1983 (10) TMI 248 - AT - Central Excise

Summary

Issues:
1. Interpretation of Notification No. 35/73-C.E. regarding the use of toluene for concessional duty.
2. Compliance with Chapter X of the Central Excise Rules, 1944 for availing exemptions.
3. Allegations of misuse of concession and contravention of Central Excise Rules.

Analysis:

Issue 1 - Interpretation of Notification No. 35/73-C.E.:
The appeal was filed against a demand for duty on toluene obtained at a concessional rate under Notification No. 35/73-C.E. The Appellate Collector held that the toluene should have been used in the manufacture of thinners for paints to qualify for the exemption. However, discrepancies arose as the show cause notice alleged that the toluene was not used as thinners in the manufacture of paints. The notification exempts specified motor spirits if intended for use as solvents, diluents, or thinners for paints, varnishes, and lacquers. The appellant, Arti Paints, had declared their intention to use toluene for manufacturing thinners, which was granted a license by the Central Excise authorities. The Central Excise Tribunal found that the toluene was not used as prescribed by the notification, leading to the demand for duty.

Issue 2 - Compliance with Chapter X of Central Excise Rules:
The Assistant Collector concluded that Arti Paints did not use the toluene for the intended purpose as per the notification. He emphasized that the concession was available only to paint manufacturers and questioned the lack of proper accounting and use of the goods by Arti Paints. The Tribunal noted that Chapter X procedures were not followed correctly, as the toluene was not used as a solvent, diluent, or thinner for the manufacture of paints, as required by the notification. The Tribunal highlighted the error in allowing the concession to Arti Paints, who were only manufacturers of thinners, not paints, thereby indicating a failure in compliance with the Central Excise Rules.

Issue 3 - Allegations of Misuse and Contravention of Central Excise Rules:
The show cause notice alleged that Arti Paints misused the concession granted under Rule 192 of the Central Excise Rules. The Assistant Collector invoked Rule 196, holding the licensee responsible for failing to satisfy the Central Excise about the appropriate use of the material. However, the Tribunal found that the demand under Rule 196 could not be sustained, as the permission granted to Arti Paints was erroneous and not in accordance with the notification. Consequently, the Tribunal deemed the order of the Appellate Collector as unlawful and set it aside, allowing the appeal.

In conclusion, the Tribunal's judgment focused on the misinterpretation and non-compliance with Notification No. 35/73-C.E., the failure to adhere to Chapter X procedures, and the erroneous permission granted to Arti Paints, leading to the reversal of the demand for duty.