1985 (2) TMI 277 - AT - Central Excise

Summary

Issues Involved:
1. Whether the product in question (wash oil) being an intermediate product transferred from ESRC to Lube Refinery was not excisable under the Central Excises law.
2. Assuming that this could be considered excisable, whether no duty could be levied on wash oil used in the Lube Refinery in view of Rule 143-A of the Central Excise Rules, 1944.
3. Whether the impugned demand could not be raised under Rule 160 since that rule is not applicable and in any case whether the demands are barred by time.
4. Whether the doctrine of promissory estoppel would apply and could be invoked.

Detailed Analysis:

Point (i):
The core issue is whether wash oil, an intermediate product, is excisable. The appellants argued that wash oil is an intermediate product used in the manufacturing process and not sold in the market. They relied on various rulings emphasizing that marketability must be established before excise duty could be levied. However, the Departmental Representative countered that marketability was not the sole test and that wash oil had a distinct name, character, and use, making it capable of being sold. The tribunal concluded that wash oil is excisable because it meets the test of marketability, is mentioned in the First Schedule, and is capable of being sold, as evidenced by the price adjustments and accounting between ESRC and Lube Refinery.

Point (ii):
The appellants claimed that even if wash oil is considered excisable, no duty should be levied on it under Rule 143-A of the Central Excise Rules, 1944. This rule allows goods processed or manufactured in a refinery to undergo further manufacturing processes without being subject to duty. The tribunal agreed with the appellants, stating that Rule 143-A should be interpreted broadly to include integrated refining systems, even if the processes occur in different legal entities. The tribunal held that the use of wash oil in the Dewaxing Unit is part of the manufacturing process and thus eligible for the benefit of Rule 143-A.

Point (iii):
The tribunal examined whether the impugned demand could be raised under Rule 160 and whether the demands were time-barred. Rule 160 pertains to goods removed without permission, lost, or destroyed. The tribunal found that the appellants had followed the proper procedures, and the goods were not removed without permission or lost. Additionally, the show cause notice was issued beyond the permissible period, making the demand time-barred. The tribunal concluded that the show cause notice was invalid.

Point (iv):
The appellants argued that the doctrine of promissory estoppel should apply, given the assurances from the government. However, the tribunal held that there could be no estoppel against statutory demands. It cited various rulings stating that estoppel cannot be invoked to prevent the government from discharging its statutory duties. The tribunal concluded that the plea of promissory estoppel could not be sustained.

Conclusion:
The tribunal allowed the appeals, finding that the appellants are entitled to the benefit of Rule 143-A and that the show cause notice is void ab initio. The tribunal set aside the demands and all proceedings arising from them.