1997 (12) TMI 207 - AT - Central Excise

Summary

Issues: Misuse of concessional rate under Notification 35/73 for obtaining Mixed Xylene, contravention of Rules 192 and 196 of Central Excise Rules, 1944, applicability of the decision in Shalimar Paints v. Commissioner, whether repacking constitutes manufacturing process under the notification, satisfaction of conditions for concessional rate eligibility.

In the present case, the appeal was filed against an order passed by the Commissioner of Central Excise, Mumbai-III, regarding the misuse of a concessional rate under Notification 35/73 for obtaining Mixed Xylene. The appellants were found to be clearing petroleum products as thinner without undergoing the required manufacturing process, in violation of Rules 192 and 196 of the Central Excise Rules, 1944. The Commissioner confirmed the demand for duty and imposed a penalty of Rs. 5,000 under Rule 173Q on the appellant.

The appellant argued that their case was similar to the decision in Shalimar Paints v. Commissioner, where the Tribunal allowed concessional rate for thinner as an allied material to the output goods. They claimed that the Mixed Xylene was sent to their factory for manufacturing paints since the factory was not equipped to receive it in bulk. However, the Department contended that the case law cited by the appellant was not applicable as the Mixed Xylene was directly removed without undergoing any manufacturing process.

Upon consideration, the Tribunal found that while the notification allowed concessional rate for petroleum products used as solvents or diluents for manufacturing paints, varnishes, and allied materials, the appellant failed to satisfy this condition. The Mixed Xylene was repacked and sent without undergoing any manufacturing process at the Andheri factory. The Tribunal noted that the repacking alone did not constitute a manufacturing process. As a result, the fundamental requirement of using the material in the manufacture of specified materials was not met. The Tribunal upheld the Commissioner's decision, stating that the appellant's case did not align with the cited case law, and therefore, rejected the appeal.