Reliance Industries Ltd. Vs C.C.E. & S.T.-Rajkot (CESTAT Ahmedabad)
Appellant blended 5% ethanol with 95% motor spirit to form EBMS – such blending doesn’t amount to manufacture – final duty payable on EBMS.
Facts- The appellant is engaged in the manufacture of Motor spirit. 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 requirement 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.
It was alleged that there was no exemption on EBMS for the period 01.07.2004 to 07.08.2004. Further it was also alleged that circular dated 02.01.2003 uses the word manufacture for the process of blending 5% ethanol with 95% motor spirit to produce EBMS.
Conclusion- We observed that the activity of blending does not amount to manufacture therefore, motor spirit cannot be treated as a intermediate product but the motor spirit in the form of EBMS is a final product for the reason that there is no difference between the unblended motor spirit and EBMS from Central Excise Tariff therefore, reference to Notification No. 67/95-CE is also not relevant.
We are of the clear view that blending of 5% ethanol with 95% motor spirit which made the product EBMS does not amount to manufacture.
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 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.
In view of our above discussion and findings, we are of the clear view that 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.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The brief facts of the case are that the appellant are 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 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 requirement 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. The appellant was issued a Show Cause Notice dated 09.06.05 wherein, it was alleged that the process of blending ethanol with motor spirit amounts to manufacture as:
(a) Notification No. 63/2003-CE specifically exempted EBMS from excise duty and that there was no exemption on EBMS for the period 01.07.2004 to 07.08.2004.
(b) Circular F.No. 366/5/2002-TRU dated 02.01.2003 uses the word manufacture for the process of blending 5% ethanol with 95% motor spirit to produce EBMS.
1.1 Further, that unblended motor spirit had been used captively by appellant to manufacture a new product namely EBMS. The benefit of captive consumption under Notification No. 67/95-CE dated 16.03.1995 was not available to motor spirit. Accordingly, it was proposed to demand excise duty on the motor spirit which was subsequently cleared as Ethanol blended motor spirit on payment of duty. The Show Cause Notice was adjudicated vide Order-In-Original dated 24.02.2006 whereby, the demand of excise duty was confirmed along with interest and penalty. The appellant being aggrieved by the said Order dated 24.02.2006 filed an appeal No. E/1758/06 before this tribunal which remanded the matter back with a direction to the original Adjudicating Authority to examine the effect of the notification No. 25/2006-CE dated 20.11.06 and also to decide the issue of manufacture in light of the CBEC Circular dated 13.12.94. The adjudicating authority, however, vide order dated 2.11.2010 once again confirmed the demand of duty along with interest and penalty primarily by placing reliance on a draft circular F.No.84/04/2007-CX hosted on website of CBEC in November, 2007 which purported to withdraw the CBEC Circular of 13.12.94 by stating that the process of mixing additives in normal petrol/diesel results in the emergence of new product having a distinct name, character and uses and should amount to manufacture. The appellant filed an appeal No. E/286/2011 before this tribunal in second round, the tribunal remanded the matter back to the original adjudicating authority for fresh consideration on the ground that reliance placed by the adjudicating authority on the draft circular hosted on CBEC website in 2007 which was never issued was not sustainable. This tribunal also observed that as the above circular was not issue therefore, circular no. 83/83/94-CX dated 13.12.94 issued by the board which held that blending of Ethanol with motor spirit does not amount to manufacture continued to be valid. The adjudicating authority however, vide the impugned order dated 19.11.20 once again confirmed the demand of duty along with interest and penalty. The impugned order contended that the factum of manufacture of EBMS further, emerged from the exemption notification No. 62/2002-CE, 63/2002-CE, 64/2002-CE all dated 31.12.2002.
1.2 As regard the notification No. 25/2006-CE (NT) dated 20.11.2006 issued in exercise of the power under Section 11C is concerned, it held that as the notification exempted EBMS from payment of Central Excise Duty for the period from 01.07.20004 to 03.08.2004, it is clear that the EBMS has been considered as an excisable/dutiable and manufacture product under the provision of Central Excise Act, 1944.
02. Shri Vipin Jain, learned counsel along with Ms. Dimple Gohil, Advocate 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 have paid the duty on the higher value i.e. on the value of EBMS, no duty can be demanded on the unblended motor spirit. He submits that there is no difference in the motor spirit and EBMS as both are treated as motor spirit and falling under the same CETH 27.10 and both conform to BIS Specification i.e. BIS specifications 2796 for motor spirit. He submits that this is the third round of appeal. In the same case earlier the hon’ble Tribunal remanded the matter. However, the impugned order has travelled beyond the scope of such remand by stating that CBEC Circular dated 13.12.19 refers to methanol whereas, the product in question in the present case was ethanol. He failed to appreciate that the said circular was considered by the Hon’ble Tribunal as well and found to be relevant therefore, it was beyond the scope of remand for the respondent to consider and adjudicate upon the applicability or otherwise of the said circular. He further submits that the mere fact an exemption notification existed (albeit for another period) for EBMS cannot be itself mean that the process of blending of ethanol with motor spirit tantamounts to manufacture.
2.1 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. In this regard he placed reliance on the following judgments:
