2003 (12) TMI 565 - AT - Central Excise

Summary

Issues:
1. Clearance of chemicals to a L-6 holder under a CT-3 certificate not covered under Notification No. 43/88.
2. Confirmation of demands under Rule 9(2) and penalty on the L-4 license holder.
3. Interpretation of CT-2 certificate mentioning use of Orthophenylene Diamine (OPD) in the manufacture of Quinolphos.
4. Liability of duty on the L-6 holder and imposition of penalty on the L-4 holder.

For the first issue, the case involved the clearance of chemicals to a L-6 holder under a CT-3 certificate, which was later found not covered under Notification No. 43/88. The lower authority confirmed demands under Rule 9(2) on the L-4 license holder along with a penalty of Rs. 1 lakh under Rule 173Q. The Commissioner (Appeals) found that the permission given to the L-6 holder was incorrect, and the duty exemption under Notification No. 43/88 did not apply. However, it was established that the contravention was by the L-6 holder, not the manufacturer, absolving the L-4 holder of liability. The Tribunal held that the responsibility for duty shifts to the buyer after clearance, and the L-6 holder, who undertook to use the goods for a specific purpose, was responsible for duty payment.

Moving on to the second issue, the Commissioner (Appeals) correctly found that the misuse, if any, occurred at the L-6 holder's end, and any demands should be made on the L-6 holder, not the L-4 holder. As the grounds for the Revenue's appeal were not valid, the demands and penalties imposed on the L-4 holder were rightly set aside. Therefore, the Tribunal rejected the Revenue's appeal, affirming the decision of the Commissioner (Appeals) in this regard.

Regarding the interpretation of the CT-2 certificate mentioning the use of Orthophenylene Diamine (OPD) in the manufacture of Quinolphos, the Tribunal emphasized that the basic condition of the notification was satisfied as the OPD was intended for use in the manufacture of the product falling under a specific chapter. The Tribunal differentiated this case from previous decisions by highlighting that the misuse, if any, was attributable to the L-6 holder, not the manufacturer, and thus, the duty liability rested with the L-6 holder.

In conclusion, the judgment clarified the allocation of duty liability and penalties between the L-6 and L-4 holders based on the misuse of permissions and certificates. The Tribunal upheld the decision of the Commissioner (Appeals) to set aside the demands and penalties imposed on the L-4 holder, emphasizing that any liability should be directed towards the L-6 holder for any misuse or contravention of regulations.