2012 (7) TMI 638 - AT - Central Excise

SSI Limits - Computation of turnover - Notification No. 8/2003-CE - the process of denaturing in the tanker / manufacture of denatured alcohol - held that - The fact that the tanker was brought by the buyer and denaturant was also brought by the buyer and assessee simply poured the impure spirit into the tanker and mixed denaturant with it to manufacture denatured spirit cannot be said to be undertaken with an intention to evade duty. This is a case where two views are possible. - Demand set aside - Decided in favor of assessee.

Summary

Issues:
1. Whether the process of mixing denaturant in the tanker amounts to manufacture, making the assessee liable to pay duty.
2. Whether penalties imposed on the assessee for suppression of facts and mis-declaration are justified.

Analysis:

Issue 1:
The case involved a dispute regarding the liability of the assessee to pay duty on denatured ethyl alcohol manufactured by mixing denaturant in the tanker within the factory premises. The Revenue contended that the assessee had crossed the exemption limit and was ineligible for exemption under Notification No. 8/2003-CE. The original adjudicating authority held that the mixing process amounted to manufacture within the factory, making the duty payable. The Commissioner (Appeals) upheld this view, stating that the process of mixing and the resulting new product constituted manufacture. The Tribunal concurred with the Commissioner's decision, emphasizing that the mixing process occurred within the factory premises, necessary for the sale and movement of the denatured spirit. The Tribunal rejected the assessee's appeal, affirming the duty liability.

Issue 2:
Regarding the penalties imposed on the assessee, the Revenue argued that there was deliberate misdeclaration of turnover and suppression of facts to evade duty. However, the Tribunal noted that the mixing process in the tanker, facilitated by the buyer and conducted within the factory premises, did not demonstrate an intention to evade duty. The Tribunal observed that the situation allowed for differing interpretations, indicating no deliberate evasion. Consequently, the Tribunal upheld the decision of the Commissioner (Appeals) to set aside the penalties under the Central Excise Act and Rules. The Revenue's appeal against the penalties was also rejected.

In conclusion, the Tribunal upheld the duty liability on the assessee for the manufacturing process involving mixing denaturant in the tanker within the factory premises. Additionally, the Tribunal found no justification for imposing penalties on the assessee, as there was no evidence of deliberate intention to evade duty or suppression of facts in the mixing process.