1998 (4) TMI 296 - AT - Central Excise

Summary

Issues Involved:
1. Availability of the benefit of Notification No. 58/86.
2. Compliance with Chapter X Procedure under the Central Excise Rules, 1944.

Issue-wise Detailed Analysis:

1. Availability of the Benefit of Notification No. 58/86:
The primary issue in this appeal is whether the appellants are entitled to the benefit of Notification No. 58/86, dated 10-2-1986, which exempts certain tools and dies from excise duty if they are manufactured in one factory and used in another factory of the same manufacturer. The appellants, engaged in manufacturing motor vehicles and tractors, claimed this exemption for tools and dies produced at their Nasik factory and transferred to other units. The Asstt. Collector initially approved their claim, but later the Department issued a notice demanding excise duty for non-compliance with procedural requirements under Chapter X of the Central Excise Rules, 1944.

2. Compliance with Chapter X Procedure:
The appellants argued that the exemption under Notification No. 58/86 should not be denied due to their failure to comply with Chapter X procedures, which they considered merely procedural. They cited previous decisions, such as Mangalore Chemicals & Fertilizers Ltd. v. Dy. Commissioner, to support their claim that procedural lapses should not negate substantive benefits. However, the Department contended that compliance with Chapter X was a mandatory condition for availing the exemption, as explicitly stated in the notification.

Tribunal's Analysis:
The Tribunal examined the text of Notification No. 58/86, which provides an exemption for tools and dies used in the same factory or another factory of the same manufacturer, conditional on compliance with Chapter X procedures. The Tribunal emphasized that the notification's exemption is not absolute and is contingent upon adherence to these procedures, which include obtaining a Central Excise Registration Certificate and executing a bond with adequate security under Rule 192.

The Tribunal distinguished the present case from the Mangalore Chemicals & Fertilizers Ltd. case, noting that the failure to comply with Chapter X was entirely on the appellants, and there was no administrative failure by the authorities. The Tribunal also referenced the Apex Court's decision in Kedarnath Jute Manufacturing Co., which held that procedural compliance is mandatory to prevent fraud and administrative inconvenience.

Conclusion:
The Tribunal concluded that the appellants' failure to comply with Chapter X procedures, including obtaining necessary registrations and permissions, disqualified them from the exemption under Notification No. 58/86. The appeal was dismissed, affirming the mandatory nature of procedural compliance for availing the exemption.

Order:
The appeal is dismissed, and the appellants are not entitled to the benefit of Notification No. 58/86 due to non-compliance with Chapter X procedures.