Excise Duty needs to be paid at value of the product in the form as it is cleared from the factory

The Hon’ble Customs, Excise & Services Tax Appellate Tribunal, Ahmedabad (“CESTAT”) in the matter of Reliance Industries Ltd. v C.C.E. & S.T.-RAJKOT [Final Order No. A/ 12472 /2021 dated October 28, 2021], held that the Excise Duty needs to be paid at value of the product in the form as it is cleared from the factory.

The Reliance Industries Ltd. (“the Appellant”) filed the current appeal being aggrieved of the Order-in-Appeal (“OIO”) dated November 19, 2020 passed by the Commissioner of Customs. The Appellant 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 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 EBMS on its clearance value.

The Appellant submits that the Revenue Dept has wrongly considered the issue as Central Excise duty is required to be paid on motor spirit since the motor spirit is used captively in the manufacture of EBMS. The Appellant 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. Moreover 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 Hon’ble CESTAT relied on the case of Siddharta Tubes Ltd. v. Commissioner of Customs and Central Excise [ APPEAL NO. 4247-4248 OF 2000]  in which it was held that the Applicant 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. The CESTAT further said that 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.

Online GST Course by Bimal Jain

Recorded: Certified Advanced GST Course

Course Details: Certificate of Participation will be Provided, Free GST Updates on E-mail, WhatsApp, Telegram for 1 Year, Background Material and PPT will be Provided on the downloadable basis, Total 21 Recorded Sessions (60 Hours), will be available for 120 hours or 60 Days whichever expires earlier.

For Registration:- https://cutt.ly/hxjl5Cu

Recorded: GST Course on Exports, Deemed Exports, SEZ, Imports, Merchandise Exports, Inverted Duty Structure (including Refunds)

Course Details: 6 Online Recorded Sessions of 2.30Hrs each with Background Material (BGM)

For Registration:- https://cutt.ly/pvw7mzl

For more details, Call: +91-8076563802, E-mail: intern@a2ztaxcorp.com, Web: www.a2ztaxcorp.in

DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose and for the reader’s personal non-commercial use. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon. Further, no portion of our article or newsletter should be used for any purpose(s) unless authorized in writing and we reserve a legal right for any infringement on usage of our article or newsletter without prior permission.

The Hon’ble Customs, Excise & Services Tax Appellate Tribunal, Ahmedabad (“CESTAT”) in the matter of Reliance Industries Ltd. v C.C.E. & S.T.-RAJKOT [Final Order No. A/ 12472 /2021 dated October 28, 2021], held that the Excise Duty needs to be paid at value of the product in the form as it is cleared from the factory.

The Reliance Industries Ltd. (“the Appellant”) filed the current appeal being aggrieved of the Order-in-Appeal (“OIO”) dated November 19, 2020 passed by the Commissioner of Customs. The Appellant 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 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 EBMS on its clearance value.

The Appellant submits that the Revenue Dept has wrongly considered the issue as Central Excise duty is required to be paid on motor spirit since the motor spirit is used captively in the manufacture of EBMS. The Appellant 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. Moreover 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 Hon’ble CESTAT relied on the case of Siddharta Tubes Ltd. v. Commissioner of Customs and Central Excise [ APPEAL NO. 4247-4248 OF 2000]  in which it was held that the Applicant 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. The CESTAT further said that 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.

Online GST Course by Bimal Jain

Recorded: Certified Advanced GST Course

Course Details: Certificate of Participation will be Provided, Free GST Updates on E-mail, WhatsApp, Telegram for 1 Year, Background Material and PPT will be Provided on the downloadable basis, Total 21 Recorded Sessions (60 Hours), will be available for 120 hours or 60 Days whichever expires earlier.

For Registration:- https://cutt.ly/hxjl5Cu

Recorded: GST Course on Exports, Deemed Exports, SEZ, Imports, Merchandise Exports, Inverted Duty Structure (including Refunds)

Course Details: 6 Online Recorded Sessions of 2.30Hrs each with Background Material (BGM)

For Registration:- https://cutt.ly/pvw7mzl

For more details, Call: +91-8076563802, E-mail: intern@a2ztaxcorp.com, Web: www.a2ztaxcorp.in

DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose and for the reader’s personal non-commercial use. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon. Further, no portion of our article or newsletter should be used for any purpose(s) unless authorized in writing and we reserve a legal right for any infringement on usage of our article or newsletter without prior permission.

The Hon’ble Customs, Excise & Services Tax Appellate Tribunal, Ahmedabad (“CESTAT”) in the matter of Reliance Industries Ltd. v C.C.E. & S.T.-RAJKOT [Final Order No. A/ 12472 /2021 dated October 28, 2021], held that the Excise Duty needs to be paid at value of the product in the form as it is cleared from the factory.

The Reliance Industries Ltd. (“the Appellant”) filed the current appeal being aggrieved of the Order-in-Appeal (“OIO”) dated November 19, 2020 passed by the Commissioner of Customs. The Appellant 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 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 EBMS on its clearance value.

The Appellant submits that the Revenue Dept has wrongly considered the issue as Central Excise duty is required to be paid on motor spirit since the motor spirit is used captively in the manufacture of EBMS. The Appellant 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. Moreover 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 Hon’ble CESTAT relied on the case of Siddharta Tubes Ltd. v. Commissioner of Customs and Central Excise [ APPEAL NO. 4247-4248 OF 2000]  in which it was held that the Applicant 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. The CESTAT further said that 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.

Online GST Course by Bimal Jain

Recorded: Certified Advanced GST Course

Course Details: Certificate of Participation will be Provided, Free GST Updates on E-mail, WhatsApp, Telegram for 1 Year, Background Material and PPT will be Provided on the downloadable basis, Total 21 Recorded Sessions (60 Hours), will be available for 120 hours or 60 Days whichever expires earlier.

For Registration:- https://cutt.ly/hxjl5Cu

Recorded: GST Course on Exports, Deemed Exports, SEZ, Imports, Merchandise Exports, Inverted Duty Structure (including Refunds)

Course Details: 6 Online Recorded Sessions of 2.30Hrs each with Background Material (BGM)

For Registration:- https://cutt.ly/pvw7mzl

For more details, Call: +91-8076563802, E-mail: intern@a2ztaxcorp.com, Web: www.a2ztaxcorp.in

DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose and for the reader’s personal non-commercial use. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon. Further, no portion of our article or newsletter should be used for any purpose(s) unless authorized in writing and we reserve a legal right for any infringement on usage of our article or newsletter without prior permission.