2011 (1) TMI 807 - AT - Central Excise

Exemption - notification No. 217/86 upto 15-3-1995 and Notification No. 67/95, dated 16-3-95 thereafter - captive use - DMT Residue - the same was not cleared outside the factory, was used captively as fuel in furnace - Marketability - Appellants contended that although there are catena of judgments to substantiate that the disputed product is not marketable, as mere selling of a commodity does not mean that it is excisable - it was submitted that DMT, a final product, was fully exempt upto 19-3-1990. With effect from 20-3-1990, DMT was chargeable to duty, at the effective rates as above, and was being cleared by the Appellants on payment of duty, which is not in dispute - For the period 20-3-1990 onwards, the Appellants would be eligible for exemption under Notn. 217/86-C.E., dated 2-4-1986 (upto 15-3-1995) and, thereafter, under succeeding Notn. 67/95-C.E., dated 16-3-1995. Notifications for the relevant periods would substantiate that all goods falling under Chapter 38 (where DMT- Residue was classified) were specified as inputs and goods falling under Chapter 29, wherein DMT falls, was specified as final product - Since duty on DMT was paid, exemption to DMT-Residue was undisputedly available to the Appellants, during the disputed period - it is no doubt that DMT-Residue has been used by the appellants in their own factory for generation of steam in boiler for further manufacturing of the final products viz., DMT - Hence, after going through the facts of this case, we hold that the appellants are entitled for the benefit of the above said notifications for the period with effect from 20-3-90 till 2006 - Decided in favour of assessee.

Summary

Issues Involved:
1. Marketability of DMT-Residue.
2. Applicability of extended period of limitation.
3. Eligibility for exemption under Notification No. 217/86-C.E. and Notification No. 67/95-C.E.
4. Imposition of penalties and interest.

Detailed Analysis:

1. Marketability of DMT-Residue:

The Tribunal addressed the issue of whether DMT-Residue is marketable. The Appellants argued that DMT-Residue was not a commercial product and was used captively as fuel in the boiler. The Tribunal noted that the Department had previously drawn samples and had knowledge of the residue's use since 1985. Despite the Department's evidence from IPCL-Baroda showing marketability, the Tribunal did not delve into this issue further, as it was resolved on other grounds.

2. Applicability of Extended Period of Limitation:

The Tribunal examined whether the extended period of limitation was applicable for the demand from 1-3-86 to 31-3-90. The Appellants had informed the Department about the emergence and use of DMT-Residue in 1985 and had obtained an L-4 license. The Tribunal found no suppression of facts, fraud, or willful misstatement by the Appellants. Consequently, the demand for this period was barred by limitation, as the show-cause notice was issued beyond the permissible period.

3. Eligibility for Exemption under Notification No. 217/86-C.E. and Notification No. 67/95-C.E.:

The Tribunal considered whether the Appellants were eligible for exemptions under Notification No. 217/86-C.E. and Notification No. 67/95-C.E. for the period post 20-3-90. The Appellants used DMT-Residue as fuel for generating steam, which was used in the manufacture of DMT. The Tribunal held that the Appellants were entitled to the benefit of these notifications, as the residue was used captively within the factory. The Tribunal also noted that the issue of eligibility for exemption could be raised at any stage of the proceedings, citing relevant Supreme Court judgments.

4. Imposition of Penalties and Interest:

Given that the demands were not sustainable due to the limitation period and the eligibility for exemption notifications, the Tribunal found no grounds for imposing penalties or interest. The Tribunal set aside the impugned order and allowed the appeal with consequential relief.

Conclusion:

The Tribunal concluded that the demands for the period 1-3-86 to 31-3-90 were barred by limitation, and the demands for the period post 20-3-90 were not sustainable due to the Appellants' eligibility for exemption under Notification No. 217/86-C.E. and Notification No. 67/95-C.E. As a result, no penalties or interest were warranted, and the appeal was allowed with consequential relief.