1999 (11) TMI 242 - AT - Central Excise

Summary

Issues:
1. Entitlement to exemption under Notification No. 181/86-C.E.
2. Concessional rate of duty on raw naptha under Notification No. 75/84-C.E.
3. Allegations of clandestine removal of urea and non-intended use of raw naptha.
4. Validity of the impugned order based on assumptions and presumptions.

Issue 1: Entitlement to exemption under Notification No. 181/86-C.E.:
The appeal challenged the demand confirmed by the Collector against the appellants under Section 11A of the Central Excise Act. The controversy revolved around the appellants' entitlement to the benefit of exemption under Notification No. 181/86-C.E. for urea used as a fertilizer. The appellants, engaged in urea fertilizer manufacturing, faced a demand due to discrepancies in urea stock and the clearance for use as fertilizer.

Issue 2: Concessional rate of duty on raw naptha under Notification No. 75/84-C.E.:
The appellants procured raw naptha at a concessional rate for manufacturing fertilizers, as per Notification No. 75/84-C.E. The dispute arose as the urea, for which raw naptha was received at a concessional rate, was not shown to have been cleared for use as fertilizer. This discrepancy led to a demand for excise duty on urea and differential duty on raw naptha.

Issue 3: Allegations of clandestine removal of urea and non-intended use of raw naptha:
The Collector alleged that the urea stock discrepancies indicated non-clearance for use as fertilizer, implying potential clandestine removal. The appellants contested this, claiming losses in urea stock were due to handling during mass production and dispatches. The Collector's order lacked evidence of clandestine removal or non-intended use of raw naptha, making the demand legally questionable.

Issue 4: Validity of the impugned order based on assumptions and presumptions:
The appellants challenged the impugned order, arguing it was based on assumptions and presumptions without concrete evidence of non-compliance. The appellants' explanations for urea stock discrepancies, supported by Board decisions to write off losses, were deemed acceptable. The lack of evidence for clandestine activities or non-intended use of raw naptha rendered the Collector's order invalid.

In conclusion, the Appellate Tribunal accepted the appellants' appeal, setting aside the Collector's order. The Tribunal found the appellants justified in their explanations for urea stock discrepancies and rejected the allegations of clandestine activities or non-intended use of raw naptha. The legal basis for demanding excise duty on urea and differential duty on raw naptha was deemed unsustainable, leading to the decision in favor of the appellants.