TMI Blog1990 (6) TMI 167X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of Rule 49(1) of the Central Excises Salt Act, 1944. As it is the chlorine gas, used for the manufacture of hydrochloric acid cleared on payment of duty was exempt under Notification No. 145/71. The authorities have demanded duty in respect of chlorine utilised for the manufacture of hydrochloric acid destroyed by them and also on the acid destroyed. 3. Learned Consultant for the appellants pleaded that chlorine gas obtained in the process of manufacture first emerges as wet chlorine and which was partly converted into marketable chlorine and the balance was utilised for manufactured of hydrochloric acid. He pleaded the wet chlorine cannot be considered as goods as the same being corrosive was not sold as such while the duty has been demanded on the wet chlorine by the Revenue in terms of Rule 9 and 49, as the same had been cleared for captive consumption for the manufacture of hydrochloric acid which was ultimately destroyed for the reasons that no duty had been paid by the appellant on the hydrochloric acid destroyed. He pleaded that they had to undertake the destruction of part of the hydrochloric acid as they could not market the same on account of limited demand for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase is that part of hydrochloric acid manufactured by them they could not market as there was limited demand for the acid in the backward area where their factory is situated. Destruction therefore was carried out by them for the reason that the goods could not be marketed by them. Rule 49 provides that the duty may not be demanded by proper officer in case the goods are found unfit for consumption or marketing. The contingencies under which, therefore, when the duty is not required to be paid is when the goods are unfit for consumption or are unfit for marketing and this is to be done only subject to the conditions that may be imposed by the Collector by order in writing. It is seen that legislation has intended that the satisfaction that the goods are unfit for consumption or for marketing has to be at the higher level, i.e., of a Collector and the waiver of the demand would be only subject to such condition as the Collector may impose. That has been apparently provided for to ensure that the charge that is created on the goods on their manufacture is not allowed to be lifted till there is a satisfaction at the higher level and that the grounds as set out under Rule 49 exist. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alling under item 14H produced in a continuous and uninterrupted process of manufacture and used captively, will not be classifiable under item 14H if it is impure and does not conform to the relevant ISI specification or trade nomenclature of commodity. - (68/81 dated 22-7-1981) - T.I. No. 14H Gases - Acetylene Gas) The learned Consultant for the appellants also explained the process of manufacture by hydrochloric acid and the generation of chlorine and its processing with the help of a flow chart to show that the chlorine which was not liquified for marketing was diverted at an earlier stage for manufacture of hydrochloric acid when it could be considered only as wet chlorine and this wet chlorine, it was pleaded was neither marketable nor sold and in that view of the matter no duty could be charged on the chlorine utilised for the manufacture of hydrochloric acid even though same was destroyed. The question of levy of duty on chlorine used for hydrochloric acid in the context of our decision above regarding levy of duty on hydrochloric acid is only academic. Once it has been held that duty on hydrochloric acid is required to be paid the duty on chlorine automatically is exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dissent briefly as follows :- 7. That surplus gases may have to be destroyed is borne out even from Notification No. 120/77 dated 18-6-1977 and also by a latter Notification No. 40/85-C dated 17-3-1985 Serial No. 6. Under these two notifications, gases allowed to escape in the atmosphere by flare system or otherwise are exempt from duty. Hence the appellants should not be disbelieved when they say surplus chlorine required destruction merely for the reason that permission for the purpose was not obtained. In fact, the plan of the factory of the appellant, (copy available on file), shows that there is arrangement for neutralisation of hydrochloric acid obtained from chlorine and there is a neutralisation pit where it is neutralised with timestone. In fact, at no stage, the respondent has disputed the appellant claim that hydrochloric acid was destroyed and the appellant also does not dispute that specific permission for the purpose was not obtained. 8. While the later Notification No. 40/85-CE dated 17-3-1985 surprisingly appears to permit destruction of chlorine by letting it into air, I find the appellant claim that chlorine cannot be destroyed by burning or by allowing it to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary for the Assistant Collector of Central Excise to verify the claim of destruction after giving opportunity to the appellant to substantiate their plea of destruction of hydrochloric acid. The demand of duly in respect of hydrochloric acid should be limited to the quantity not proved to the satisfaction of the Collr. of Central Excise to have been destroyed. 12. To the extent the hydrochloric acid is found to have beeh destroyed, the chlorine which has gone into manufacture of the same would naturally become exempt from duty on position both brother Gulati and I are in agreement. 13. The quantity of chlorine which was gone into manufacture of hydrochloric acid not proved to have been destroyed would call for an examination whether this chlorine was in a state commercially understood and known to be chlorine. Liability or otherwise of such chlorine to duty would depend on whether it was in such a state as would be commercially known and understood as chlorine. 14. As a result of the aforesaid discussion, I would pass the following order :- (1) The Assistant Collector of Central Excise should examine the appellants claim as to destruction of hydrochloric acid and demand of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 62 for decision on the points of difference. [Majority per: G. Sankaran, President].- 16.. This matter, though referred by the Bench on 9-2-1988, could not be taken up for hearing so far because the office of the President was vacant till recently. I have heard Shri K.K. Kapoor and Shri R.B. Sinha, learned consultants, for the appellants and Shri S. Chakraborty, learned DR, for the respondent Collector. 17. At the outset Shri Sinha submitted a compilation of documents for the use of the Bench. However, it appeared that some of the documents in the compilation were not before the lower authorities and one of them before the referring Bench. Accordingly, it was made clear that only the documents at serial numbers 2,3, 4, 5 and 6 out of the compilation would be looked into. 18. Shri Sinha submitted that the Department had not disputed that the Hydrochloric acid (HCl) in question was being destroyed. As opined by the learned Vice-President, the Department must verify whether the subject chlorine was marketable commodity and, therefore, excisable. He supported the view of the Vice-President that duty would be leviable on only HCl not shown to have been destroyed and on chlorine, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an arrangement for neutralisation of HCl obtained from chlorine and that there is a neutralision pit where the acid is neutralised with timestone. As he has observed, there is no reason, on the facts and in the circumstances of the case, to disbelieve the statement of the appellants that surplus chlorine was destroyed by the aforesaid method. 21. Turning to the HCl which is stated to have been destroyed by neutralisation, the appellants contention that there was no market in the backward region where the factory was located and that, therefore, it had to be destroyed, has again not been controverted by the Department. The object behind the second proviso to Rule 49(1) is that the manufacturer should not be required to pay duty on any goods claimed by him as unfit for consumption or for marketing subject to such conditions as may be imposed by the Collector in writing. In the present instance, it would appear that there was no permission from the Collector covering the period in dispute. However, that, as observed by the learned Vice-President, at worst, might entail a penalty. (No penalty has, however, been imposed on the appellants for failure to obtain permission.) The conten ..... X X X X Extracts X X X X X X X X Extracts X X X X
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