Customs, Excise and Gold Tribunal - Delhi
Amrit Chemicals vs Collector Of C. Ex. on 18 August, 1989
Equivalent citations: 1990(25)ECC68, 1990ECR593(TRI.-DELHI), 1990(45)ELT282(TRI-DEL)
ORDER
G. Sankaran, Senior Vice-President
1. This appeal is directed against order-in-original No. 3/Addl.Collector/1986, dated 26-8-1986 passed by the Additional Collector of Central Excise, Ahmedabad whereby he demanded from the appellants a sum of Rs.1,16,212.22 being the duty leviable on recovered caustic soda and imposed on them a penalty of Rs. 30,000/-.
2. The facts of the case, briefly, stated are that the appellants were engaged in "manufacture" (as the Revenue would put it) or "recovery" (as the appellants would put it) of caustic soda from spent caustic soda lye. The Superintendent of Central Excise who along with his officers visited the factory of the appellants on 25-1-1985 and 30-1- 1985 found on scrutiny of the factory records that the appellants were undertaking concentration of caustic soda liquor from spent caustic soda lye received from textile mills and returning the same after process to the Mills under their delivery slips. On fruther scrutiny, the Supdt. noticed that the appellants had received spent caustic soda lye from M/s. Darshan Corporation for concentration and the concentrated liquor was returned to the latter under their delivery challans after recovering labour charges at the rate of Rs. 2.50 per K.G. It appeared that M/s. Darshan Corporation was a trading firm doing trading in chemicals etc. It was further noticed that the appellants were availing themselves of duty exemption in respect of such recovered caustic soda in terms of Notification No. 113/74-C.E., dated 20-7-1974. Investigation followed and statements were recorded and eventually a show cause notice was issued to the appellants on 14-10-1985 alleging violation of several provisions of the Central Excise Rules, 1944, and calling upon them to explain why a penalty should not be imposed on them and why duty amounting to Rs.1,16,212.22 should not be recovered from them on the caustic soda liquor manufactured and cleared to M/s. Darshan Corporation during the years 1982-83,1983- 84 and 1984-85 (upto January, 1985). In their reply to the show cause notice and during the personal hearing before the Additional Collector, the appellants denied all the alegations. However, the Additional Collector rejected their explanation and passed the impugned order which is now under appeal.
3. We have heard Shri D.T. Trivedi, Consultant, for the appellants and Shri A.S. Sunder Rajan, DR, for the respondent-Collector.
4. Before we consider the rival contentions, it is necessary to notice the provisions of Central Excise Notification No. 113/74-C.E., dated 20-7-1974. By this notification, the Central Government exempted caustic soda falling under Item No. MB of the First Schedule to the Central Excises & Salt Act, 1944 and recovered from spent caustic soda lye or black liquor obtained during the manufacturing or processing or manufacturing and processing of excisable goods or non-excisable goods in a factory other than the factory where the said spent caustic soda lye or black liquor was obtained, from the whole of the duty of excise leviable thereon. This exemption was subject to certain conditions; (a) the appropriate duty of excise, or the additional duty of customs, as the case may be, should have already been paid on the caustic soda initially taken for use during the aforesaid operations; (b) the ownership of the spent caustic soda lye or black liquor continued to vest in the factory where the same was obtained; and (c) the caustic soda recovered in another factory was actually returned to the first factory to which the spent caustic soda lye or balck liquor belonged.
5. There is no dispute in so far as fulfilment of condition (a) above is concerned. It is the appellant's contention that ownership of the spent lye continued to remain with the Textile Mill concerned, viz., M/s. Jaipur Mfg. Co. Ltd. and that though the receipt of the lye from the said Mills by the appellants and the return of the concentrated liquor by the appellants to the Mill was through an intermediary, viz., M/s. Darshan Corporation, the latter at no time had acquired ownership of the goods. The goods after processing were factually returned to the textile mill. Thus, it is contended, conditions (b) and (c) were also satsified and that, therefore, the appellants were eligible for the benefit of Notification No. 113/74-C.E. The Additional Collector, however, did not accept this contention and it is the appellants' grievance that he not given adequate consideration to the submissions made before him and the documentary evidence placed on record.
6. In their reply to the show cause notice, the appellants had contended that they had been receiving spent caustic soda lye from M/s. Darshan Corporation which, in turn, had received the same from M/s. Raipur Mfg. Co. Ltd. The appellants had been recovering caustic soda out of the said lye and returning it to M/s. Darshan Corporation which, in turn, returned it to M/s. Raipur Mfg. Co. Ltd. It was also submitted that M/s. Darshan Corporation merely acted as an intermediary between the textile mill and the appellants. They relied on the statement recorded from Shri K. Hathesing of Darshan Corporation in which he had stated that the corporation was receiving caustic soda lye from Raipur Mills and were sending the same to the appellants for concentration and, after concentration, it was being returned to the Mill. Reliance was also placed on the statement of Shri R.S. Bhatt, Assistant Manager of the appellant firm in which he had stated that the appellants were receiving spent lye from Darshan Corporation and returning it to them after concentration, alongwith the reply, the appellants had also enclosed a copy of the contract entered into between the textile mill and the Darshan Corporation which stated, inter alia, that, after concentration, the caustic liquor was to be returned to the mill by Darshan Corporation. Another piece of evidence was an affidavit of Shri Anil Narottamdas Dalai, Secretary of M/s. Raipur Mfg. Co. Ltd., to the effect that at no point of time the mills had sold caustic soda lye to Darshan Corporation and that the ownership of the same out of which caustic soda or concentrate was produced, continued to vest in the mill from the time of sending the lye to Darshan corporation and receiving back concentrated liquor from the appellants through Darshan Corporation who were acting as the Mill's intermediary. The appellants had also filed an affidavit from Kanakbhai S. Hutheesing of Darshan Corporation deposing that caustic soda lye was received by the firm from M/s. Raipur Mfg. Co. Ltd., that it was delivered to the appellants for concentration and the caustic soda received back after concentration from the appellants was actually returned by Darshan Corporation to M/s. Raipur manufacturing Co. Ltd. He further deposed that the Corporation had acted only as an intermediary and had not acquired ownership of the lye. The third affidavit placed on record was that of Shri Nitin J. Nanavaty, Manager of the appellant firm, to the effect that the appellants were, on recovery of job charges, concentrating spent lye received from Darshan Corporation which, in turn, had received it from Raipur Mfg. Co. Ltd., and that the ownership continued to vest in Raipur Mfg. Co. Ltd. to which the recovered caustic soda was factually returned by Darshan Corpn. The appellants also had placed on record some delivery challans evidencing the transit of the spent lye from the textile mill to Darshan Corporation and of the concentrated liquor from Darshan Corporation to the textile mill.
7. The above evidence, in our opinion, overwhelmingly points to the conclusion that Darshan Corporation was acting only as an intermediary. It did not acquire ownership of the spent lye which continued to vest in Raipur Mfg. Co. Ltd. Spent lye was being routed through Darshan Corporation to the appellants for concentration and the concentrate, in turn, was being routed through Darshan Corporation to Raipur Mfg. Co. Ltd. This evidence has not been controverted by the Department. The notification itself does not place a prohibition on the presence of an intermediary as in this case. What it required was that the ownership of the spent caustic soda lye should continue to vest in the factory where it was obtained, in this case, Raipur Mfg. Co. Ltd. The evidence on record points to the fulfilment of this condition. The other condition was that the caustic soda recovered in another factory (the appellants, in the present case) was actually returned to the first factory (Raipur Mfg. Co. Ltd.) to which the spent caustic lye belonged. The evidence on record points to the fulfilment of this condition also. The Additional Collector, however, has drawn conclusions which, according to us, are untenable. He has stated that the evidence on record showed that it was Darshan Corporation and not Raipur Mfg. Co. Ltd. (who produced the spent lye) which sent spent lye to the appellants and received back the concentrated liquor. Darshan Corporation was not a factory and they did not produce the spent lye. They were a trading firm. There was no evidence to show that the ownership of the spent lye vested with Darshan Corpn. This spent lye did not belong to the Darshan Corporation and they were not a factory manufacturing excisable or non-excisable goods. Thus, the two conditions as regards ownership and return of the recovered caustic soda as set out in the notification were not fulfilled. In short, the existence of the intermediary firm seems to have clouded the appreciation of the evidence by the Additional Collector. He seems to have felt that he was fortified in his conclusion by the absence of any provision in the notification permitting the existence of an intermediary. As set out earlier, in our view, the evidence o record points to the conclusion that the two conditions had been fulfilled. Therefore, in our opinion, the appellants were eligible for the benefit of duty exemption on the caustic soda recovered by them from the spent caustic soda lye received by them from Raipur Mfg. Co. Ltd. through Darshan Corporation, in terms of Notification No. 113/74-C.E.
8. In the above view of the matter, it is not necessary to consider the other sub- missions made before us. We set aside the impugned order and allow the appeal with consequential relief to the appellants.