1997 (10) TMI 233 - AT - Central Excise

Exemption for specified end use subject to Chapter X procedure under Notification No. 276/67-C.E.

Summary

Issues:
1. Whether the returned surplus stream of C4 Raffinate by the appellants to IPCL was permissible under Central Excise Rules.
2. Whether the demand of duty on the appellants by the Collector, Central Excise and Customs was justified.
3. Whether the appellants were entitled to exemption under Notification 276/67 for the entire quantity of C4 Raffinate received from IPCL.

Analysis:
1. The appellants had obtained permission to receive C4 Raffinate from IPCL under an agreement for manufacturing Polyisobutylene. The Assistant Collector had previously approved the return of surplus material to IPCL, considering it as permissible under Rule 196A of Central Excise Rules. The Collector's order acknowledged that no excisable goods other than C4 Raffinate were manufactured by the appellants. The agreement between the parties specified the return stream's composition and confirmed it as a mixture of C4 hydrocarbons. The Tribunal found that the department's contention that the returned product was different lacked merit, as the Assistant Collector's decision was based on the same facts, and any change in interpretation should be within the normal time limit under Section 11A of the Central Excise Act.

2. The Collector imposed duty and penalty on the appellants, alleging that the return stream was different from C4 Raffinate and that necessary analytical reports were not conducted. However, the Tribunal noted that the appellants had used all C4 Raffinate received for producing isobutylene, and the emergence of unreacted stream was a technological necessity in the manufacturing process. The Tribunal concluded that the demand for duty was time-barred and set it aside. The appellants were found to be entitled to the exemption under Notification 276/67 for the entire quantity of C4 Raffinate received.

3. The Tribunal referenced a similar Supreme Court case involving an exemption notification for raw naphtha, where the Court held that incidental or inevitable production of other goods during the manufacturing process does not violate the exemption notification. Applying this rationale, the Tribunal found that the entire quantity of C4 Raffinate received was used for producing polyisobutylene, justifying the appellants' entitlement to the exemption. The Tribunal set aside the impugned order and allowed the appeal, concluding that there was no case for penalty on the appellants.

This detailed analysis of the judgment highlights the key legal issues, the Tribunal's reasoning, and the ultimate decision in favor of the appellants.