1996 (11) TMI 238 - AT - Central Excise

Issues Involved:
1. Violation of principles of natural justice.
2. Determination of whether the appellants manufactured intermediate products or the final product (Surfactant).
3. Correctness of duty demand and abatement under Section 4(4)(d)(ii) of the Central Excises and Salt Act.
4. Eligibility for Modvat credit.

Detailed Analysis:

1. Violation of Principles of Natural Justice:
The appellants contended that no personal hearing was granted, thus violating the principles of natural justice. They requested an adjournment on 25-10-1994, but this was not considered by the adjudicating authority. The Tribunal noted that personal hearings were granted on multiple occasions (18-8-1994, 29-9-1994, and 29-10-1994). The appellants failed to substantiate their claim that their Advocate was unavailable, as no Vakalatnama or affidavit was filed. The Tribunal concluded that the plea of violation of natural justice was not substantiated, as the appellants approached the matter casually and did not produce the necessary documents despite multiple opportunities.

2. Determination of Product Manufactured:
The main issue was whether the appellants manufactured only intermediate products or the final product, Surfactant. The appellants claimed they produced intermediate products, but failed to provide details of the intermediate product or the additional processes required to make it a finished product. Statements from Shri D.K. Joseph and Shri V. Krishnamurthy indicated that no intermediate products were produced and no further manufacturing processes were carried out on goods received back from the appellants. The Tribunal found the appellants' claim unsubstantiated and concluded that they manufactured the final product, Surfactant.

3. Correctness of Duty Demand and Abatement:
The appellants argued that the duty demand was incorrect as it did not consider abatement under Section 4(4)(d)(ii) of the Central Excises and Salt Act. The adjudicating authority's order did not specifically examine this aspect. The Tribunal noted that the adjudicating authority needs to examine the correctness of the duty demand, including the quantities shown in Annexure VII of the show cause notice, which were not considered. The matter was remanded for re-examination of these aspects after granting a personal hearing to the appellants.

4. Eligibility for Modvat Credit:
The appellants contended that they should be allowed to take Modvat credit since the duty was already demanded from them. This aspect was not pleaded before the adjudicating authority. The Tribunal noted that the goods were received under Rule 57F (2) challans and Modvat credit had been taken by M/s. AAA and M/s. Himom. The adjudicating authority needs to examine whether the Modvat credit taken by the other firms should be reversed and if the appellants are eligible for Modvat credit under the law. This aspect requires examination in light of the evidence available on record after granting a personal hearing to the appellants.

Conclusion:
The Tribunal reduced the penalty on M/s. East Coast Surfactant to Rs. 1,00,000/- but maintained the other penalties imposed. The appeals were disposed of for de novo adjudication, with the adjudicating authority instructed to re-examine the issues of duty demand, abatement, and Modvat credit eligibility after granting a personal hearing to the appellants.

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