JSW Steel Limited Vs Commissioner of Central Excise (CESTAT Bangalore)
CESTAT Bangalore held that top gas 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.
Facts- JSW Steel Limited 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. It is for this reason that 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 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.
Conclusion- Held that top gas is refuse 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 refuse. 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.
Held that the process undertaken on the top gas for removal of impurities to satisfy not only the conditions set out in the letter granting permission to the appellant for continuation and expansion of its manufacturing facilities but also to ensure compliance of the process design of the Technology supplier would not result in „manufacture‟ of the export gas. The Commissioner was, therefore, not justified in confirming the demand.
FULL TEXT OF THE CESTAT BANGALORE ORDER
JSW Steel Limited, Bellary1 is engaged in the manufacture of Hot Rolled Coils, Sheets, Plates and Direct Reduced Iron. The appellant claims 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 of 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 be „manufactured‟ goods. It is for this reason that the appellant believed that central excise duty could not have been levied on the export gas that emerged after removal of impurities even if the export gas was supplied to Jindal Praxair Oxygen Company Pvt. Ltd.2 and JSW Energy Limited3. 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 removal 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.
2. It needs to be noted that five show cause notices dated 26.02.2010, 16.08.2010, 23.08.2011, 02.05.2012 and 15.11.2012 had been issued to the appellant for the period from February 2009 to June 2012. These show cause notices were adjudicated by orders dated 21.05.2010, 30.11.2010, 25.01.2012, 24.12.2012 and 22.06.2015 respectively and it is these orders which have been assailed in the aforesaid five Excise Appeals.
FACTS
3. The appellant is engaged in the manufacture of Hot Rolled Coils, Sheets, Plates and Direct Reduced Iron falling under Chapter 72 of the Excise Tariff Act, 19854. Direct Reduced Iron can be manufactured using Blast Furnace Technology as also Corex Technology. The appellant, during the relevant period from February 2009 to June 2012, had two functional C-2000 Corex Modules that operated on patented technology of VAI, Austria. The two reactors of the Corex Module are Reduction Shaft and Melter Gasifier.
4. In the Reduction Shaft, the volume of which is 600m3, Iron ore, pellets and additives (limestone and dolomite) are continuously charged through a lock hopper system located on top of the Shaft. The same reacts with Carbon Monoxide and Hydrogen content of the reduction gas generated in the Melter Gasifier for reducing the Iron ore to Iron. The said reduction gas has a temperature of around 8500C and a pressure of over 3 bar gauge. The same is injected in the Reduction Shaft through a Bustle located 5 meters above the bottom of the Reduction Shaft. The composition of the reduction gas is broadly as follows:
