Per Mrs. Archana Wadhwa, M (J):

The common disputed question in all the three appeals is as to whether Lean Gas/Off Gas emerged during the process of manufacture of carbon black in the assessee's factory can be considered to be excisable or not? Since this is a common question in all the three appeals (two appeals filed by the appellant company, M/s. Phillips Carbon Black Ltd. and one filed by the Revenue), a common Order is being passed.

2. Appeal No. E-3417/89 is filed by the appellant firm against the Order-in-Appeal No. 99/Bol/88 dated 28.9.88 passed by the Commissioner of Central Excise and Customs (Appeals), upholding the Order of the Assistant Commissioner vide which Off Gas/Lean Gas has been held to be an excisable item classifiable under Sub-Heading: 2705.00 of the Central Excise Tariff attracting duty of excise at the rate of 12% adv.

3. Appeal No. E-4107/94 is against the Order of the Commissioner of Central Excise, Bolpur conveyed vide Order-in-Original No. V (15) 61-SH-2803.00/CE/BOL/92-9/94 and V (15) 18/SH-2705.00/CE/BOL/92-10/94 dated 26.9.94. Vide the said Order, duty of Rs. 614.730 lakhs and Rs. 415.967 lakhs has been confirmed against the appellant firm on Off Gas/Lean Gas emerged in the appellants' factory during the period from 1.3.86 to 31.3.88 and 1.4.88 to 28.2.89, on the ground that the same has been manufactured by the appellants and consumed captively by them as fuel. Apart from confirming the above demands of duties, penalty of Rs. 60 lakhs and 40 lakhs has also been imposed by the Commissioner.

4. In the third Appeal No. 302/95, Revenue has also challenged the same Order dated 26.9.94 passed by the Commissioner of Customs and Central Excise (Appeals), in terms of the provisions of Section 35E (1) of the Central Excises and Salt Act, 1944 and prayed for setting aside the same on the ground that Off Gas/Lean Gas produced by the respondent firm is not unusable in terms of the Board's Circular dated 28.12.1988. As such, in Appeal No. E-4017/94 filed by the appellant firm and in Appeal No. E-302/95 filed by the Revenue, both the appellants as well as the Revenue have prayed for setting aside the impugned Orders passed by the Commissioner of Central Excise and Customs (Appeals), Calcutta and by the Commissioner of Central Excise, Bolpur respectively, confirming the demands of duty and imposing penalties as above.

5. The appellants are mainly engaged in the manufacture of black carbon. The process for the manufacture of those carbon black is the original patented "Oil Furnace Process" for Philback production. In this process, raw-materials used are liquid hydrocarbons, principally aromatic refinery material, phenol extracts, coal tar, furfural extracts and high viscosity fuel as feed-stock. The hydrocarbon oil and air are fed into the reactor where the temperature is raised to 1250o to 1400oC causing decomposition of the unburnt hydrocarbon to carbon black which is in the shape of dense smoke. A water spray at the outlet-end of the reactor cools the hot reacted product. The carbon black leaves the reactor in the form of dense smoke which is further cooled by passing through heat exchangers and water-quench prior to filtering through glass fibre bags. The clean filtered gases are collected in the pipelines and through "Off Gas Blower" sent to the Off Gas combustion furnace for burning as fuel. The carbon black collected through Bag Filters and Cyclone Collectors are subsequently processed in the pulveriser and palletizer unit. The wet palletized material is finally dried at 250oC to 300oC in horizontal rotating dryer. The dried pallets are conveyed over to the product storage tank after passing over a magnetic separator. The clean filtered gases are collected in the pipe line and through `Off Gas Blower' sent to the Off Gas Combustion Furnace for burning as a fuel. This Lean Gas generated is mixture of a number of Gases like Carbon Dioxide, Carbon Monoxide, Oxygen, Hydrogen, Nitrogen etc. Such a Gas genera