2019 (5) TMI 1565 - AT - Central Excise

Benefit of N/N. 7/94-CE dated 01.03.1094 - duty free procurement of sulphuric acid - diversion in open market and instead they purchased spent sulphuric acid which is being used by them in the manufacture of SSP - HELD THAT - The entire case of the Revenue is based upon the statement of the Director admitting that the sulphuric acid procured by them without payment of duty in terms of N/N. 7/94-CE dated 01.03.1994 was cleared by them in the open market and instead they purchased spent sulphuric acide which was used by them in the manufacture of SSP. The said statement dated 10.04.1996 was subsequently retracted by him vide letter dated 14.04.1996 which was received by the Department on 17.04.1996 - Apart from above, there is no evidence on record indicating the sale of the sulphuric acid and the purchase of the spent sulphuric acid. It is well settled law that the retracted statements cannot be made the basis for holding against the assessee unless the same are corroborated in material particulars by independent and reliable evidences. In the absence of any evidence to the contrary, I find not merits in the Revenue s stand. As per the appellant such consignment of duty free procurement were verified by their Jurisdictional Central Excise officers and no discrepancies were ever found. The Commissioner (Appeals) observed that the said plea of the assessee does not hold water and is not sustainable inasmuch as the Jurisdictional Central Excise Officer have verified the quantity of the raw material and not the quality of the goods. However, the same reasoning of Commissioner (Appeals) acts prejudice to the Revenue s own case. The supplier in the present case was the manufacturer of sulphuric acid and not spent sulphuric acid. As such on this ground also the Revenue s case has no legs to stand. The Lower Authorities have not referred to any technical literature to show that the SSP can be manufactured even out of spent sulphuric acid. If the raw material specified in the Notification is sulphuric acid and not spent sulphuric acid, the said fact leads to an inevitable conclusion that it is only sulphuric acid which can be used for the manufacture of SSP. Revenue has not advanced any evidence to show that the SSP can be manufactured even out of the spent sulphuric acid. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Duty-free procurement of sulphuric acid for manufacturing Single Super Phosphate Fertilizer (SSP).
2. Allegations of diversion of sulphuric acid in the open market.
3. Show cause notice for duty demand and penalty imposition.
4. Reliance on retracted statement of the Director as the basis of the Revenue's case.
5. Verification of raw material under Chapter X procedures.
6. Discrepancies in the quality verification process by the Jurisdictional Central Excise Officer.
7. Technical aspect: SSP manufacturing from sulphuric acid vs. spent sulphuric acid.

Analysis:
1. The case revolved around the duty-free procurement of sulphuric acid by the appellants for manufacturing SSP under Notification No.7/94-CE dated 01.03.1994.
2. Allegations arose after a search at the appellant's factory revealed statements suggesting diversion of sulphuric acid in the open market, leading to a show cause notice for duty demand.
3. The Original Adjudicating Authority confirmed the demand and imposed penalties, which were upheld by the Commissioner (Appeals), prompting the present appeals.
4. The Revenue's case heavily relied on the Director's retracted statement regarding the procurement and use of sulphuric acid, lacking corroborative evidence, which was deemed insufficient to hold against the appellants.
5. The appellant argued that the raw material verification under Chapter X procedures by the Jurisdictional Central Excise Officer did not reveal any discrepancies in quantity, challenging the Revenue's stance.
6. Discrepancies in the quality verification process raised doubts on the Revenue's claim regarding the nature of the procured material, as the supplier was the manufacturer of sulphuric acid, not spent sulphuric acid.
7. The technical aspect highlighted that SSP manufacturing requires sulphuric acid, not spent sulphuric acid, with no evidence presented by the Revenue to support the contrary claim, leading to the appeal's success and setting aside of the impugned orders.