Case Law Details
Anheuser Busch InBev India Limited Vs Commissioner (CESTAT Delhi)
Appellant is manufacturing an alcoholic drink i.e. Beer which is not excisable under Central Excise Act but is excisable under Rajasthan State Excise Act. The show cause notices have been issued under Central Excise Act. This Act is a central legislation enacted pursuant to the legislative power conferred on the Parliament in terms of Article 246 read with Entry 84 of List-I of the Seventh Schedule to the Constitution during the relevant Entry No.84 read as follows:
“84. Duties of excise on tobacco and other goods manufacture or produced in India except (a) alcoholic liquors for human consumption and (b) opium, Indian hemp and other narcotic drugs and narcotics.”
The perusal makes it ample clear 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.
Coming to the second aspect of marketability, any good which is known to market attracts Excise Duty when cleared provided it has been manufactured. As already held above Carbon Dioxide (CO2) herein was not the product of manufacturing process. However, it is an admitted case that the appellants in addition of using CO2 captively were also purchasing CO2 for the same purpose of giving effervescence to the manufactured Beer. The marketability cannot be denied. Also Carbon Dioxide has a specific Tariff Entry under Central Excise Act cannot be denied. But the fact remains is that impugned CO2 is not a manufactured product, as held above, it fails to satisfy the dual test. Question of levy of Excise even under Central Excise Act does not arise.
Coming to the applicability of Notification No.67/95 dated 16.03.1995 based where upon the duty demand has been confirmed, it is observed that the said Notification was introduced with a view to exempt the manufacturer of the requirement of maintaining additional CENVAT records while captively consuming an intermediate product in a manufacturing process liable to duty under Central Excise Act. This Notification exempted manufacturers from the requirement of payment of duty on captively consumed products so long as they paid duty on the final product that was cleared from their factory premises. It is because of this reason that the proviso to the Notification indicates that if the final product cleared from the factory of manufacturer attracts a Nil rate of duty or is otherwise exempt from payment of duty then the benefit of exemption at the captive consumption stage will not accrue to such manufacturer. The product been non-excisable, the situation is not covered by the said Notification even by the proviso thereof. As is apparent that impugned Beer is excisable under State Law during manufacture whereof the impugned CO2 has inevitably evolved, it is held that authorities have wrongly held the said CO2 to be an exempted product or a product of Nil rate of duty under Central Excise Act. The final product herein i.e. Beer is actually non-excisable under Central Excise Act. The Notification being issued under the said Act is held to have wrongly applied in the present case. The Carbon Dioxide irrespective of being an independent product under Central Excise Tariff but in the present case, it is a product that has arisen inevitably in such a manufacturing process that does not attract the levy of Central Excise Duty under Central Excise Act question of imposing demand and confirmation of duty on Carbon Dioxide in given circumstances is highly unsustainable. The captive consumption of such CO2 was only to efficiently manufacture the non-excisable Beer/the final product. The orders confirming duty on the quantity of CO2 being captively used by the appellant is therefore liable to be set aside.
FULL TEXT OF THE CESTAT DELHI ORDER
The present appeal has been filed to assail the Order-in-Appeal No.03-04/2021 dated 15.01.2021. The facts in brief are as follows that:
M/s SAB Miller India Private Limited (presently known as Anheuser Busch InBev India Limited), 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. 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. Alleging that the appellants have contravened the provisions of Central Excise Rules, 2002 and that the benefit of Notification No.67/1995 dated 16.03.1995 was not available to the appellants for the final product (Beer) being not liable to duty that the duty on Carbon Dioxide so generated which was used captively was proposed to be recovered from the appellants along with interest and the proportionate penalties vide the show cause notice No.1202 dated 18.03.2015 and the show cause notice No.931 dated 09.11.2015 respectively.
2. The said show cause notices were first adjudicated by the Order- in-Original No.44-15/15-16 dated 30.03.2016 vide which the proposal was confirmed when the said matter was appealed, Commissioner (Appeals) vide Order-in-Appeal No.154-155/2018 dated 19.06.2018 had remanded back the matter for first carrying out the physical verification of Carbon Dioxide Plant of the appellant’s company and the process carried out on CO2 so generated before it was captively consumed and then to arrive at the findings. Pursuant to the said directions that the Order-in-Original No.2184 dated 28.06.2019 was passed again confirming the proposed demand under both the show cause notices. The Appeal against the said order has been dismissed vide the Order under challenge. Still being aggrieved, the appellant is before this Tribunal.
3. I have heard Shri Sachin Agarwal and Ms Richa Bhandari, Advocates for the appellant and Shri Mahesh Bhardwaj, Authorised Representative for the Department.
4. It is submitted on behalf of the appellant that the appellants 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. Accordingly, the operations of company are not governed by Central Excise Act. Further, the appellant has regularly been discharging its obligations under the law applicable upon them i.e. Rajasthan State Excise Act. It is submitted that any action for levying Excise Duty to whole or any part of the process of manufacture of Beer, therefore, would be violative of Article 246 of the Constitution of India. The appellant further submitted that similar proceedings were initiated against other units of the appellant in State of Andhra Pradesh and Kerala and Writ Petitions were filed before the respective High Courts. Hon’ble High Court of Kerala vide Order dated 02.02.2015 had granted Stay directing the Commissionerate to not to further proceed. The said Stay had been extended finally vide Order dated 02.04.2019. The Kerala High Court has held that irrespective of Carbon Dioxide may be an independent product mentioned under Central Excise Tariff but in the present case, it is a product that arises in a manufacturing process that does not attract the levy of Central Excise Duty under Central Excise Act. It is submitted that the confirmation of demand is highly unsustainable, impugned order accordingly is prayed to be set aside and the appeal is prayed to be allowed.
5. To rebut these submissions, it is submitted that Rule 9 of Central Excise Rules make an excisable intermediate good, even when used for captive consumption, liable to duty. It is further submitted that the duty would have been exempted on CO2 in terms of Notification No.67/1995 dated 16.03.1995 but since the CO2 is captively consumed for production of such final product which is not an excisable good, the exemption under said Notification is not available to the appellants. With these submissions learned DR impressed upon that there is no infirmity in the Order under challenge. The appeal is accordingly prayed to be dismissed.
6. After hearing both the parties, the considered opinion is as follows:
The appellants, admittedly, are engaged in manufacture of alcoholic liquor for human consumption namely Beer excisable under Rajasthan State Excise Act. 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. Another undisputed fact apparent on record is that the process of manufacture of Beer consists of following stages:
(i) Milling of salt.
(ii) Crushing of malt.
(iii) Addition of water.
(iv) Boiling of the mixture known as “wort”
(v) Fermentation at the stage the above said “wort” is passed into fermentation tanks.
(vi) Due to fermentation of said “wort” that formation of alcohol takes place however simultaneously Carbon Dioxide is released in gaseous state.
(vii) Another apparent fact is that the CO2 so released is then collected to get captively consumed for the effervescence in the so manufactured Beer.
7. The impugned both the show cause notices have been issued on the basis 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 of manufacturing Beer. The duty has been demanded based upon the Notification No.67/95 dated 16.03.1995 for the period w.e.f. March 2010 to December 2014 and January 2015 to June 2015. While adjudicating the said show cause notice, the authorities have taken a view that Carbon Dioxide fall under Tariff Sub Heading No.28112190 of the First Schedule to Central Excise Tariff Act, 1985 which is generated during the manufacturing of Beer and the same is captively used in further manufacturing process of Beer. Since the Beer is a non-excisable good and not covered under First Schedule to Central Excise Tariff Act, 1985. Hence the benefit of exemption under Notification No.67/95 is denied to the appellant thereby confirming the demand as was proposed under the aforesaid two show cause notices.
8. The above discussed facts make it ample clear that appellant is manufacturing an alcoholic drink i.e. Beer which is not excisable under Central Excise Act but is excisable under Rajasthan State Excise Act. The show cause notices have been issued under Central Excise Act. This Act is a central legislation enacted pursuant to the legislative power conferred on the Parliament in terms of Article 246 read with Entry 84 of List-I of the Seventh Schedule to the Constitution during the relevant Entry No.84 read as follows:
“84. Duties of excise on tobacco and other goods manufacture or produced in India except (a) alcoholic liquors for human consumption and (b) opium, Indian hemp and other narcotic drugs and narcotics.”
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