By TIOL News Service

MUMBAI, AUG 08, 2016: THE appellant, an EOU, purchased Heavy Duty Furnace Oil for use as fuel for their captive power plant. Out of this, some quantity of waste/ remnant was deposited at the bottom of the tank and was known as Furnace Oil Sludge.

The appellant sold the F.O. Sludge without payment of duty.

Not happy with this removal, the jurisdictional authorities issued a notice invoking para 7 of the Notification No. 53/97-CE dated 3.6.1997 and demanding duty on the said clearance considering the same as waste/remnants/scrap.

The lower authorities confirmed the demand.

Before the CESTAT, the appellant argued that the demand was confirmed by the original adjudicating authority by holding that para 7 of the Notification No. 53/97 had been violated. However, the Commissioner (Appeals) had clearly held that para 7 of the Notification N. 53/97 is not applicable. Nonetheless, he confirmed the demand by holding that the goods cleared are not waste/scrap but remnants of the furnace oil and duty is payable on the same. Inasmuch as such a confirmation is not tenable, emphasized the appellant.

These are the findings recorded by the Commissioner(A) -

"I have carefully gone through the case records and the various submissions made by the appellants. I find that appellants import furnace oil and the remnants of furnace oil get deposited at the bottom of the storage tanks. The duty payable at the time of clearance of this sludge is in dispute. Para 7 of Notification No. 53/97 dated 3.6.97 lays down the manner as to how the articles (including rejects, waste scrap material arising during the course of manufacture) out of duty free imported goods are to be disposed off for home consumption, if not exported out of India. Since the furnace oil sludge, under dispute, is a waste arising before furnace oil is issued for consumption in captive power plant, para 7 of Notification No. 53/97-Cus does not apply. However, as part of the imported goods contained in furnace oil sludge were not put to use as required under Notification No. 53/97-Cus dated 3.6.97, the exemption is not available. I, therefore, do not find any provisions to grant exemption to the furnace oil sludge and therefore customs duty is payable on the same. There is therefore no merit in the appeal."

The Bench observed -

"…We find that the Commissioner (Appeals) has clearly held that the charges made in the show-cause notice cannot be upheld. He has, however, confirmed the demand on a totally new ground not alleged in the show-cause notice. We observe that the Commissioner (Appeals) cannot travel beyond the show-cause notice and therefore, the Order-in-Appeal is set aside and the appeal is allowed."

In passing: Perhaps, since the order passed by the Commissioner(A) was in favour of the department, none thought about reviewing it!

(See 2016-TIOL-1989-CESTAT-MUM)