2000 (10) TMI 489 - AT - Central Excise

Summary

Issues:
- Interpretation of Notification No. 55/86 regarding clearance of waste and scrap of steel at nil rate of duty.
- Allegation of misuse of duty-free goods and demand of duty under Rule 196 of the C.E. Rules.
- Consideration of whether the goods were used for the intended purpose of manufacturing specified items.
- Application of time-bar under Section 11A(1) to Rule 196.

Analysis:
1. Interpretation of Notification No. 55/86:
The appeal involved a dispute over the interpretation of Notification No. 55/86, which permitted clearance of waste and scrap of steel at nil rate of duty subject to specific conditions. The notification required the goods to be used in the manufacture of specified items with the aid of an electric furnace. The appellants, holders of an L4 license, obtained steel waste and scrap at nil rate of duty from another company and used it in their electric furnace to manufacture molten steel.

2. Allegation of Misuse and Demand of Duty:
The department alleged that the appellants did not use the waste and scrap for the intended purpose as per the notification. A demand of duty amounting to Rs. 3,08,563.70 was raised against the appellants under Rule 196 of the C.E. Rules for the period from 1-3-1986 to 28-2-1988. The original authority and the Collector (Appeals) upheld the demand, leading to the filing of the present appeal.

3. Verification of Intended Use of Goods:
During the hearing, the appellants argued that the molten steel manufactured in their premises was transferred to an adjacent factory for the manufacture of castings falling under the specified sub-heading. They contended that the lower authorities overlooked this crucial aspect and failed to establish that the goods were not used for the intended purpose. The appellants cited previous rulings to support their position and emphasized that they followed the prescribed procedure.

4. Application of Time-Bar:
The appellants also raised the issue of time-bar under Section 11A(1) in relation to Rule 196. However, upon reference to a Supreme Court decision, they conceded that the limitation argument was not applicable in their case.

5. Judgment and Conclusion:
After considering the submissions and reviewing the evidence, the Tribunal found similarities between the present case and the precedent of Arti Paints & Chemicals Ltd. The Tribunal noted that the appellants, as L-6 license holders, had followed the necessary procedures and utilized the molten steel for manufacturing the specified items. Consequently, the Tribunal set aside the impugned order and allowed the appeal, ruling in favor of the appellants.

In conclusion, the Tribunal's decision centered on the correct interpretation of the notification, the verification of the goods' intended use, and the application of relevant legal provisions. The judgment highlighted the importance of following prescribed procedures and utilizing duty-free goods for their designated purpose to avoid demands for additional duties.