UNION CARBIDE INDIA LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) The Petitioners have Petrochemical Company at Chembur, Bombay, where they manufacture low density polyethylene and various chemicals. The petitioners also manufacture acetylene black which is chargeable under Central Excise Tariff Item 64. Acetylene black is manufactured by the petitioners in a continuous, integrated and uninterrupted process by a stream of production using naphtha or another stream using calcium carbide and both continuing to produce acetylene black. In one continuous stream naphtha is thermally cracked in furnaces for production of ethylene and its ultimate conversion into low density polyethylene. During the continuous process of cracking of naphtha, several gases including acetylene gas are released. The petitioners have annexed Ex. "A" which a flaw chart showing the manufacturing process of acetylene black.

(2.) "Acetylene gas" was brought under the Central Excise Tariff Item No. 14H(vi) with effect from June 18, 1977 and attracted excise duty at the rate of 12% ad valorem. The as valorem rates have varied from time to time. The Excise Department classified the acetylene gas obtained in the petitioner's factory under Tariff Item No. 11A and totally exempted from payment of duty till December 21, 1967 under Notification No. 276/67. On June 22, 1977 the petitioners filed a classification list before the Central Excise Authorities showing acetylene gas as an excisable commodity and the list was approved on July 6, 1967. Before that date on July 1, 1977 the petitioners informed the Excise department that the acetylene gas which comes into existence in the uninterrupted process of manufacture of acetylene black is not liable for excise duty under Tariff Item No. 14H(vi).

(3.) On April 27, 1978, the petitioners filed a fresh classification list before the Excise authorities classifying acetylene gas as a non-excisable product. The petitioners also supplied reasons in support of the claim that the product was non-excisable. On August 7, 1978, the petitioners received a show cause notice from 2nd respondent stating that the gas manufactured by the petitioners was not exempt from duty and the refund claim made by the petitioners for Rs. 6,17,255.91 was liable to be rejected. After hearing the petitioners the 2nd respondent by his order dated October 18, 1978 rejected the claim for refund of the excise duty. The copy of the order is annexed as Ex. "L" to the petition. The petitioners received a further show cause notice on January 16, 1979 to show cause as to why the classification List filed by the petitioners showing acetylene gas as a non-excisable product should not be rejected. The classification list filed by the petitioners was rejected by an order dated May 29, 1979 after the petitioners filed their reply.