2007 (2) TMI 21 - AT - Central Excise

EOU Revenue alleged that the goods manufactured from the imported raw material are not eligible for the benefit of notification exemption After considering the detail authority allow the appeal with consequential relief

Summary

Issues:
Entitlement to Notification No. 8/97-C.E. for Aluminium Hydroxide and Copper sludge clearance.

Analysis:
The appellant, a 100% EOU, manufactured Copper Phthalo Cyanine Green and Blue along with Aluminium Hydroxide. The raw materials for the Green Plant included Aluminium Chloride, cupric chloride, crude CPC Blue, Chlorine, and caustic soda. Mother Liquor emerged during the CPC Green production, treated to obtain Copper Sulphide and Aluminium Hydroxide. The appellant sold Copper slurry and Aluminium Hydroxide powder in DTA under Notification No. 8/97-C.E. Revenue contended that goods manufactured from imported raw materials were not eligible for the exemption. A show cause notice was issued for duty demand, penalty, and interest. The Commissioner confirmed the demand, imposed penalties, and held the Senior Manager liable. The appellant challenged the order on merits and limitation.

The main issue was whether the appellants were entitled to the Notification for Aluminium Hydroxide and Copper sludge clearance. The appellant argued that the Mother Liquor, an indigenously manufactured by-product, was used to produce Aluminium Hydroxide and Copper sludge, meeting the Notification's conditions. They relied on tribunal decisions, which were overruled by a Larger Bench decision. The Larger Bench held that goods produced in EOU using imported raw materials were not entitled to the Notification's benefit. The Tribunal found no merit in the appellant's contentions, upholding the demand on merits.

Regarding limitation, the appellant argued no wilful misstatement or suppression existed, citing conflicting opinions on the Notification's eligibility. The Tribunal held that the demand beyond the normal limitation period was barred due to conflicting opinions. As the law was clarified by the Larger Bench, the appellant was not charged with wilful misstatement. The Commissioner did not show any positive attempt by the appellant to withhold vital information. Thus, the demand beyond the normal limitation period was deemed unsustainable. Penalties were set aside due to no suppression or misstatement.

In conclusion, the appeal was allowed on limitation, with the demand confirmed within the normal limitation period. Penalties imposed were set aside. The appeal of the Senior Manager was unconditionally allowed. The judgments were pronounced on 21-2-2007.