1999 (12) TMI 189 - AT - Central Excise

Summary

Issues Involved:
Whether the use of raw naptha for flushing operations, resulting in contamination and subsequent recycling into the manufacturing process, attracts Central Excise duty?

Analysis:
1. Duty Leviable on Contaminated Naptha:
The appeal by Revenue challenges the dropping of show cause notices demanding duty from the respondents for the use of contaminated raw naptha. The main contention is whether the contaminated raw naptha, recycled into the manufacturing process after being used for flushing operations, is subject to Central Excise duty. Revenue argues that duty should have been paid as the removal of raw naptha from the bonded tank was not declared and cleared as per the required procedures.

2. Contentions of the Respondents:
The respondents argue that no duty liability arises from the use of raw naptha for flushing operations. They assert that all relevant information was provided to the department, and the recycled contaminated naptha did not result in any loss of excisable goods. The respondents believed that duty was not applicable as there was no physical removal of goods outside the factory gate.

3. Examination of Order-in-Original:
The Tribunal examined the Order-in-Original in detail and found no infirmity in the decision. The Collector acknowledged the necessity of the single-line operation involving naptha flushing and concluded that Rule 143A covered such removals. It was noted that since the entire quantity was recycled within the bonded area, no duty was chargeable. The Tribunal agreed with the Collector's findings and found no suppression of information by the respondents.

4. Application under Section 11C:
The only ground raised by Revenue was the rejection of the respondents' application under Section 11C. However, the rejection was not based on the merits of duty liability but on other considerations. The Board rejected the application as the issue was not a general concern in the industry. Therefore, the rejection did not establish duty liability, and the appeal on this ground was deemed invalid.

5. Conclusion:
After considering all submissions and records, the Tribunal found no merit in the Revenue's appeal. The Order-in-Original was upheld, and it was concluded that no duty was chargeable on the recycling of contaminated raw naptha. The appeal by Revenue was rejected based on the detailed analysis of the issues involved.