2000 (2) TMI 432 - AT - Central Excise

Summary

Issues:
Applicability of Notification No. 202/88-CE dated 20-5-1988 regarding exemption to steel tubes, interpretation of the notification's terms, evidence of raw material thickness exceeding 5 mm, capacity of plant to manufacture tubes beyond 5 mm, reliance on quality control reports and invoices, burden of proof on Revenue to show plant modification, impact of ISI specifications on thickness determination.

Analysis:
The case involved a Revenue appeal against an order-in-original dropping proceedings initiated against the respondents based on a show cause notice alleging the manufacture of tubes and pipes out of HR coils exceeding 5 mm thickness. The key issue revolved around the interpretation of Notification No. 202/88-CE and its applicability to the end product's thickness. The respondents argued that the notification only pertained to the input material's thickness, not the output, supported by evidence that they procured 5 mm coils from SAIL due to plant limitations.

The Commissioner considered the evidence presented by both parties, noting that the raw material was 5 mm thick, the plant was incapable of producing tubes beyond 5 mm, and no proof of procuring thicker sheets existed. The Revenue contended that since the exemption related to the output, both input and output thickness should align, citing quality control reports as evidence. They argued that the respondents could modify their plant to produce thicker tubes, shifting the burden of proof to them.

The Tribunal analyzed the evidence, emphasizing that the notification specified only input thickness, rejecting the Revenue's attempt to extend it to output thickness. They upheld the Commissioner's decision, highlighting the consistent procurement of 5 mm coils, plant design limitations, and the lack of evidence supporting plant modification. The Tribunal agreed that as long as the input met the notification's criteria, the exemption applied, irrespective of plant capacity. They accepted the respondents' explanation for discrepancies in quality reports and invoices based on ISI specifications, finding no legal or logical flaws in the Commissioner's order.

In conclusion, the Tribunal dismissed the Revenue's appeal, finding no merit to interfere with the order. They affirmed that the evidence supported the respondents' compliance with the notification requirements, emphasizing the importance of aligning with the notification's explicit terms and the burden of proof on the Revenue to substantiate any plant modifications. The impact of ISI specifications on thickness determination was deemed reasonable, leading to the dismissal of the appeal.