JUDGMENT : P.R. Ramachandra Menon, J. Imposition of Excise Duty, Interest and Penalty in terms of Sections 11A, 11AB and 11AC respectively of the Central Excise Act, 1944 pursuant to sale of 42262.5 Kg of Mercury, on closure of the Mercury Cell Processing plant in the year 2004 (where Caustic soda was being manufactured by the appellant Company), is the subject matter of consideration in this appeal. 2. The case projected by the appellant is that the Mercury procured and used in the Mercury Cell Processing Plant was without availing any CENVAT Credit and it is the said exact quantity that has been recovered/retrieved on closing the plant, which in turn has been sold and hence it would not attract any tax liability. It is stated that, in the Mercury Cell process, for production of Caustic Soda, Mercury acts only as a Cathode (in the process of Electrolysis) and by the end of the process, it is recovered without change; though minute quantity may disappear, which was being replenished by procuring Mercury, availing CENVAT Credit. It is also pointed out that the reliance sought to be placed on Rule 3(4) of the CENVAT Credit Rules, 2001 and the law laid down in Indian Organic Chemicals Ltd. vs. Collector of Customs & Excise [ 1996 (88)E.L.T. 644 (SC)] to fix the liability is not correct or applicable and further that Section 11 AC of the Central Excise Act, 1944 is not attracted to the case in hand. 3. The appellant is a Public Limited Company constituted under the relevant provisions of the Companies Act, 1956 and is engaged in the manufacture of Caustic Soda and such other products, falling under Chapter 28 of the Schedule to the Central Excise Tariff Act, 1985. Infact, the appellant was adopting the 'Mercury Cell Process' for manufacture of Caustic Soda, which is by way of 'Electrolysis', where Mercury acts as a Cathode. According to the appellant, the Brine Solution of Sodium Chloride, on Electrolysis, leads to mixing up of Sodium with Mercury (while acting as Cathode) and forms an Amalgam. On treating the Amalgam with water, Sodium Hydroxide is produced, in turn liberating Mercury from the clutches of Sodium. The Mercury so reclaimed is put to use again, as a Cathode for Electrolysis. On treating the Amalgam with water, Sodium Hydroxide is produced, in turn liberating Mercury from the clutches of Sodium. The Mercury so reclaimed is put to use again, as a Cathode for Electrolysis. The process continues in cycle, where slight reduction in the quantity of Mercury is resulted, which is an inevitable loss and the said extent is replenished by adding the requisite extent, procuring the same. The Mercury Cell Process Plant was decommissioned by the appellant in the year 2004 and a new process called "Membrane Cell Process" was introduced for manufacture of Caustic Soda, which was found to be better in all respects. By the time the change was introduced, there was a stock of 42262.5 Kg of reclaimed/used Mercury. As the said Mercury was no more needed, it was sold by the appellant on 22.09.2004. By virtue of the particular nature of transactions, it was not dutiable and it was accordingly, that the sale was effected without payment of duty. 4. Shortly after the sale of Mercury as above, Annexure A Show-Cause notice dated 31.08.2005 was issued by the authorities of the Department, asking to explain why duty amounting to Rs.17,78,406/- together with interest and penalty thereon shall not be mulcted upon the appellant, in terms of Sec.11A of the Central Excise Act, 1944 r/w. Section 11AB and Sec.11AC of the said Act and Rule 25 of the Central Excise Rules, 2002. On receipt of the said notice, a detailed reply by way of Annexure B dated 03.10.2005, was preferred by the appellant. After giving an opportunity of hearing, the Joint Commissioner passed Annexure C order dated 03.04.2006 rejecting the contentions and sustaining the demand for duty, interest and penalty. 5. On being aggrieved of Annexure C order, an appeal was preferred before the Commissioner of Central Excise, Customs and Service Tax (Appeals), who declined interference as per Annexure D order dated 28.12.2006. This made the appellant to move further, in turn filing second appeal before the Customs, Excise & Service Tax Appellate Tribunal, South Zonal Bench, Bangalore. After considering the matter, the Tribunal confirmed the impugned order and the appeal was dismissed as per Annexure E order dated 25.01.2016. This in turn is under challenge in the present appeal preferred under Section 83 of the Finance Act r/w. Section 35G of the Central Excise Act. 6. Heard Mr. After considering the matter, the Tribunal confirmed the impugned order and the appeal was dismissed as per Annexure E order dated 25.01.2016. This in turn is under challenge in the present appeal preferred under Section 83 of the Finance Act r/w. Section 35G of the Central Excise Act. 6. Heard Mr. P. Gopinath Menon, the learned counsel appearing for the appellant and Mr. P.R. Sreejith for the respondent/Department. 7. The learned counsel for the appellant submits that the original as well as the appellate/second appellate authorities have gone wrong in noting that there was manufacturing of Mercury by the appellant Company. The use of Mercury was only as a Cathode in the process of Electrolysis in connection with the manufacture of Caustic soda, by way of 'Mercury Cell Process'. The Sodium ions in the process of Electrolysis get associated with Mercury used as a Cathode and forms an Amalgam, which on treatment with water (Hydrolysis) will give rise to Sodium Hydroxide, liberating Mercury, which again is used as Cathode in the process to be repeated. Mercury was reclaimed with some impurities and it was the said Mercury, that was sold in the year 2004, pursuant to closure of the Mercury Cell Processing Plant, on switching over to 'Membrane Cell Process' for production of Caustic Soda. This being the position, no duty was liable to be paid. It is also pointed out that the Tribunal has gone wrong in placing reliance on the verdict passed by the Apex Court in Lord Chloro Alkali Ltd. vs. Commissioner of Central Excise [2015 (322)E.L.T. 823(SC)] to fix liability upon the appellant, in so far as it was a case where the assessee had availed CENVAT credit on the raw materials and as such, payment of duty on Mercury removed from the factory was held as exigible to duty. In the instant case, it is stated that no such CENVAT Credit was availed by the appellant/assessee and hence it stands on a different footing. The learned counsel also pointed out that, by virtue of the law declared by the Supreme Court in Indian Organic Chemicals Limited vs. Collector of Customs and Excise [ 1996 (88)ELT 622 (SC)], the appellant is not liable to pay Central Excise Duty on the clearance of contaminated Mercury, for the reason that there cannot be any manufacture of Mercury from Mercury. 8. 8. Reference made to Rule 3(4) of the CENVAT Credit Rules, 2004, Note 10 to Chapter 28 of the First Schedule to the Central Excise Tariff Act, 1985 and Note 1(a) thereunder is also stated as not correct or sustainable. It is further contended that imposition of penalty under Section 11AC of the Central Excise Act, 1944 is not correct or proper. Though penalty may be mandatory under section 11AC of the Act, the quantum of penalty to be imposed is discretionary and depends upon the facts and circumstances. In the instant case, it is contended that the penalty mulcted upon the appellant is grossly disproportionate to the nature of the offence alleged. 9. The learned Standing Counsel for the respondent submits with reference to the contents of the counter affidavit that there is absolutely no merit or bonafides in the stand taken by the appellant and that at no point of time, had the Department contended that there was manufacture of Mercury in the appellant's establishment. When the appellant stopped production of Caustic Soda in the Mercury Cell Processing Plant, they had a stock of 42262.5 kg of Mercury in the plant. In the Mercury Cell Processing Plant, Sodium, on reacting with Mercury results in the formation of an amalgam, will be subsequently subjected to Hydrolysis, liberating Mercury, on formation of Sodium Hydroxide. It is also an admitted fact that over and above the initial quantity of Mercury, the appellant had purchased Mercury at different points of time, availing CENVAT Credit and on closure of the Plant in the year 2004, there was a stock of 42262.5 kg of Mercury, which was sold by them on 22.09.2004 without payment of duty and without raising any invoice. This clearly amounts to suppression of material facts and it was in the said circumstance, that duty was mulcted in accordance with the provisions of law; also realising interest and penalty to the requisite extent. It is pointed out that the matter finalised by the Joint Commissioner, by passing Annexure C order, was after completing all procedural formalities and no prejudice has been caused to the appellant under any circumstance. The said order has been passed in conformity with the factual and legal position, which has been upheld by the appellate authority and also by the Tribunal by way of Annexures D and E orders respectively, which do not warrant any interference. 10. The said order has been passed in conformity with the factual and legal position, which has been upheld by the appellate authority and also by the Tribunal by way of Annexures D and E orders respectively, which do not warrant any interference. 10. As a matter of fact, the appellant is engaged in the manufacture of Caustic Soda and its by-products falling under Chapter 28 of First Schedule to Central Excise Tariff Act, 1985. The dispute is whether the use of Mercury, when cleared and sold by the appellant, would attract levy of duty under CETH 2805 or not (Mercury being classified under CETH 2805 and chargeable to duty at the rate of 16% as per the Central Excise Tariff Act). By virtue of the undisputed process deployed in the Electrolysis Plant for manufacture of Caustic Soda, Mercury does not get consumed and after Electrolysis, Mercury remains as Mercury, though with some impurities. Admittedly since the basic chemical properties/characteristics of Mercury do not get changed, it is still classifiable as Mercury itself and hence on clearance, it would attract duty under the same CETH 2805, at the rate of 16% of the actual value, which alone has been worked out and demanded with interest and penalty. It is also pointed out that the appellant had admitted in paragraph 4 of Annexure B reply to Annexure A Show Cause notice, that they had taken CENVAT credit on the Mercury purchased and as such, while selling the Mercury, they have to reverse the credit taken or pay the duty on the transaction value. 11. It is further pointed out that the contention now put forth during the course of hearing before this Court, that no CENVAT credit was availed by the appellant on the Mercury purchased, was never mooted before the Original/Appellate authorities and hence it is not liable to be considered. On the other hand, there is a clear admission as well, to the effect that the appellant had availed CENVAT credit on the purchase of Mercury. This being the position, it is stated as squarely covered by the verdict passed by the Apex Court in Lord Chloro Alkali Ltd. vs. Commissioner of Central Excise [2015 (322) E.L.T. 823(SC)]. 12. On coming across the sale of Mercury without paying any duty or without raising any invoice, Annexure A Show-cause notice was issued, referring to violation of the relevant provisions of law. 12. On coming across the sale of Mercury without paying any duty or without raising any invoice, Annexure A Show-cause notice was issued, referring to violation of the relevant provisions of law. The actual value of Mercury was worked out on the stock of 42262.5 kg at the selling price rate of Rs.260/- per kg plus loading charges of Rs.126787/- and computing 16% of the same, leading to fixation of duty payable as Rs.1778406/-. It was accordingly, that the said duty was demanded in terms of Sec.11A of the Central Excise Act, 1944, plus interest under Section 11AB of the said Act and also penalty of an equal amount, under Section 11 AC of the very same enactment. The nature of contentions raised by the appellant is discernible from Annexure B reply. The only contention is with reference to utilisation of Mercury only as a Cathode in the process of Electrolysis and that Mercury is unaffected in the whole process and retains its character as Mercury throughout. The 'penultimate paragraph' of the said reply is very relevant and hence it is extracted below : "The scheme of the Act contemplating the levy of duty of central excise on the manufacture and clearance of marketable goods from the factory of the manufacturer and in the instant case, there being no manufacture of mercury, no duty is payable at the time of removal of the said used mercury in accordance with the provisions of Central Excise Act. Also, though it may be a fact that credit of the mercury purchased periodically to make up for the quantitative losses in the electrolytic cell is taken by the company, the item removed is not the input as such, but used inputs which is in a different form from the input as it was at the time of taking credit. Therefore, it is amply discernible that no duty is payable at the time of the removal of the said used mercury". Since an opportunity of hearing was sought for before passing any order, such opportunity was given before passing Annexure C order, as discernible from 'paragraph 4' of the said order. Therefore, it is amply discernible that no duty is payable at the time of the removal of the said used mercury". Since an opportunity of hearing was sought for before passing any order, such opportunity was given before passing Annexure C order, as discernible from 'paragraph 4' of the said order. It was after detailed deliberation of the facts and figures, that a finding was arrived at, fixing the liability upon the appellant as per Annexure C order, which came to be upheld by the Appellate Authority as per Annexure D order, which is also a speaking order. On further challenge, the nature of dispute was taken note of by the Tribunal and it was thereafter, that interference was declined and the appeal was dismissed, as per Annexure E order, placing reliance on the verdict passed by the Apex Court in Lord Chloro Alkali Ltd. vs. Commissioner of Central Excise [2015 (322)E.L.T. 823(SC)]. 13. In this context, it will be worthwhile to make a reference to Rule 3 of the CENVAT Rules. The relevant portion of Rule 3(4) of the CENVAT Credit Rules, 2001 is extracted below: "(4) When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, the manufacturer of the final products shall pay an amount equal to the duty of excise which is leviable on such goods at the rate applicable to such goods on the date of such removal and on the value determined for such goods under section 4 or section 4A of the Act, as the case may be, and such removal shall be made under the cover of an invoice referred to in rule 7." It is true that the Tribunal has made an observation in Annexure E order (paragraph 5.2 of Annexure E order) that the appellant during hearing had submitted that they had not taken any CENVAT Credit in respect of the Mercury involved, but the facts on record did not throw any light whether the appellant had actually taken any CENVAT Credit or not. There is a case for the appellant that the Department had no such case to the contrary and no such proposition was put forth in Annexure A show-cause notice. There is a case for the appellant that the Department had no such case to the contrary and no such proposition was put forth in Annexure A show-cause notice. As it stands so, it is argued that the Tribunal has exceeded in its jurisdiction, which ought not to have been the proper course, in view of the law declared by the Supreme Court in Chevalier I.I. Iyyappan and another vs. The Dharmodayam Co., Trichur[ AIR 1966 SC 1017 ], it being an attempt to traverse beyond dispute and to bring in fresh facts. The said proposition does not impress this Court much, in so far as Rule 3(4) is quite categoric and the instance of violation of the relevant rules is clearly made out in Annexure A Show-Cause notice. There was no case for the appellant (on getting such notice and while submitting Annexure B reply) that the appellant had not availed CENVAT Credit on the input Mercury. On the other hand, as rightly pointed out by the respondent and as clearly discernible from the contents of the 'penultimate paragraph' of Annexure B (extracted above), the contention of the appellant was that "though it may be a fact that credit of the mercury purchased periodically to make up for the quantitative losses in the electrolytic cell is taken by the company, the item removed is not the input as such, but used inputs which is in a different form from the input as it was at the time of taking credit." 14. It is quite evident that the contention of the appellant was that the cleared Mercury was something different from the input Mercury and that availing of CENVAT Credit on the input Mercury was having no significance. Having admitted that the Company had availed the CENVAT credit on the input Mercury, by virtue of the categoric stipulations in the provisions of law, the appellant was bound to reverse the credit on sale of Mercury or pay the duty thereon; more so when the input Mercury and the cleared Mercury are one and the same, as now conceded in the appeal filed before this Court (Ground D and E), though a different stand is taken under 'Ground H' and elsewhere, which by itself is a pointer to the fact that the appellant did not have any consistent case at any time. Even though Mercury liberated may have some impurities, there is no change in character of Mercury. The appellant has conceded this fact in 'Ground J', when they contended as follows: "The fact that the used Mercury regained in the secondary cell had some impurities in it does not make the used Mercury any different from the Mercury originally fed into the Cell". The name, character and use of used Mercury are undisputedly the same as the Mercury originally fed into the Cell." From the above, it is clear that the case now projected before this Court by the appellant is diametrically opposite to the actual facts conceded by them in Annexure B reply to the show-cause notice, wherein they had conceded that the Company had taken CENVAT credit on the input Mercury. As it stands so, it is squarely covered by the verdict passed by the Apex Court in Lord Chloro Alkali Ltd. vs. Commissioner of Central Excise [2015 (322)E.L.T. 823(SC)] and the fixation of liability towards Duty, Interest and Penalty does not warrant interference. 15. Coming to the quantum of penalty imposed, it is true that an equal amount of duty has been fixed as penalty payable. No mitigating circumstance is brought to the notice of this Court as to the unhealthy financial status of the Company, if any, or such other adverse circumstances prevailing at the relevant time or even as on date. It also remains as an admitted fact that large quantity of Mercury was sold by the Company on decommissioning of the Mercury Cell Processing Plant in 2004 (42262.5 kg) and such sale was without any invoice. The appellant, being a Government Company, ought to have been more prudent and transparent in all its deeds, acting as a model to others. No materials are brought before this Court to interfere with the quantum of penalty as well. This Court finds that the law stands already declared by the Apex Court, which in fact has been applied to the given set of facts and circumstances, by the authorities concerned. The appeal is devoid of any merit and it is dismissed accordingly.