The CESTAT, Delhi bench has held that central excise duty cannot be levied on the manufacture of carbon dioxide gas during the manufacture of beer as the alcoholic liquors for human consumption is a State-subject.
The appellant, are engaged in manufacture of Beer which is alleged as non-excisable being not covered under First Schedule to the Central Excise Tariff Act, 1985 and are engaged in manufacture of alcoholic liquor for human consumption namely Beer excisable under Rajasthan State Excise Act.During the process of manufacture of Beer, a gas namely Carbon Dioxide (CO2) is generated falling under Tariff Sub Heading No.28112190 of the First Schedule to Central Excise Tariff Act, 1985. The Department observed that the appellant has captively consumed 5546095 Kgs and 729055 Kgs of Carbon Dioxide valued at Rs.2,52,11,407/- and Rs.32,85,619/- during the period from March, 2010 to December 2014 and from January 2015 to June 2015 respectively without paying the Central Excise Duty amounting to Rs.29,46,375/- and Rs.4,09,545/- respectively.
The appellant contended that they are engaged in manufacture and sale of alcohol which is subject to the jurisdiction of State Excise Authorities under Entry 8 and 15, List 2 of the Seventh Schedule of the Constitution of India and teherfore, the operations of company are not governed by Central Excise Act.
After perusing the documents and facts, Judicial Member Ms. Rachna Gupta observed that the duty has been demanded on Carbon Dioxide gas which evolves during the process of manufacture of Beer at fermentation stage which is a separate good under Central Excise Tariff Sub Heading No.28112190 of the First Schedule to Central Excise Tariff Act, 1985.
The Tribunal observe that it is during the process of fermentation that is integral to the manufacture of alcoholic liquor, the Carbon Dioxide, which is an excisable commodity, has been generated as the by-product which admittedly has been captively used by the appellant in further process.
It was observed that “alcoholic liquors for human consumption as that of Beer are out of the scope of Central Excise Act.Though the goods which are specified in First and Second Schedule to Central Excise Tariff Act, 1985 only are excisable goods: But alcoholic liquors including Beer find no mention in the said Schedules of Central Excise Tariff Act, 1985 because of the above Entry No.84. There is no denial that such alcoholic liquors are subject to Excise Duty under State Excise Law. The collection of duty and levy thereof is mentioned in Section 3 of Central Excise Act. The word “produced” or “manufacture” in said Section 3 has to be read as in relation to excisable goods resulting from such processes. Accordingly, it becomes clear that the provisions of Central Excise Act including the procedure for levy and collection of duty would apply only to such production or manufacturing process that result in production or manufacture of excisable good as mentioned in the Central Excise Act. Since the manufactured good in question is Beer, an alcoholic liquor for human consumption, the manufacturing process is out of the purview of Central Excise Act. Question of any intermediate product arising during such manufacturing process, irrespective find mentioned under Central Excise Tariff, cannot be made liable for Excise Duty under Central Excise Act.”
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