Circular No. 246/80/96-CX dated 1/10/96

Government of India
Ministry of Finance
Department of Revenue Tax Research Unit,
New Delhi

Subject: Excise duty on gases falling under Chapter 28 and 29 escaping into atmosphere by flare system

I am directed to refer to erstwhile notification No. 75/94-CE dated 1.3.1984. Gases falling under Chapter 27, 28 or 29 produced in a factory and allowed to escape in the atmosphere by flare system or otherwise were exempt from excise duty vide S.No. 14 of the notification. The exemption was reviewed during the budget and it was felt that gases escaping in the atmosphere by flare system or otherwise may not be considered as "manufactured" products and amounting to clearance and as such there may not be any need for prescribing separate exemption from the duty and hence the reference to the above mentioned exemption was deleted. Accordingly, It has been clarified in para 11.8 of Budget Instructions sent alongwith Commissioner(TR)"s D.O. letter No. 334/14/95 dated 23rd July, 1996 that gases falling under Chapter 27 produced in a factory and allowed to escape in the atmosphere by flare system or otherwise may not be considered as manufactured products and amounting to clearance (refer para 18.1. of instructions on Central Excise notifications issued in connection with Union Budget 1996-97).

2. Para 11.8 of the Budget Instructions refers to goods falling under Chapter 27 and there is no reference to gases falling under Chapter 28 or 29. In this context, a question has been raised whether on similar basis gases falling under Chapter 28 and 29 produced in a factory and allowed to escape in the atmosphere are also not to be regarded as "manufacture". The answer to this lies in the affirmative. Accordingly, it is clarified that gases falling under Chapter 28 and 29 produced in a factory and allowed to escape in atmosphere are not liable to duty.

Sd/-
(R. Sekar)
Deputy Secy.(TRU)
Central Board of Excise & Customs

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