1988 (4) TMI 68 - HC - Central Excise

Summary

Issues Involved:
1. Scope of the word 'transfer' in sub-rule (3) of Rule 170A of the Central Excise Rules.
2. Validity of the orders passed concerning the alleged transfer of business from M/s. Daurala Sugar Works to M/s. Daurala Chemical Industries.
3. Use of Toluene in the manner stated in the application.
4. Applicability of Rule 10 and Rule 10A(2) of the Central Excise Rules.

Issue-wise Detailed Analysis:

1. Scope of the word 'transfer' in sub-rule (3) of Rule 170A of the Central Excise Rules:
The principal issue in this case was the interpretation of the term 'transfer' as used in sub-rule (3) of Rule 170A of the Central Excise Rules. The court noted that the dictionary defines 'transfer' as the conveyance of right, title, or interest in property from one person to another, which involves a change of ownership or title. The court emphasized that transfer envisages conveying what vested in one entity to another. In this case, the court found no material evidence to establish that the right or title of M/s. Daurala Sugar Works had been transferred to M/s. Daurala Chemical Industries. The mere opening of a separate bank account was deemed a colorless circumstance insufficient to establish a transfer of ownership.

2. Validity of the orders passed concerning the alleged transfer of business from M/s. Daurala Sugar Works to M/s. Daurala Chemical Industries:
The court examined the validity of the orders passed by the Assistant Collector, the appellate authority, and the revising authority, which held that the business covered by the AL6 license granted to M/s. Daurala Sugar Works had been transferred to M/s. Daurala Chemical Industries. The court found that the authorities had erroneously concluded that there was a transfer based on the opening of a separate bank account and the administrative grouping of units under different names. The court held that the change of name or creation of a new entity did not amount to a transfer of ownership unless explicitly provided for in the Act or Rules. Consequently, the finding of transfer could not be upheld.

3. Use of Toluene in the manner stated in the application:
The court addressed the issue of whether Toluene was used in the manner stated in the application. The application declared that Toluene would be used only for the manufacture of specified commodities and not for any other purpose without prior approval. The appellate authority found that the use of Toluene was fully accounted for, but concluded that there was a violation because the concession for industrial use of Toluene was granted to M/s. Daurala Sugar Works, while it was actually used by M/s. Daurala Chemical Industries. The court held that since the Toluene was used for the purpose for which the license was granted and was duly accounted for, there was no breach of Rule 196. The violation of Rule 196 could only occur if the finding of transfer was upheld, which it was not.

4. Applicability of Rule 10 and Rule 10A(2) of the Central Excise Rules:
The petitioner argued that the authorities failed to record any findings on the applicability of Rule 10 and Rule 10A(2), despite these being specifically raised. The court found it unnecessary to examine this issue in detail, as the orders could not be upheld on merits. The court noted that the notices issued to M/s. Daurala Sugar Works for non-levy were invalid if M/s. Daurala Chemical Industries was considered a separate entity.

Conclusion:
The petition was allowed, and the orders of the opposite parties were quashed. The notices issued were discharged, and the petitioner was entitled to its costs. The court concluded that there was no transfer of the unit, and the use of Toluene was in accordance with the rules and the manner stated in the application.