1985 (4) TMI 309 - AT - Central Excise

Summary

Issues:
1. Interpretation of Notification No. 35/73 regarding concessional rate of duty for toluene/benzene.
2. Compliance with conditions of L-6 Licence and Notification No. 35/73.
3. Legality of the show cause notice dated 5-1-1982.
4. Application of the 3rd proviso to Section 36(2) of the Central Excises and Salt Act, 1944.

Analysis:

Issue 1: Interpretation of Notification No. 35/73
The case involved M/g. Amber Paints, Bombay, who obtained an L-6 Licence for concessional duty on toluene/benzene under Notification No. 35/73. The notification exempted duty on products used as solvents for paints/varnishes. The dispute arose when Amber Paints sold excess solvent to other parties. The Appellate Collector held that solvent/thinner had to be used for paints/varnishes, regardless of the location of use, and only toluene in 400 litres was chargeable to differential duty.

Issue 2: Compliance with L-6 Licence and Notification No. 35/73
The Central Government issued a show cause notice to Amber Paints questioning the Appellate Collector's order. The Government tentatively viewed the order as incorrect, stating that the concession was only for licensees using goods in their own factory. Amber Paints contended that the order was legal. The Tribunal was tasked with reviewing this matter transferred under Section 35-P of the Central Excise and Salt Act, 1944.

Issue 3: Legality of show cause notice
A preliminary objection was raised on the show cause notice dated 5-1-1982 being time-barred. The Respondents argued it was beyond the six-month period for review proceedings. The Departmental Representative contended that Rule 196 had no time limit for such notices, citing relevant case law and tribunal decisions.

Issue 4: Application of the 3rd proviso to Section 36(2)
The Central Government issued a notice under Section 36(2) more than six months after the Appellate Collector's order. The 3rd proviso to Section 36(2) requires notice within the time limit specified in Section 11A for cases of non-levy or short-levy of duty. However, in this case, the duty was assessed and paid by Amber Paints, and the demand for differential duty arose due to non-compliance with conditions, not non-levy or short-levy.

In conclusion, the Tribunal rejected the preliminary objection, stating that the show cause notice was not time-barred. The appeal was scheduled for further hearing.