Judgment

PARIPOORNAN, J.

( 1 ) THE appellant is a small scale industry. It carries on the business of manufacture of liquid Carbon Dioxide (Co2) conforming to ISI Grades. The factory is situated at Kalamassery in Ernakulam District, Kerala State. The first respondent in this appeal is the Collector of Central Excise, Cochin. The second respondent is the fertiliser and Chemicals Travancore Limited (FACT ). The appeal is filed under Section 35l (b) of the Central Excise and Salt Act, 1944, against the order dated 18-3-1986 passed by the Central Excise and Gold (Control) Appellate Tribunal, New Delhi substantially modifying the order passed in the appellants favour by the Appellate Collector of Central Excise, Madras dated 18-6-1982. The Appellant Collector set aside the order of the Assistant Collector rendered on 2-2-1982 holding that the appellant is not entitled to the benefit of exemption notification No. 7/65-Ce dated 30-1-1965.

( 2 ) THE facts of this case are in a narrow compass. The appellants manufacture carbon di-oxide of ISI specification out of raw carbon dioxide gas received through pipe line from M/s. FACT Ltd. , Eloor. The raw carbon dioxide is odourous and has a purity of less than 99 Per Cent and contains moisture above 0. 1 Per Cent. Such raw carbon dioxide is subjected to various processes in order to remove traces of moisture, oxide of sulphur etc. The gas is then dried and fed into Rotary Booster compressor to boost the pressure to a very high point and then passed through activated carbon to remove final traces of oil and also to deodourise. The pure gas obtained after these processes is liquified and filled in cylinders and removed therefrom for making further products or for sale.

( 3 ) AT the relevant time, Carbonic Acid (carbon dioxide) was specified in Entry No. 14h (iv) of the Ist Schedule to the Central Excise Act, 1944 and was assessable to duty of excise at the rates in force from time to time. The appellants had taken out L. 4 licence for the manufacture of carbon dioxide. They were permitted to remove waste gas generated from M/s. Fertiliser and Chemicals Travancore Ltd. , in view of paragraph 2 of Notification No. 7/65 dated 30-1-1965 after taking out L. 6 licence. The licence was granted on 11-3-1977. Under notification No. 7/65, carbon dioxide falling under item 14h of the Central Excise Tariff was exempted from the whole of the duty of excise leviable thereon, provided it was used for any "industrial purpose" and subject to the procedure in Chapter X of the Central Excise Rules and it is common ground that such procedure was followed by the appellant by taking out L. 6 licence. The appellants had given an undertaking that they would pay the duty on the carbon dioxide received for processing (raw carbon dioxide-waste gas) in case it was subsequently decided that they were not entitled to receive the said carbon dioxide free of duty under Notification No. 7/65.

( 4 ) THE appellants were served with a show-cause notice dated 20-11-1978 to explain why L. 6 licence granted to them (to receive impure carbon dioxide gas (waste gas) by pipe line from M/s. FACT.) and also 4 licence for the manufacture of carbon dioxide (or liquid carbonic acid) should not be revoked and why duty of Rs. 8,92,695. 60 along with SED Rs. 19,823. 10 should not be demanded from them for the period from March 197 7/09/1978 under Rule 10 of the Central Excise Rules, 1944.

( 5 ) THE plea of the Revenue was that the appellant was not entitled to receive Co2 gas (raw carbon dioxide) free of duty under Notification No. 7/65 as they are not using the same for any "industrial purposes" involving any product other than the self-sale of CO2 which was received by them.

( 6 ) AFTER hearing the appellant, the Assistant Collector of Central Excise passed an order on 2-2-1982 holding that the appellants are not eligible for the benefit of the Notification No. 7/65 dated 30-1-1965 and in consequence the Superintendent of Central Excise by p