Relief to Reliance Industries: Excise Duty needs to be paid on Product in the form it is cleared at Value from Factory, rules CESTAT [Read Order]

In a major relief to Reliance Industries, the Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that the Excise Duty needs to be paid on the Product in the form it is cleared at value from the factory.

The appellant, Reliance Industries, is engaged in the manufacture of Motor spirit falling under Central Excise Tariff Heading 27.10 at its refinery in Jamnagar. The said motor spirit was being cleared as such or after the addition of 5% duty paid ethanol in the later situation 5% duty paid ethanol and 95% manufactured motor spirit are cleared by loading into road tankers by two separate pipelines in the refinery. The motor spirit is blended with Ethanol for the purpose of reducing Carbon Monoxide and consequent air pollution. The ethanol-blended motor spirit (EBMS) was being cleared by the appellant to comply with requirements laid down by the Ministry of Petroleum and Natural Gas. The appellant paid the duty at the time of removal of ethanol-blended motor spirit on its clearance value.

Mr. Vipin Jain, counsel appearing on behalf of the appellant submits that the respondent has wrongly considered the issue before him as Central Excise duty is required to be paid on motor spirit since the motor spirit is used captively in the manufacture of EBMS. He submits that the process of blending 5% ethanol with 95% motor spirit to produce EBMS does not amount to manufacture therefore when the appellant has paid the duty on the higher value i.e. on the value of EBMS, no duty can be demanded on the unblended motor spirit.

It is a settled law that merely because a product is appearing in the tariff or in an exemption notification that itself is not sufficient to hold that it is the result of the process of manufacture.

The coram of Judicial Member Ramesh Nair and Technical Member, Raju held that the assessee sought to pay duty only at the stage of black pipe whereas, they have cleared the goods in the form of galvanized pipe on the ground that the conversion from black pipe to galvanized does not amount to manufacture however, it was held that the duty has to be paid on the galvanized pipe and not on the black pipes on the value at which such galvanized pipe is cleared from the factory. An exactly similar situation prevails in the present case that the appellant has correctly paid the duty on the EBMS and they were not required to pay duty on motor spirit. It is also to be noted that the appellant had paid duty on EBMS instead of motor spirit and that they paid higher duty as compared to the duty payable on motor spirit therefore, there is no loss of revenue by paying the duty on EBMS.

“The payment of duty by the appellant on EBMS is correct and legal and they are not required to pay any duty again on the motor spirit,” the CESTAT said.

Support our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.