1994 (10) TMI 189 - AT - Central Excise

Summary

Issues:
1. Duty liability on excess consumption of Sulphuric Acid in the manufacture of Super Phosphate Fertilisers.
2. Interpretation of the exemption Notification No. 81/75 regarding duty exemption on Sulphuric Acid.
3. Calculation of Sulphuric Acid consumption based on CBEC guidelines.
4. Time bar for invoking Section 11A for demand of duty.
5. Imposition of penalty based on alleged excess consumption of Sulphuric Acid.

Analysis:

1. Duty Liability on Excess Consumption:
The case revolved around the Appellants' alleged excess consumption of Sulphuric Acid in the production of Super Phosphate Fertilisers, leading to a duty demand of Rs. 60,559.38 and a penalty of Rs. 10,000 imposed by the Additional Collector. The Appellants contested this claim, arguing that the department's case was based on a strict assumption of not more than 40% Sulphuric Acid consumption, which they refuted based on the quality of raw materials used and variations in consumption levels across different batches and months.

2. Interpretation of Exemption Notification:
The Appellants relied on Notification No. 81/75, which fully exempted Sulphuric Acid used in the manufacture of Super Phosphate fertiliser from duty, subject to certain conditions. They argued that the department's interpretation of the notification was rigid and did not account for variations in Sulphuric Acid consumption based on factors such as the quality of Rock Phosphate and the strength of the acid used.

3. Calculation of Sulphuric Acid Consumption:
The Appellants contested the department's calculation of Sulphuric Acid consumption, citing CBEC guidelines that indicated a general 40% consumption rate but highlighting that this was not a fixed rule. They pointed out discrepancies in the department's assessment compared to their own records, emphasizing that the evidence did not support the claim of clandestine removal of Sulphuric Acid.

4. Time Bar under Section 11A:
The Appellants argued that the demand for duty was time-barred as they maintained statutory records open for inspection and submitted regular returns, making the longer five-year period stipulated in Section 11A unjustified. They contended that the total demand should be considered time-barred based on this premise.

5. Imposition of Penalty:
The department sought to uphold the penalty based on the Appellants' representative's statement admitting 40% Sulphuric Acid consumption. However, the Tribunal found the department's case to be purely inferential, lacking concrete evidence of clandestine removal. Citing precedent judgments, the Tribunal concluded that the department failed to prove its case, leading to the allowance of the Appeal and relief for the Appellants from the duty demand and penalty.

This comprehensive analysis highlights the key legal issues, arguments presented by both parties, and the Tribunal's reasoning in reaching its decision to provide a clear understanding of the judgment.