1990 (7) TMI 236 - AT - Central Excise

Summary

Issues Involved:
1. Recovery of excise duty on Raw Naphtha.
2. Withdrawal of concession under Rule 192.
3. Forfeiture of security deposit under Rule 192.
4. Imposition of penalty under Rule 209(1) and 210 of Central Excise Rules, 1944.

Detailed Analysis:

1. Recovery of Excise Duty on Raw Naphtha:
The appellant, a Public Limited Company controlled by the Government of Gujarat, engaged in manufacturing Ammonia/Fertilizer, was enjoying concessional duty rates under Notification No. 187/61 and Notification No. 75/84 for Raw Naphtha used in manufacturing. The Department alleged that the appellant was evading duty by using Raw Naphtha for purposes other than manufacturing Fertilizer/Ammonia, leading to a Show Cause Notice demanding Rs. 1,16,47,534.78 for the financial years 1982 to 1987. The Tribunal examined the notifications and concluded that the requirement was to use Raw Naphtha in the manufacture of Fertilizer/Ammonia, not necessarily as feed stock. The appellant had meticulously followed all procedures, and the use of Raw Naphtha in the manufacturing process was integral and indispensable. Therefore, the demand for excise duty was not justified.

2. Withdrawal of Concession under Rule 192:
The Collector of Central Excise & Customs, Baroda, had ordered the withdrawal of the concession granted under Rule 192. However, the Tribunal found that the appellant had duly accounted for the Raw Naphtha used in the manufacturing process as per the notifications. The Tribunal referred to various judgments to interpret "use in the manufacture of goods" and concluded that the appellant's process met the requirements. Consequently, the concession under Rule 192 should be continued.

3. Forfeiture of Security Deposit under Rule 192:
The Collector had also ordered the forfeiture of the security deposit under Rule 192. The Tribunal noted that the appellant had followed all prescribed procedures and that the use of Raw Naphtha was integral to the manufacturing process. Since the appellant had duly accounted for the excisable goods, the forfeiture of the security deposit was not warranted.

4. Imposition of Penalty under Rule 209(1) and 210:
The Collector had imposed a penalty of Rs. 15,00,000 on the appellant under Rule 209(1) and 210. The Tribunal found that there was no suppression, evasion, or fraud on the appellant's part, and the longer period of limitation could not be invoked. The imposition of the penalty was deemed unjustified and was set aside.

Final Order:
1. The appeal was allowed, and the impugned order was set aside.
2. The concession under Rule 192 in respect of Raw Naphtha was to be continued.
3. The order of forfeiture of the security deposit and the penalty was set aside.
4. Consequential relief, if any, was to be provided to the appellant.