plant to make it marketable. During the present period, there was no intention on the part of the appellants to bring into existence CO2 as a necessity during the process of manufacture of beer but CO2 on its own emerged during fermentation and it got itself utilised. Therefore, it is clear from records that revenue has not produced any evidence to show that the said....