The Bangalore Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the Zero Air/Synthetic Air is classifiable under Chapter Heading 2804 of Central Excise Tariff Act, 1985 (CETA, 1985).
The bench of Dr. D.M. Misra (Judicial Member)and R Bhagya Devi (Technical Member) has observed that the gas cleared from the factory of the appellant was not Compressed Air but Zero Air/Synthetic Air which is classifiable under Chapter Heading 2804 of CETA, 1985.
The bench noted that the process of manufacture of Synthetic Air and Compressed Air are different. It is stated that they purchased Zero Air from the appellant and categorically stated that the said Zero Air contains 78% of Nitrogen, 20.8% of Oxygen and 1.2% of Argon and they do not use the same as Compressed Air in or in relation testing their manufacture of their finished products, since Compressed Air cannot be used in Gas Chromatograph test. Besides, composition of Compressed Air is not of required standard for Gas Chromatograph test.
Background
The appellant/assessee is in the business of manufacture of excisable goods viz. industrial gases, medical grade Oxygen etc. falling under Chapter 28 of the Central Excise Tariff Act, 1985.
On the basis of intelligence, investigation was initiated against the appellant as they were clearing ‘synthetic air’ as ‘zero air’ without payment of duty by misclassifying the same under Chapter Sub-heading 28510030 of CETA, 1985. Consequently, the officers visited their premises on 26.10.2007 and retrieved the records from the premises.
On completion of investigation, a show-cause notice was issued to them on 02.01.2008 demanding duty for the period December 2002 to June 2007 on the quantity of Zero Air cleared from their factory without payment of duty along with interest and penalty. On adjudication, the demand was confirmed with interest and penalty. They filed an appeal before the learned Commissioner(Appeals) who in turn rejected their appeal.
Arguments
The assessee contended that the distinction between Zero air and Synthetic air depends on the process of manufacture and since Zero air is obtained from the natural air by way of compression and removal of Carbon di-Oxide, moisture, dust into pure air the difference between these two products is that Zero air contains Argon as is available in natural air whereas Synthetic air contains traces of Argon. There is no misstatement or suppression of facts as the appellant has correctly classified the product Zero air.
The department contended that the customers of the appellant had categorically stated that the Zero air purchased by the customers from the appellant cannot be equated with compressed gas, as compressed gas cannot be used for the purpose of lab test.
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Conclusion
The tribunal while dismissing the appeal held that the clearance of Zero Air classifying the same under Chapter Heading 2851 as Compressed Air itself involved suppression of facts. Therefore, invocation of an extended period is justified.
Case title: M/s. Bhuruka Gases Limited v/s The Commissioner of Central Excise
Citation: Central Excise Appeal No. 2746 of 2011
Counsel for the Petitioner: B. Venugopal
Counsel for the Respondent: K. Vishwanatha
Date: 27.09.2024
