1991 (3) TMI 259 - AT - Central Excise

Summary

Issues:
1. Interpretation of Central Excise Notification No. 201/79 regarding exemption from excise duty.
2. Authority of the Collector to relax procedural requirements in excise notifications.
3. Compliance with procedural requirements for availing excise duty exemption.
4. Validity of demand for recovery of proforma credit due to procedural lapses.

Analysis:

Issue 1: Interpretation of Central Excise Notification No. 201/79
The case involved the interpretation of Central Excise Notification No. 201/79, which exempted finished goods from excise duty to the extent of duty paid on inputs used in their manufacture. The notification required manufacturers to follow specific procedures for informing the proper officer about the receipt of excise duty paid inputs. The dispute arose due to the practical difficulties faced by the appellants in complying with these procedural requirements.

Issue 2: Authority of the Collector to Relax Procedural Requirements
The Collector had previously granted relaxation of procedural requirements under Notification No. 178/77 and later under Notification No. 201/79. The question was whether the Collector had the authority to relax these conditions and whether such relaxations were still valid. The subsequent amendment to Notification 201/79 empowered the Collector to relax provisions for manufacturers under certain circumstances.

Issue 3: Compliance with Procedural Requirements
Both parties agreed that the conditions laid down by the Collector in his letters were being complied with by the appellants. The inputs were used in the manufacture of finished goods as required. The dispute primarily revolved around the timing of relaxation granted by the Collector and its impact on compliance with procedural requirements.

Issue 4: Validity of Demand for Recovery of Proforma Credit
The demand for recovery of proforma credit was based on the alleged procedural lapses by the appellants in not waiting for the proper officer to identify the inputs before consumption. The Assistant Collector initially dropped the proceedings against the appellants, but the Collector (Appeals) later revived the demand for a limited period. The Tribunal held that the demand was not justified given the practical difficulties faced by the appellants and the overall compliance with the substantive requirements of excise duty exemption.

In conclusion, the Tribunal set aside the Collector (Appeals) order and provided relief to the appellants, emphasizing that procedural lapses should not hinder substantive justice. The case highlighted the balance between procedural requirements and the practical challenges faced by manufacturers in complying with excise duty regulations.