The Bangalore bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) in the case of JSW Steel Limited has held that permitting expansion of manufacturing facilities and complying with process design of supplier technology does not result in the manufacture of export gas and set aside the excise duty demand.
JSW Steel Limited, the appellant assessee is engaged in the manufacture of Hot Rolled Coils, Sheets, Plates and Direct Reduced Iron. The appellant claimed that it had become necessary to remove the impurities from the top gas which had emerged from the Reduction Shaft during the process of manufacture to ensure compliance with the directions issued by the Ministry of Environment and Forests.
The top gas, according to the appellant, is refuse like dross and skimmings which are merely scum thrown out in the manufacture of aluminium sheets and have been held not to be “manufactured” goods. The appellant believed that central excise duty could not have been levied on the export gas that emerged after the removal of impurities even if the export gas was supplied to Jindal Praxair Oxygen Company Pvt. Ltd. and JSW Energy Limited.
The demand has been confirmed by the orders impugned in these appeals holding that since the top gas that emerged from the Reduction Shaft had been subjected to a refining process for the removal of impurities, the process had resulted in changes that made the resultant export gas marketable which indicates that it was ‘manufactured’, an essential factor for levy of central excise duty.
A two-member bench comprising Justice Dilip Gupta, president and Ms.R Bhagya Devi, Member (Technical) observed that Top gas is refused and has not been manufactured. Merely because impurities have to be removed to comply with the conditions set out in the letter granting permission to the appellant to ensure the protection of the environment, the refuse will not change its character and will continue to be refused. It cannot be urged that a new product having a distinct name would emerge after removal of impurities and the product will continue to be refused.
The Commissioner also failed to appreciate that the calorific value of export gas is around 1830 kCal/Nm3, which is equal to 1429 kCal/kg, as is evident from a perusal of the agreements entered into by the appellant with Jindal and JSW. Learned counsel for the appellant pointed out that the calorific value of the said export gas is lower than most other waste such as medical waste, which has a calorific value between 4530-5745kCal/kg; domestic waste (recycled) which has a calorific value between 2379-3335 kCal/kg.
It was viewed that the process undertaken on the top gas for removal of impurities satisfied not only the conditions set out in the letter granting permission to the appellant for the continuation and expansion of its manufacturing facilities but also to ensure compliance with the process design of the Technology supplier would not result in “manufacture” of the export gas.
The CESTAT set aside the impugned order and held that the Commissioner was, therefore, not justified in confirming the demand.
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