Customs, Excise and Gold Tribunal - Delhi
Premier Credits Ltd. vs Collector Of Central Excise on 20 November, 1998
Equivalent citations: 1999ECR224(TRI.-DELHI), 1999(114)ELT271(TRI-DEL)
ORDER Jyoti Balasundaram, Member (J)
1. The above appeal arises out of the order passed by the Collector of Central Excise, Indore confirming a duty demand of Rs. 11,74,450.94 P for thinners manufactured by the appellants herein by disallowing the benefit of Notification No. 230/86, dated 3-4-1986 on the ground that they were manufactured with the aid of power, confiscating two electric motor pumps and pipelines with option to redeem on payment of a fine of Rs. 25,000/- and imposing a penalty of Rs. 1,50,000/-.
2. The brief facts of the case are that the appellants are engaged in the manufacture of plasticizer and thinner falling under sub-heading 2917.00 and 3814.00 respectively of the Central Excise Tariff Act, 1985. In their classification list No. 18/89-90 they claimed exemption for thinner under Notification No. 230/86 which grants total exemption from payment of duty to certain goods specified in Col. 3 of the table annexed thereto and falling under heading or sub-headings of the Schedule to the Central Excise Tariff Act, 1985 specified in Col. 2 of the said table and made without the aid of power. Sl. No. 1 of the table covers thinners.
3. The Central Excise officers visited the factory premises of the appellants on 3-2-1990 and found that there were four underground storage tanks meant for storing Hexane, toluene and Benzene i.e. raw material for thinner, and one underground tank for storage of diesel and these four tanks were connected with two electric motors with pumps installed in a room situated in between the storage tank and thinner processing room. Two electric motors connected with four storage tanks were joined together and one red colour pipeline from them was passing through the thinner processing room directly into thinner processing vessels installed in that room. These two vessels were joined by valves. Besides two semi rotor hand-operated pumps were installed in the room. There was no separate pipeline from these hand pumps which were not found in working condition and the raw materials were pumped from the storage tanks forcefully with the aid of electric pump to the mixing vessels in order to mix the same with industrial solvent homogenously. From this it was evident that the assessee had used power in the manufacture of thinner.
4. On 12-2-1990, the Central Excise officers again visited the factory and found that the appellants had dismantled the installation of electric motor pumps and red colour pipeline connecting electric motors to the thinner vessels. Since the appellants had installed dummy S.R. pumps to avoid detection of use of power in the manufacture of thinner, it was alleged that the appellants had suppressed the fact of manufacture of thinner with the aid of power and wilfully mis-declared the same in the approved classification list and removed 2,55,054 litres and 60,400 kgs of thinner during the period 8-12-1988 to 24-1-1990. A show cause notice was issued proposing recovery of duty on this quantity of thinner and also proposing imposition of penalty. The duty demand and penalty were confirmed by the adjudicating authority; hence this appeal.
5. We have heard Shri J.S. Aggarwal, learned Advocate and Sh. J.M. Sharma, learned DR. We find that the appellants have not been able to explain satisfactorily that no power was used in the mixing of thinners. The appellants contention is that no power has been used in the manufacture of thinner because power was only used to pump raw materials into the thinner processing plant. However, this process of lifting of raw material for mixing with the industrial solvent is a process in relation to the manufacture of thinners. In the case of Collector of Central Excise, Jaipur v. Rajasthan State Chemical Works and Anr. reported in [1991 (55) E.L.T. 444] the Apex Court has held that transfer of raw material to the reacting vessel (in the case of Rajasthan State Chemical Works, brine was the raw material for manufacture of crude sodium sulphate and in the case of Sandersons Minerals Ltd. coke and limestone were raw materials in the manufacture of lime) is a preliminary operation but it is part of a continuous process. The handling of the raw materials for the purpose of such transfer was held to be integrally connected with the process of manufacture and preliminary steps like pumping brine and filling the salt pans form integral part of the manufacturing process even though the change in the raw material commences only when evaporation takes place. The Court held that when coke and lime are taken to the platform in definite proportions for the purpose of mixing, such operation is a step in the manufacturing process which precedes the feeding of the mixture into the kiln where the burning takes place. The Court has held that power is used in any of these operations in relation to the manufacture, the process is carried on with the aid of power.
6. The learned Counsel Sh. Agarwal attempted to distinguish this judgment by pointing out that Notification No. 179/77-C.E., dated 18-6-1977 which was the subject matter of interpretation by the Apex Court was worded differently i.e. it exempted all goods falling under T.I. 68 "in or in relation to the manufacture of which no process is ordinarily carried on with the aid of power" while in the present case, Notification 230/86 grants exemption to thinners etc. "made without the aid of power". The contention is that this expression occurring in Notification 230/86 has to be interpreted in a narrow manner and the notification has to be interpreted to apply only if power is directly used in the manufacture of specified goods and not to apply to goods in the manufacture of which raw materials have been lifted with the aid of power. This contention of the learned Counsel is not tenable in the light of the judgment of the Apex Court cited supra. The learned Counsel's reliance on the Supreme Court judgment reported in [1996 (82) E.L.T. 447] in the case of C.C.E., Baroda v. Ojas Corporation is also misplaced - the Supreme Court has extended the benefit of Notification 28/64, dated 1-2-1964 to laundry soap manufactured without the aid of power even though trimmings were converted into soap chips with the aid of power. The Notification exempted soap in or in relation to the manufacture of which no process has been carried on with the aid of power or of steam for heating, and the Apex Court has held that in the absence of evidence to show that power is used for the purpose of heating in the manufacture of soap chips, the duty demand could not be sustained. On the other hand, the notification with which we are concerned in the present appeal, grants exemption to thinners etc. made without the aid of power and since the use of power in lifting of raw materials into the thinner processing vessel has been held to amount to manufacture with the aid of power, the appellants are not eligible to the benefit of Notification 230/86. Therefore, the duty demand requires to be confirmed. The confiscation of electric motors, pumps and pipelines under Rule 173Q is also upheld as they were used in the manufacture of thinners for which the appellants wrongly availed the benefit of the Notification; however, the redemption fine is reduced to Rs. 10,000/- having regard to the overall facts and circumstances of the case. Penalty is also warranted in view of the fact of suppression of manufacture of thinner with the aid of power and mis-declaration in classification list (wherein the benefit of the notification was claimed) that the thinner was manufactured without the aid of power and also for the reason that the appellants had acted malafidely by dismantalling installation of electric motor pumps and pipe line connecting the electric motors to the thinner vessels after the first visit of the officers on 3-2-1990; however, in the facts and circumstances of the case, the penalty is reduced to Rs. 50,000/-.
7. The alternative plea for considering their claim for Modvat credit cannot be decided by us in the absence of the relevant information such as duty paid nature of inputs used in the manufacture of thinners and we therefore, remand the case to the Commissioner of Central Excise, Indore for consideration of extension of Modvat credit after necessary verification. The appeal is disposed of in the above terms.