1990 (1) TMI 260 - AT - Central Excise

Summary

Issues:
- Set-off of duty paid on chemicals used in the manufacture of plastic laminated sheets against Central Excise duty payable.
- Applicability of Notification No. 201/79-C.E. regarding duty exemption on inputs.
- Time-barred nature of the first show cause notice issued.

Analysis:

Issue 1: Set-off of duty paid on chemicals
The appellants manufactured plastic laminated sheets using chemicals like Phenol and Formaldehyde, duty-paid under Tariff Item 68. They argued that resin manufactured from these chemicals was used captively for producing treated paper and fabrics, which were further used in manufacturing plastic laminated sheets. The Department issued show cause notices demanding Central Excise duty, contending that set-off was not allowed as the resin, treated paper, and fabrics were intermediate stages. The appellants relied on various judgments, including those of the Tribunal and the Supreme Court, to support their claim for set-off under Notification No. 201/79-C.E. The Tribunal analyzed the precedents and concluded that the chemicals used by the appellants were eligible for set-off under the notification, despite the intermediate stages of resin, treated paper, and fabrics. The Tribunal distinguished the Revenue's reliance on a previous judgment, stating it did not address the specific issue at hand.

Issue 2: Applicability of Notification No. 201/79-C.E.
The Tribunal referred to judgments where the Supreme Court clarified that any material forming part of the manufacturing process or essential for making the end-product marketable should be considered raw material. In this case, chemicals falling under Tariff Item 68 were used in manufacturing plastic laminated sheets falling under Item 15A(2). The Tribunal held that the chemicals were eligible for set-off under the notification, emphasizing the integral role of these inputs in the manufacturing process, despite the creation of intermediate products like treated fabrics and paper.

Issue 3: Time-barred nature of the show cause notice
The appellants argued that the first show cause notice was partly time-barred due to the absence of suppression of facts. However, the Tribunal did not delve deeply into this aspect as the primary focus was on the eligibility of set-off under the notification and the manufacturing process involving the chemicals and intermediate products. The decision to allow the appeals was based on the Tribunal's interpretation of the law and the precedents cited, rather than the time-barred nature of the notice.

In conclusion, the Tribunal set aside the impugned order and allowed the appeals, affirming the appellants' right to set-off the duty paid on chemicals used in the manufacturing process of plastic laminated sheets against the Central Excise duty payable, in accordance with Notification No. 201/79-C.E.