1990 (10) TMI 228 - AT - Central Excise

Summary

Issues Involved:

1. Entitlement to exemption under Notification No. 75/84.
2. Validity of the show cause-cum-demand notice.
3. Requirement of end-use verification certificate.
4. Consistency in departmental decisions.

Issue-wise Detailed Analysis:

1. Entitlement to Exemption under Notification No. 75/84:

The appellants were denied exemption under Notification No. 75/84 by the Assistant Collector, which was upheld by the Collector (Appeals). The appellants argued that they were entitled to the exemption as they were using Benzene, Toluene, and Xylene to manufacture thinners and solvents, which are used in paints, varnishes, and other industrial applications. They contended that the Assistant Collector's decision to disallow the exemption was inconsistent with a previous order dated 31st October 1986, where the same benefit was granted under similar circumstances. The Tribunal noted that the wording of Notification No. 75/84 was similar to the earlier Notification No. 35/73, and there was no material difference that justified the denial of exemption.

2. Validity of the Show Cause-cum-Demand Notice:

The show cause-cum-demand notice issued on 30th March 1988 demanded Rs. 3,59,885.91 from the appellants, claiming they were not using the raw materials as specified in the notification. The Tribunal found that the Assistant Collector had previously withdrawn a similar show cause notice without any new evidence or change in circumstances. Citing previous decisions, the Tribunal held that the department could not arbitrarily change its stance without fresh facts or legal changes, making the demand invalid.

3. Requirement of End-Use Verification Certificate:

The department argued that an end-use verification certificate was necessary under Notification No. 75/84, relying on a Supreme Court decision that implied such a requirement. However, the Tribunal found that this requirement was neither explicitly stated in the notification nor supported by the facts of the case. The Tribunal emphasized that the solvents and thinners manufactured by the appellants were intended for use in paints, varnishes, and similar products, and there was no evidence to suggest misuse. Thus, the end-use verification was deemed unnecessary.

4. Consistency in Departmental Decisions:

The appellants highlighted the inconsistency in the department's decisions, pointing out that a previous Assistant Collector had granted them the exemption under similar conditions. The Tribunal agreed, stating that the department's change in stance was unjustified without new evidence or legal changes. The Tribunal referenced several judicial precedents supporting the principle that long-standing departmental decisions should not be altered arbitrarily, as it would disrupt settled rights and expectations.

Separate Judgment by G. Sankaran:

While agreeing with the conclusion, G. Sankaran added that the difference between Notifications 35/73 and 75/84 was more a matter of form than substance. He noted that both notifications required the Assistant Collector to be satisfied about the intended use of the materials, and there was no significant difference in their wording. Sankaran emphasized the practical difficulties in proving the end-use of solvents in painting and concluded that the department's interpretation was overly stringent and impractical.

Conclusion:

The Tribunal set aside the impugned order, allowing the appeal and ruling that the demand in the show cause notice was not in accordance with law. The decision emphasized the importance of consistency in departmental actions and the impracticality of stringent end-use verification requirements.