1996 (1) TMI 204 - AT - Central Excise

Summary

Issues:
Demand of Central Excise duty on raw naphtha received for fertilizer manufacturing, discrepancy in quantity used, time limit for raising demand, applicability of exemption notification, storage losses, and evaporation losses.

Analysis:
The appeal was filed by M/s. Gujarat State Fertilizers Co. against the Order-in-Appeal rejecting their appeal regarding the demand of Central Excise duty on raw naphtha received for fertilizer manufacturing. The Collector of Central Excise (Appeals) had rejected the appeal due to discrepancies in the quantity used compared to the quantity received, leading to a demand of Rs. 14,24,065.16. The matter was heard, and the appellant argued that there were no discrepancies in the quantity received and consumed, emphasizing the flow meters' accuracy in measuring the transfer to the plant.

The appellant also contended that the show cause notice was issued beyond a reasonable period, citing a Supreme Court decision on the limitation period for duty recovery. They highlighted that the demand was raised under an exemption notification and executive instructions allowed for condoning storage losses. On the other hand, the Respondent argued that the demand was made within a reasonable time and requested the appeal's rejection, pointing out the appellant's failure to provide evidence to substantiate losses.

Upon careful consideration, the Tribunal found no discrepancies in the raw naphtha supply and transfer process within the factory premises. The show cause notice, issued for a period spanning four years, was deemed unreasonable, especially since no allegations of suppression or clandestine removal were made. The Tribunal noted that discrepancies only arose during the transfer to the plant, where flow meters were used for recording. Despite potential defects in the flow meters, the demand was solely based on the appellant's records available to excise officers, indicating no suppression or clandestine activities.

Ultimately, the Tribunal accepted the appeal solely on the question of limitation, setting aside the Order-in-Appeal and allowing the appeal without delving into other raised issues. This decision was based on the finding that the demand was raised beyond the normal time limit specified under Rule 10 of the Central Excise Rules, despite no limitations under Rule 196, due to the absence of discrepancies in the initial receipt of raw naphtha.