Flue Gas Generated During Manufacturing Metallurgical Coke Is Not A Manufactured Product, Tata Steel Not Liable To Pay Excise Duty: CESTAT

The Kolkata Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the flue gas generated during the course of manufacturing metallurgical coke is not a manufactured product and is also not marketable.

The bench of Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) has observed that the burden of proof that the product is marketable is on the department to prove that the flue gas in question is a marketable product. There is no market enquiry conducted by the department, in this case, to hold that the gas is marketable and freely sold. Therefore, the department has failed to prove the test of marketability also.

The appellant/assessee is in the business of manufacturing metallurgical coke. The coke so manufactured is cleared to Tata Steel Ltd., Jamshedpur, who use it in the blast furnace for manufacturing steel.

The department was of the view that the flue gas was generated and cleared to TPCL by classifying the flue gas as ‘Nitrogen’. The appellant is engaged in the manufacture of flue gas, a show cause notice was issued to the appellant by invoking an extended period of limitation alleging that as per the agreement with TPCL flue gas is being sold. Hence, it can be said to be marketable since it is capable of being bought and sold.

The assessee contested the matter, but the adjudicating authority confirmed the demand in holding that as per Rule 3(b) of the General Rules of Interpretation, flue gas should be classified as ‘Nitrogen’ under CTH 28043000 which gives flue gas its essential character. The flue gas is not a waste but is in fact a by-product produced during the manufacture of another product and was sold regularly and known in the market as a distinct entity.

The assessee contended that the flue gas is not being manufactured by the appellant. It is his submission that flue gas is automatically emitted during the process of manufacturing coke from coal by the Waste Recovery Method being followed by the appellant. It is not manufactured by the appellant but is a waste gas which arises inevitably without beyond the appellant’s control. Therefore, flue gas fails to satisfy the test to be fulfilled to get an excisable product i.e. ‘manufacture’.

The department urged that the flue gas which is generated in the process of manufacturing coke is a manufactured product and is marketable. It is having more than 80% contents of Nitrogen, therefore, the adjudicating authority has rightly demanded duty from the appellant.

The CESTAT held that the flue gas which is generated in the manufacture of coke is not a manufactured product, therefore, duty is not payable.

Case Title: M/s. Tata Steel Limited Versus Commissioner of Central Excise, Haldia

Case No.: Excise Appeal No.75422 of 2017

Date: 12/07/2023

Counsel For Appellant: B.L.Narasimhan

Counsel For Respondent: K.Chowdhury

Click Here To Read The Order