2024 (4) TMI 1091 - AT - Central Excise

Recovery of differential Central Excise Duty - Clearance of subsidized SSP under concessional rate of duty - Violations of the conditions of the Exemption Notification - entire production was meant for agriculture use only and it was explicitly mentioned so on every pack - case of the revenue is that after the SSP was removed and sold to IPL IPL further sold it to Mahadhan who further sold it to Hindustan who misused the SSP for agriculture use to manufacture other products in their industry - HELD THAT - The diversion of SSP meant for and clearly marked as meant for agriculture use to non-agricultural use was done by Hindustan alone. It is undisputed that all bags of SSP were clearly meant for agriculture use only . Such being the case there was absolutely no reason for Hindustan to have put the subsidized SSP cleared under concessional rate of excise duty and intended for agricultural use to industrial use. The submission of Hindustan in its appeal that the SSP which it purchased was of sub-standard quality holds no water. As rightly pointed out by the lower authorities the Fertilizer Control Order 1994 clearly requires marking of fertilizer meant for agriculture use and non-agriculture use. There is nothing in the records to substantiate the appellant s claim that the SSP sold by Manglam to IPL and IPL to Mahadhan and further by Mahadhan to Hindustan was of sub-standard quality unfit for agricultural use. Clearly by diverting the fertilizer meant for agriculture use to other use Hindustan was responsible for evasion of excise duty. In fact Manglam and IPL could not have foreseen this diversion by Hindustan. There are no justification to set aside the confiscation of the seized 33 MT of SSP or to set aside the imposition of 50, 000/- redemption fine in lieu of confiscation. There are no justification to modify penalty of Rs. 20, 000/- under rule 26 imposed on Hindustan by the Commissioner (Appeals). Appeal allowed.

Summary

Issues involved:
The issues involved in this case are the imposition of differential central excise duty, penalty under rule 26 of the Central Excise Rules, and the diversion of goods meant for agriculture use to industrial use.

Manglam's Appeal (Excise Appeal No. 53077 of 2018):
Manglam Phosphate Limited challenged the order passed by the Commissioner (Appeals) upholding the imposition of central excise duty, interest, and penalties on them. The appellant argued that they had no control over the goods once sold to IPL, and the subsequent misuse by Hindustan should not result in liability for Manglam. They contended that the duty should be recovered from the actual users of the goods, not the original manufacturer. The appellant also claimed that the demand was time-barred and penalties were wrongly imposed. The Tribunal found merit in Manglam's arguments, stating that the manufacturer's responsibility ends upon removal of the goods, and liability cannot be imposed based on the actions of subsequent buyers. Consequently, the appeal was allowed, and the impugned order was set aside in favor of Manglam.

Hindustan's Appeal (Excise Appeal No. 50981 of 2018):
Hindustan Phosphate Pvt Ltd. appealed against the penalty imposed under rule 26 of the Central Excise Rules and the redemption fine in lieu of confiscation of seized goods. Hindustan argued that as a buyer, they should not be penalized for the actions of the manufacturer or previous sellers. They also claimed that the seized goods were of sub-standard quality, justifying their industrial use. The Tribunal disagreed, stating that Hindustan alone diverted the goods meant for agriculture use to industrial purposes. The bags clearly indicated agricultural use, and Hindustan's actions led to evasion of excise duty. The appeal was dismissed, upholding the penalty and fine imposed on Hindustan.

Conclusion:
In conclusion, the Tribunal allowed Manglam's appeal, setting aside the order against them, while dismissing Hindustan's appeal and upholding the penalties imposed on them. The judgment highlights the distinction between the responsibilities of manufacturers and buyers in ensuring compliance with excise duty regulations.