2004 (12) TMI 486 - AT - Central Excise

Summary

Issues Involved:
1. Allegation of clandestine manufacture and clearance of commercial LPG mix.
2. Determination of the place and process of mixing LPG components.
3. Validity of the extended period of limitation invoked.
4. Imposition of penalties and interest under the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Allegation of clandestine manufacture and clearance of commercial LPG mix:
The Department alleged that M/s. HALPG and M/s. ACIL engaged in the clandestine manufacture and clearance of commercial LPG mix under the guise of trading. The investigation revealed that orders were placed for propane and butane, which were mixed at the discharge manifold of the ship and transported to shore tanks. The Department contended that the companies misdeclared the imported goods and suppressed the manufacture of LPG mix to evade duty, leading to a show cause notice proposing recovery of Central Excise Duty along with interest and penalties.

2. Determination of the place and process of mixing LPG components:
The Commissioner of Central Excise concluded that both companies manufactured LPG mix during specific periods and confirmed the demand for duty. However, the Tribunal found that the mixing of liquefied gases was done either during the voyage or at the ship's manifold, not in the storage tanks. The Tribunal noted affidavits and letters from industry experts and shipping companies confirming that mixing at the ship's manifold is a common practice. The Tribunal further examined technical details, including boiling points and tank pressure design, to conclude that mixing in storage tanks was not feasible and would lead to tank failure.

3. Validity of the extended period of limitation invoked:
The extended period of limitation was invoked in the show cause notice, suggesting deliberate suppression of facts by the companies. However, the Tribunal's findings on the actual mixing process and the documentary evidence contradicted the Department's claims, weakening the basis for invoking the extended period.

4. Imposition of penalties and interest under the Central Excise Act, 1944:
The Commissioner imposed penalties equal to the duty demands confirmed, along with personal penalties on the directors and general manager of the companies. The Tribunal, however, set aside these penalties, given the conclusion that no manufacturing activity took place within the companies' premises. The Tribunal emphasized the overwhelming documentary evidence that supported the companies' claims and contradicted the statements relied upon by the Commissioner.

Conclusion:
The Tribunal accepted the appellants' contention that no manufacturing activity of mixing liquefied petroleum gases occurred in their storage tanks. The impugned order was set aside, and the appeals were allowed, nullifying the duty demands, penalties, and interest imposed by the Commissioner. The Tribunal's decision was based on substantial documentary evidence and technical analysis, which demonstrated that the mixing took place either during the voyage or at the ship's manifold, not in the storage tanks as alleged by the Department.