Customs, Excise and Gold Tribunal - Delhi
Singhal Paints (P) Ltd. vs Collector Of C. Ex. on 6 November, 1998
Equivalent citations: 1999(106)ELT38(TRI-DEL)
ORDER S.L. Peeran, Member (J)
1. This appeal arises from Order-in-Original, dated 6-4-1992, passed by the Additional Collector of Central Excise, Allahabad. By this order, he has held that the appellants have not supported by any documentary evidence regarding use the actual use of Solvent C-IX in the manufacture of Plastics in the form of any consumption or despatch register, by which it could be inferred undisputedly that the goods were really used for manufacture of "Plastics". He has held that the submission of a mere L-4 licence is not any solid proof that they have manufactured Plastics out of the raw-material Solvent C-IX. He has also held that the company might have continued with their licence but the production of "Plastics" might not have been continued. He has held that there is nothing to establish beyond doubt that they had used Solvent C-IX in the manufacture of Plastics, even if it is assumed that such plastics was manufactured by them. He has held that the burden of proof regarding the actual use of the goods is on the assessee under Chapter X which he has failed to discharge in the instant case. Therefore, he has held that the company have not fulfilled the conditions of Notification No. 276/67, dated 21-12-1967 as they had failed to submit any cogent evidence to establish that Solvent C-IX was actually used in the manufacture of "Plastics", therefore, an amount of Rs. 35,440.80 is recoverable from them under Rule 196 of the Central Excise Rules, 1944 and also liable to penalty of Rs. 3,000/-under Rule 209 of the Central Excise Rules, 1944.
2. Arguing for the appellants, the learned Advocate submits that they had bought the Solvent C-IX from Indian Petro Chemicals Corporation Ltd. at nil rate of duty on AR 3. It is further stated that under the authority of the L-6, the appellant company has been authorised to obtain without payment of duty Benzene/Benzol, Solvent C-IX etc. for use of these excisable goods for special industrial purposes in the manufacture of synthetic resins/alkyd resin. They had followed Chapter X procedure in receiving Solvent C-IX from IPCL at nil rate of duty at AR 3 and used the same in the manufacture of Synthetic resins/alkyd resins in terms of the same Notification. They maintained RG 16 register and submitted monthly RT 11 return. The same had been audited, checked, signed and accepted by the Superintendent of Central Excise. It is stated that the department knew all the facts and therefore, there is no question of invoking larger period upto 20th February, 1991, who does not have power to invoke the provision of Section 11A of the Act. It is stated that in case if the evidence produced was not acceptable, it is for the Revenue to establish that the evidence produced was not legal, tenable and acceptable. The department had not done so and therefore, the lower authorities were bound to have accepted the evidence. It is also stated that the Additional Collector has not applied his mind except to make his observation.
3. We have heard the learned DR in this matter.
4. On a careful consideration of the matter, it is seen that the RG 16 has been scrutinised, checked and accepted by the Superintendent of Central Excise. The other documents in the form of AR 3s has also been checked and signed. The form RT 11 return has also been accepted. The same has been checked, signed and inspected. The appellants' contention that these goods Solvent C-IX was brought under licence cannot be disputed, therefore, the allegation of suppression by invoking larger period is therefore, not sustainable. It is also seen that the invoking the larger period is not in terms of law.
The department has not shown that the larger period is invokable in the present case in view of the fact that the goods had been brought under L-6 and all the necessary returns and documents had been filed, scrutinised and accepted by the department. In the light of enormous evidence on record, there is no suppression of any fact to invoke larger period in the present case. The Additional Collector has shifted the burden on the appellants to produce solid evidence, without examining all the necessary statutory registers and documents which had been placed to show that the Solvent C-IX had been utilised in the manufacture of plastics for which the Notification applies. The item has been brought under Chapter X from IPCL, therefore, it cannot be said that there is any violation of rule or provisions of the Section. In that view of the matter, the impugned order is not sustainable, hence the same is set aside by accepting the appeal.
S.K. Bhatnagar, Vice President
5. Learned Counsel stated that the appellants are the manufacturer of the Synthetic Resin and registered as SSI Unit. They hold L-4 and L-6 licences since April, 1982 in terms of the provisions of Notification No. 276/67-C.E., dated 21-12-1967 and are thus authorised to obtain benzene, benzol, Solvent C-IX etc. for the purpose of manufacture of synthetic/alkyd resins. The appellants, according to him, followed Chapter X procedure, in receiving Solvent C-IX from M/s. Indian Petrochemicals Corporation Ltd., Vadodara, at nil rate of duty on AR 35, which were duly warehoused by the jurisdictional Central Excise Officer. Elaborating on his submission, it was contended by him that the appellant's company received seven consignments of Solvent C-IX in tankers during the period from June, 1982 to December, 1985 and used the same for special industrial purposes in the manufacture of synthetic/alkyd resins. However, the appellants received a show cause notice, dated 20-2-1991 alleging that the appellants did not use the said quantity of Solvent C-IX for the manufacture of synthetic/alkyd resins and instead they utilised it in the manufacture of paint and varnishes, lacquers and allied materials or a solvent thinner or dilutents for synthetic resins which are not included in the Schedule appended to the Notification No. 276/67, dated 21-12-1967, as amended. The appellants contested the show cause notice. However, the Additional Collector confirmed the demand negativing the defence of the appellants. It was his contention that there is no evidence on the record to show the mis-use of the exemption and the findings of the Additional Collector that they mis-used the said consignments of Solvent C-IX is based on surmises and conjectures. He also cited the case of Ashok Leyland Limited v. C.C.E. -1989 (44) E.L.T. 343.
6. In reply, learned DR submitted that the findings recorded by the Additional Collector regarding the mis-use are based on the evidence available on the record. He stated that the aforesaid contention of the appellants is not supported by any documentary evidence regarding the actual use of Solvent C-IX in the manufacture of plastics in the form of any consumption or despatch register by which it could be inferred undisputedly that the goods were really used for the manufacture of 'Plastics'. Submissions of a mere L-4 licence is not any solid proof that they have manufactured plastics out of the raw-material Solvent C-IX.
7. I have considered the above submissions. I observe that it is not in dispute that the appellants were holder of L-6 and L-4 licences. It is also not in dispute that the solvent in question was brought under Chapter X procedure for use in the manufactured commodity covered by Notification No. 276/67. The main allegation against the appellants, as mentioned in the show cause notice is that instead of using the quantity in question in the manufacture of the product covered by the aforesaid notification, it was diverted for use in the manufacture of paints and varnishes which were not covered by the said notification and the benefit was availed of by wilful mis-statement and suppression of material facts. A perusal of the Collector's order further shows that he has found that the appellants did not maintain any record regarding the actual use of the solvent in the manufacture of plastics in the form of any consumption or despatch register. The appellants did not deny this. The Collector is also correct in pointing out that merely stating that they were holders of L-4 and L-6 licences was not sufficient. At the same time, it was open to the department to show that no plastic was produced during the relevant period. It was necessary so to do in the face of RT 11 returns in which certain quantity of solvents is shown as having been received and used in the manufacture of alkyd resins and this RT 11 return was duly checked by the Inspector and Superintendent. Again, RG 6 record shows certain quantity of excisable goods which was received without payment of duty of having been issued for use in the manufacture of alkyd resins. During the course of hearing before us, the department side has not challenged the correctness or otherwise of the copies of the relevant portions of these documents filed before us. The department has not produced any document in the form of extracts from RG 1 or copies of GP1 to show that the specified declared products were not manufactured or cleared and the language of the operative portion of the Collector's order itself shows that he is proceeding on the basis of assumption and presumption and has not squarely dealt with the aforesaid record which was necessary as the record before us was sufficient to shift the onus back to the department. In other words, the department has not been able to substantiate its charges and in the facts and circumstances of the case, the relevant RT 11 returns are required to be taken not (sic) of. I, therefore, set aside the impugned order and accept the appeal, as already announced in the open Court.