1995 (8) TMI 145 - AT - Central Excise

Summary

Issues Involved:
1. Legality of the demand for excise duty.
2. Legality of the confiscation of goods.
3. Validity of the imposition of fines and penalties.
4. Invocation of the larger period for demand.
5. Classification of the product as a chemical or chemical formulation.

Issue-wise Detailed Analysis:

1. Legality of the demand for excise duty:
The appellants were directed to pay excise duty on 22 Kltrs of Solvent CIX received during August 1981 under Rule 196 read with Section 11A(1) of the Central Excises & Salt Act, 1944. The department alleged that the appellants wrongly availed the benefit of Notification No. 276/67, dated 21-12-1967, by not using Solvent CIX for manufacturing chemicals and chemical formulations as declared. The Learned Collector concluded that the appellants did not carry out any chemical process on Solvent CIX, and thus, were not entitled to duty exemption.

2. Legality of the confiscation of goods:
The Collector ordered the confiscation of 15843 Ltrs of Solvent CIX and GR. 17/98 valued at Rs. 54,336.00, and 4260 Ltrs valued at Rs. 25,000/-, as the goods were not produced in terms of the B. 11 Bond executed by the assessee. The appellants argued that they used Solvent CIX in the manufacture of special purpose solvents and thinners, which were exempt from excise duty under Notification No. 105/80. However, the Collector found that the appellants did not manufacture chemicals or chemical formulations, thereby justifying the confiscation under Rule 196.

3. Validity of the imposition of fines and penalties:
The Collector imposed a fine of Rs. 15,000/- for the seized goods released under the B. 11 Bond and appropriated the Rs. 5,000/- cash deposit against this fine. Additionally, Rs. 6,000/- deposited as a bank guarantee was appropriated towards the value of the seized goods. The appellants contended that the process they undertook amounted to manufacturing, but the Collector held that it was merely a purification process. The Tribunal upheld the fines and penalties, finding no violation of procedural rules under Chapter X.

4. Invocation of the larger period for demand:
The appellants argued that the demands were time-barred as the notice was issued beyond six months. However, the Collector invoked the larger period, citing mis-declaration and suppression of facts. The Tribunal agreed, noting that the appellants obtained the L. 6 Licence based on false declarations and thus, the larger period was applicable.

5. Classification of the product as a chemical or chemical formulation:
The appellants claimed their product was a special purpose solvent and thinner, classified as chemicals under Chapter 29 and Chapter 38 of the Central Excise Tariff. The Collector, relying on chemical test reports and affidavits, concluded that the product did not qualify as a chemical or chemical formulation but was a refined solvent. The Tribunal supported this finding, referencing the case of Madras Petro-Chem Ltd. where a mixture of hydrocarbons was not considered a chemically defined organic compound.

Conclusion:
The Tribunal upheld the Collector's order, confirming the demand for excise duty, confiscation of goods, and imposition of fines and penalties. The larger period for demand was rightly invoked due to mis-declaration by the appellants. The product was correctly classified as a solvent, not a chemical or chemical formulation, thus disqualifying it from the claimed duty exemptions. The appeal was dismissed for lack of merit.