1991 (2) TMI 242 - AT - Central Excise

Issues Involved:
1. Maintainability of proceedings before the Collector (Appeals)
2. Compliance with Section 35A(3) of the Central Excises & Salt Act, 1944
3. Dutiability of Acetic Acid under Item 14AAA of the First Schedule to the Central Excises and Salt Act, 1944
4. Eligibility for the benefit of Rule 56A of the Central Excise Rules

Issue-Wise Detailed Analysis:

1. Maintainability of Proceedings before the Collector (Appeals):
The appellants raised a preliminary objection regarding the maintainability of the proceedings before the Collector (Appeals), arguing that the Additional Collector was not empowered to exercise powers under Section 35E(2) of the Act. However, the Tribunal's previous decisions indicated that an Additional Collector could exercise the power of a Collector. Therefore, the Counsel did not pursue this point further.

2. Compliance with Section 35A(3) of the Central Excises & Salt Act, 1944:
The Counsel for the appellants contended that no notice under Section 11A of the Act, as required by the second proviso to Section 35A(3), was served on the appellants within the specified time-limit. The notice received merely forwarded a copy of the appeal from the Assistant Collector's office and did not fulfill the mandatory requirements of law. The Departmental Representative argued that the principles of natural justice were observed as the appellants were given an opportunity to file cross-objections and were heard in person. The Tribunal concluded that the notice issued by the office of the Collector (Appeals) did not meet the requirements of the second proviso to Section 35A(3) because it did not state that the Collector (Appeals) was of the opinion that certain duty of excise had been erroneously refunded. However, since the appellant before the Collector (Appeals) was the Assistant Collector and not Andhra Sugars Ltd., the second proviso did not apply in terms. The Tribunal harmonized the provisions of Section 35A(3) and Section 35E, concluding that the provisions of Section 11A did not apply to the instant case.

3. Dutiability of Acetic Acid under Item 14AAA of the First Schedule to the Central Excises and Salt Act, 1944:
Acetic Acid and Acetic Anhydride are specifically and separately described in the Schedule under different sub-items of Item 14AAA. The Tribunal noted that once an article is described specifically in the Tariff Schedule, the question of whether the process constitutes "manufacture" does not arise. However, the article must be marketable. The Tribunal found that Acetic Anhydride and Acetic Acid are distinct substances with different chemical formulae and are separately marketable. The appellants had been clearing Acetic Acid on payment of duty, indicating its marketability. The Tribunal upheld the finding of the Collector (Appeals) that duty was liable to be paid on Acetic Acid, as the process by which Acetic Acid emerges as a by-product constitutes "manufacture" for the purpose of levy of excise duty.

4. Eligibility for the Benefit of Rule 56A of the Central Excise Rules:
The appellants argued that the goods falling under Item 14AAA had been notified for the benefit of proforma credit procedure provided in Rule 56A. The issue of Rule 56A did not arise before the Assistant Collector because he had allowed the refund of duty paid on Acetic Acid. The Collector (Appeals) did not pronounce on this point when it was raised. The Tribunal directed the Assistant Collector to consider the matter with reference to Rule 56A after giving due opportunity to the appellants. The appellants were not debarred from the benefit of Rule 56A if they could satisfy the Assistant Collector by producing contemporaneous records and other evidence regarding the quantum of eligibility for proforma credit of the duty paid on Acetic Anhydride used in the manufacture of Acetic Acid.

Conclusion:
The appeal was disposed of with the above observations and directions, instructing the Assistant Collector to reassess the eligibility for the benefit of Rule 56A.

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