In Excise Appeal No.75422 of 2017 -CESTAT- CESTAT (Kolkata) rules in favour of Tata Steel; ‘Flue Gas’ generated during metallurgical coke manufacturing ‘Not Marketable’ & cannot be classified as ‘Nitrogen’
Members Ashok Jindal (Judicial) & K. Anpazhakan (Technical) [12-07-2023]

Read Order: M/s. Tata Steel Limited v. Commissioner of Central Excise, Haldia

Chahat Varma

New Delhi, August 21, 2023: In a significant ruling, the Kolkata bench of the Customs, Excise and Service Tax Appellate Tribunal has provided a favourable verdict for M/s. Tata Steel Limited (appellant), asserting that the flue gas generated during the course of metallurgical coke manufacture, cannot be deemed a manufactured product, was not marketable, and cannot be classified as Nitrogen.

The case revolved around an agreement between the appellant and Tata Power Company Ltd. (TPCL) for the supply of flue gas, which TPCL intended to employ for electricity generation through harnessing its heat. The appellant was served with a show cause notice, alleging that due to the agreement with TPCL, the flue gas was essentially being sold. Consequently, it was argued that the flue gas qualified as a marketable product, as it could be bought and sold. The Adjudicating Authority supported the demand by invoking Rule 3(b) of the General Rules of Interpretation. This rule classified flue gas as 'Nitrogen' under CTH 28043000. The authority determined that flue gas was not a waste product; instead, it was a byproduct formed during the manufacturing process of another item. Additionally, it was contended that flue gas was regularly sold and recognized in the market as a separate entity.

The coram of Ashok Jindal (Judicial) and K. Anpazhakan (Technical)observed that the flue gas was generated during the manufacturing of coke and was not a product that the appellant had deliberately manufactured. Instead, it was an unavoidable waste gas produced beyond the appellant's control.

The bench further noted that the mere fact that the appellant had sold the flue gas as per the agreement with TPCL did not automatically render it marketable. The bench emphasized that the burden of proof to establish marketability rested with the revenue, and without evidence of marketability, the classification could not be upheld.

Additionally, the bench rejected the classification of the gas as Nitrogen based solely on its content, emphasizing that Rule 3(b) of the General Rules of Interpretation should not be applied without proper evidence. The absence of evidence indicating that the flue gas can be sold as Nitrogen led the bench to conclude that it couldn't be classified as Nitrogen.