Custom, Excise & Service Tax Tribunal
M/S. Rashtriya Chemicals & Fertilisers ... vs Commissioner Of Central Excise & ... on 27 March, 2012
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT NO.1
APPEAL NO.E/671/ & 801/10-Mum
(Arising out of Order-in- Original No.31/Commr(KAP)/LTU/2009 dtd.27.1.2010 & 32-56/Commr(KAP)/LTU/2009 dtd 5.2.2010 passed by the Commissioner of Central Excise & Service Tax, LTU, Mumbai)
For approval and signature:
Honble Mr S.S.Kang, Vice President
Honble Mr.Sahab Singh, Member(Technical)
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1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
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M/s. Rashtriya Chemicals & Fertilisers Ltd.
:
Appellants
VS
Commissioner of Central Excise & Service Tax, LTU, Mumbai)
Respondent
Appearance
Shri A.Hidayatullah, Sr.Advocate with Shri H.G.Dharmadhikar, Advocate for Appellant Shri S.Diwalwar, Addl.Commr.(A.R.) for Respondent CORAM:
Mr. S. S. Kang, Vice President Mr.Sahab Singh, Member(Technical) Date of hearing: 20/2/2012 Date of decision 27/03/2012 ORDER NO.
Per : Sabah Singh These two appeals have been filed by M/s. Rashtriya Chemicals & Fertilisers Ltd. ( hereinafter referred to as the appellants) against the Order-in-Original No. 31/Commr./KAP/LTU/2009dated27.1.2010 and O/O No.32-56/Commr./KAP/LTU/ 2009 dated 5.2.10.
2. The brief facts of the case are that the factory of the appellants was visited by the officers of the Directorate General of Central Excise Intelligence in February, 2001 and during the course of scrutiny of records, it was observed by the officers that the appellants are procuring Naphtha at Nil rate of duty from M/s. Hindustan Petroleum Corporation Ltd. (in short HPCL) availing the benefit of Exemption Notification No.4/97, dated 1.3.97, 5/98 dated 2.6.98, 5/99 dated 28.2.99 and 6/2000 dated 1.3.2000 as amended for the manufacture of Fertiliser and Ammonia by following Chapter X procedure of the Central Excise Rules. The Naphtha so procured was being burnt in the steam generation plant to generate steam. The steam so generated was then consumed by various plants (like Urea Plant, Ammonia Plant, Turbo Generators, Chemical Group Plant and Heavy Water Plant). It was observed by the officers that steam generated and consumed in Turbo Generators for generating electricity and steam used in Heavy Water Plant is used in a manner other than used in manufacture of fertilizers. During the course of investigation, statement of Shri V.G.Londhe, Finance Manager of the appellants was recorded in which he stated that the basic feed for their unit is natural gas and naphtha is also used to supplement the deficiency of natural gas since 28.11.96 onwards and naphtha is burnt as fuel in boilers in steam generation plant to generate steam which is supplied to
(a) Urea Plant for manufacturing urea
(b) Ammonia Plant for manufacturing ammonia,
(c) Turbine Generators for generation of electricity and
(d) S.M. Header for further distribution to Organic Chemicals Plant and to T.A.E. (Heavy Water Plant of Department of Atomic Energy).
Shri Londhe also submitted the flow chart showing distribution of steam generated in the steam generation plant. The statement of Shri Londhe was also confirmed by Shri R.H.Kulkarni, Chief Finance Manager of the appellants on 12.6.2001 and he stated that electricity generated from steam is also being sold to M/s. MSEB, that the Urea, Ammonia, Trubo generator, Chemical Group and Heavy Water Plants are operating independently. After scrutiny of the documents and records of the appellants and also on the basis of statements of Shri Londhe and Shri Kulkarni, it appeared to the officers that exemption granted for use of naphtha in the manufacture of fertilizer or ammonia cannot be extended to the finished goods other than fertilizer or ammonia. Since naphtha and natural gas both could be burnt simultaneously in steam generation plant, percentage of consumption of naphtha used in generation of steam used in plants other than fertilizer and ammonia could not be ascertained directly. Therefore, the officers relied upon a statement produced by Shri Londhe, Finance Manager, showing the total generation of steam in steam generation plant and its consumption in various plants. From the said statement, percentage of steam consumed in the plants other than fertilizer and ammonia could be worked out and on the basis of which total consumption of naphtha in the plants other than fertilizer and ammonia during the period 27.11.96 to 31.3.2001 was quantified as 1,77,733.64 M.T. involving central excise duty to the tune of Rs. 28,55,95,491/-. Accordingly, the first show-cause notice was issued by the Directorate General of Central Excise Intelligence on 29.8.2001 demanding duty amounting to Rs.28,55,95,491/- under Rule 196 of the Central Excise Rules read with proviso to Section 11A of the Central Excise Act, proposing penalty under Sec. 11AC and Rule 173Q of the Central Excise Rules and proposing charging of interest under Sec.11AB of the Act and for subsequent periods 25 show-cause notices were issued covering the period from April, 2001 to February 2005 demanding total duty of Rs. 4,99,36,179/- under Rule 196 of the Central Excise Rules and Rule 6 of Central Excise (Removal of goods of concessional rate of duty for manufacture of excisable goods) Rules, 2001 read with Sec.11A of the Central Excise Act and proposing penalty under Rule 173Q and Rule 25 of the Central Excise Rules and also proposing charging of interest under Sec.11AB of the Act. These show-cause notices were confirmed by the Commissioner of the Central Excise, LTU, Mumbai vide the impugned orders and the appellants are in appeals before us against these orders.
3. The Ld.Sr.Advocate appearing for the appellants submitted that the chart which was submitted by them before the authorities is available at page 120 of the appeal paper book and it clearly states that during the period covered by the show-cause notice, steam required to be produced for fertiliser as well as electricity required for fertilizer is 14864232 M.T. and steam generated out of the impugned naphtha which is procured under exemption is 8952671 M.T. Therefore, balance steam required in the manufacture of fertilizer is 5911561 M.T which is generated from natural gas. Therefore, when naphtha itself is in short supply, the question of its diversion for manufacture of other products other than fertilizer does not arise. He submitted that in para 24 of the Order-in-original, the Commissioner has observed that the quantity of natural gas so used also needs to be considered in order to decide whether naphtha was in short supply or otherwise for manufacture of fertilizers and ammonia and generation of steam whereas in para 28 and 29 of the same order, he has made contrary observations. Hence the impugned Order-in-Original has inherent defects of contradiction and is unsustainable. Since naphtha is in short receipt than required for the manufacture of the intended product fertilizer, as per Notification No. 75/84 as amended by Notification 4/97 and Notification 5/98, the allegation of diversion of such material for the manufacture of products other than fertilizer is untenable. The Ld. Sr.Counsel further submitted that the language used in all the Notifications is intended use and not actual use as contemplated by the department. Therefore, the contention of the department in principle is not sustainable in the light of various decisions of the Courts and Tribunal. He specifically referred to the case of DCM Shriram Consolidated Ltd. vs CCE, Jaipur -2003(159)ELT 278 (Tri-Del.) wherein it was held by the Tribunal that the furnace oil procured for the manufacture of fertilizer was entitled to the benefit of Notification No.75/84 as it was intended for use in the manufacture of fertilizer. Ld.Sr.Counsel heavily relied on this decision and submitted that their case is squarely covered by the said decision of the Tribunal. He also placed reliance on the decision of the Supreme Court in the case of State of Haryana vs. Dalmia Dadri Cement Ltd. -2004 (178) ELT 13 (S.C.) which also clarified the words intended for use and it was held that the benefit in that case is permissible if the goods are cleared for intended use. He further submitted that penalty is not imposable when the demand itself is not sustainable and he also contended that simultaneous imposition of penalty under Sec.11AC and Rule 173Q and Rule 25 of the Cenvat Credit Rules is also contrary to the legal provisions. He further submitted that no penalty is imposable as they are Public Sector Undertaking and there is no intention to evade payment of duty. He, therefore submitted that the Orders-in-Original passed by the Commissioner need to be set aside.
4. The Ld. Addl. Commissioner (A.R.) appearing for the Revenue submitted that the Finance Manager Shri Londhe has categorically stated in his statement that the basic input for the manufacture is natural gas, and naphtha is also being used to supplement deficiency of natural gas since 28.11.06 and this statement of Shri Londhe was also affirmed by Shri Kulkarni in his statement recorded on 12.6.2001. Therefore, the argument of the appellants that naphtha is their main fuel and natural gas is the supplementary fuel is not acceptable and it is only an after-thought. He contended that they are using a type of boiler where natural gas and naphtha can be used simultaneously. When C.T-2 certificates were issued by Range Officers for supply of naphtha from M/s. Hindustan Petroleum Corporation Ltd., the appellants were very well aware that naphtha will also be used for generation of steam, proportion of which will go for non fertilizer purposes. Therefore, they have obtained C.T.-2 certificates by way of suppression and mis-statement on their part and therefore penal provision has rightly been invoked by the Commissioner. He further submitted that when the case was remanded by the Tribunal with direction to disclose the method of calculation to the appellants, the Commissioner has recorded in para 8 of the order as to how the consumption of naphtha in their plant other than those of fertilizer and ammonia has been worked out. It is stated that the same has been worked out on the basis of statement submitted by Shri Londhe , Finance Manager showing generation of steam in the steam generation plant and its consumption in various plants and the Commissioner also issued a letter dated 3.7.2009 explaining various facets of calculation. He further submitted that the goods were received by the appellants under Chapter X procedure. He submitted that the words intended for use are appearing in the condition of the Notification and this condition is applicable to the supplier unit which is M/s. HPCL in this case. He submitted that the main Notification clearly grants exemption to naphtha for use in fertilizer only. As a recipient of the goods under Chapter X procedure or under Central Excise (Removal of goods of concessional rate of duty for manufacture of excisable goods) Rules, 2001, Rule 196 of the Central Excise Rules and Rule 6 of the Rules clearly stated that exemption is available only when the goods have been actually used for the intended purpose. Regarding reliance placed by the appellants on M/s. DCM Shriram Consolidated Ltd (supra) he submitted that this decision has been discussed by the Commissioner in para 28 of the order and has been clearly distinguished from the facts of the present case. He also contended that the other decision relied upon by the appellants in the case of State of Haryana vs Dalmia Dadri Cement Ltd (supra) is also clearly distinguishable as the demand was made against the supplier and not against the buyer. He relied upon the decision in the case of IBP Co.Ltd. -1999(110)ELT 960(Tri) and Ferro Alloys Corporation 1994 (71)ELT 931(Tri) and Vikram Enterprises 2008(226)ELT 437(Tri-Ahd.).
5. After hearing both sides, we find that the appellants have received naphtha under Chapter X procedure and under Rule 6 of Central Excise (Removal of goods of concessional rate of duty for manufacture of excisable goods) Rules, 2001 from M/s. Hindustan Petroleum Corpn.Ltd. under Notification No.4/97,5/98, 5/99, 6/2000 and 6/2002 prevailing during the period. We find that in the Notifications the exemption is granted as shown below:-
Notification No. S.No.of Notfn.1
Chapter 2 Description of goods 3 Condition 4 4/97 5/98 5/99 6/2000 6/2002 10 11 12 14 27 27 Naphtha and natural gasoline liquid for use in the manufacture of fertilizer or ammonia 3 & 4 4 & 5 4 & 5 4& 5 All these exemptions are subject to the following conditions (Condition 3 &4 or 4&5 of table):-
(a) The exemption shall be subject to proving to the satisfaction of an officer not below the rank of the Assistant Commissioner Central Excise / Deputy Commissioner Central Excise that such goods are cleared for the intended use specified in col.3 of the said table and
(b) Where such use is elsewhere than in the factory of production, the procedure set out in Chapter X of the C. Ex. Rules 1944, is followed.
6. We find that naphtha and natural gas both are used together to produce steam in steam generation plant (SGP). In the chart submitted by the appellants, the appellants have given the quantities of naphtha and natural gas used, total steam produced and used for different purposes and also the electricity produced. In the bottom of the chart, they have shown the quantity of steam attributable to gas and naphtha and it is the contention of the appellants that total steam consumed for fertilizers is more than the steam produced attributable to naphtha. We find that as the steam produced out of naphtha and natural gas is not separately stored, it is difficult to say steam produced out of which fuel is going to manufacture of fertilizer and non fertilizer. It is not the appellants case that when naphtha is totally consumed then only the supply of natural gas is started and is consumed. As both the fuels are used together how the quantities of the steam produced out of naphtha and natural gas are shown separately in the chart submitted by the appellants. Therefore, the ratio of total steam used for non fertilizer use and the total steam generated out of both fuels should be taken for ascertaining the quantity of naphtha or natural gas consumed for non fertilizer purposes. Moreover, Shri V.G.Londhe, Finance Manager in his statement has admitted that natural gas is main fuel and naphtha is used as a supplement. He produced a statement showing the generation of steam in SGP and its consumption in various plants. From the said statement, the percentage of the steam consumed for non fertilizers can be ascertained which has been relied upon by the Revenue in the main show-cause notice. We therefore find that demanding duty on the basis of proportionate use in non fertilizer is reasonable method for demanding duty.
7. Appellants contentions is that naphtha was in short supply, is an admitted fact by the department as Annexure-E attached to the show-cause notices dated 3.8.2005 and 5.10.2004. They contended that when something is in short supply, allegation of diversion of the same cannot survive. We have seen the show-cause notices and find that in the show-cause notices the reference is made in para 6.1 and 6.2 to the Annexure A, B, C and D to the show-cause notices. These show-cause notices do not refer to Annexure-E and there is no allegation in the show-cause notices on the basis of Annexure-E and the Commissioner also while confirming the demand has not referred to any Annexure-E. Therefore, we hold that the appellants cannot get any benefit out of the figure shown in Annexure-E at this stage.
8. After going through the Notifications 4/97, 5/98, 5/99, 6/2000 and 6/2002 in para 5 above, it is seen that Notifications grant exemption in respect of the goods mentioned under heading description of goods. In all the Notifications, the goods which are exempted are described as naphtha and natural gasoline liquid for use in the manufacture of fertilizer or ammonia and this exemption is subject to the condition 3 ,4 or 4, 5 of the Notifications. The words naphtha and natural gasoline liquid for use in the manufacture of fertilizer or ammonia find place under the heading description of goods whereas the words for intended use find place in Condition No.3,4 or 4,5 of the Notifications. The first condition of the exemption Notification is that the exemption shall be allowed if it has been proved to the satisfaction of the Asstt.Commissioner or Dy.Commissioner having jurisdiction over the factory that such goods are cleared for intended use. In the second condition, Chapter X procedure or the procedure laid down under Central Excise (Removal of goods of concessional rate of duty for manufacture of excisable goods) Rules, 2001 is followed. We find that the words intended use as mentioned in the first condition are preceded by the words such goods are cleared for that means that intended use is applicable when the goods are cleared from the factory of manufacture. In the present case, naphtha is manufactured by M/s. H.P.C.L and when the goods are cleared from M/s. H.P.C.L the first condition is satisfied if Asstt.Commissioner or Dy.Commissioner in-charge of M/s. H.P.C.L is satisfied about such intended use. But the appellants are recipient of naphtha under Chapter X procedure or under Central Excise (Removal of goods of concessional rate of duty for manufacture of excisable goods) Rules, 2001 for them exemption is available if the goods are for use in the manufacture of fertilizers and ammonia. Therefore, the appellants cannot get the benefit out of the words intended use.
9. The appellants heavily relied upon the decision of the Tribunal in the case of DCM Shriram (supra). In this case, the Tribunal was considering the applicability of exemption under Notification No.75/84 at concessional rate of duty on furnace oil. The power generated by using furnace oil, procured at concessional rate of duty, is pooled in common grid with the power generated by other power plants using only coal as fuel and is distributed to various plants manufacturing various products including fertilizers. In the cited case, the Revenues contention was that there was no identification that power generated from furnace oil was used in the fertilizer plant as the assessee has failed to prove that the power generated from furnace oil was solely used in the fertilizer plant. The Tribunal relied on the decision of the Supreme Court in the case of Steel Authority of India vs.Commissioner -1996(88)ELT 314(S.C.) in which it was held by the Court that the exemption Notification required proof that the raw naphtha was intended for use in the manufacture of fertilizer and not that the raw naphtha was used in the manufacture of fertilizer. Relying on the decision of the Supreme Court, the Tribunal in the DCM Shriram Consolidated Ltd.s case held that assessee has complied with the condition in the Notification and they are eligible to get furnace oil at concessional rate of duty.
10. in the case of DCM Shriram , the dispute between the Revenue and the assessee was in respect of exemption notification No.75/84 for furnace oil and the relevant entry in the table annexed to the Notification 75/84 is under :-
Ref.No. Item No. Description of goods Rate of duty Intended use 10.04 10 Furnace oil Nil Intended for use as feed stock in the manufacture of fertilisers The Condition No. a,b stated above in para 5 were also applicable in this case as also in respect of raw naphtha in the present case. We find that under DCM Shrirams case, the exemption notification itself granted the exemption to furnace oil intended for use as fuel or feed stock in the manufacture of fertilizers whereas in the present case naphtha is exempted under these Notifications for use in the manufacture of fertilizers as mentioned under the heading of description of goods and the words intended for use are not there in the Table of the exemption notification as was the case for furnace oil in Notification No.75/84 in DCM Shrirams case. Therefore, DCM Shrirams case is clearly distinguishable from the present case. Moreover, in the DCM Shrirams case, the appellant had dedicated 35 MW Power Plant in addition to coal fired plants available with them to the fertilizer plant and boilers of other plants did not use oil and 35 MW power plant was the power plant that used furnace oil and was dedicated to fertilizer plant. It is not the case of the appellants that steam generating plant in this case is exclusively dedicated to fertilizer plant and there were other steam generating plants for other purposes and steam generated in exclusive plant for fertilizer was not sufficient. The appellants have a single power plant capable of using multiple fuel at a time and multiple fuel at all the time. Therefore, the case of DCM Shriram has been rightly distinguished by the Commissioner in para 28 and 29 of the Order-in-Original and we uphold this finding of the adjudicating authority.
11. The appellants have also relied upon another decision in the case of State of Haryana vs. Dalmia Dadri Cement Ltd 2004(178)ELT 13 (S.C.). In this case the Government of Haryana wanted to deny the benefit of non inclusion of quantity of cement sold to Electricity Board under the taxable turnover on the ground that some quantity of cement was used for construction activity in respect of staff quarters and other construction by Electricity Board and not in generation/distribution of electrical energy. In this case the Honble Supreme Court in para 13 held as under:-
We are, therefore, of the view that the real question which we are called upon to determine is whether, in the present case, the cement supplied was intended for use directly in the generation or distribution of electrical energy. If it was so intended, the exemption was attracted but not otherwise. The certificates which we have referred to earlier issued by the Board clearly show that the intention of the Board was that the cement should be used for a purpose directly connected with the generation or distribution of electrical energy. There is no material to show that the certificates were false certificates given by the Board, having another use in mind, or that they were fraudulently obtained by the assessee in collusion with the Board. The mere fact that some of the cement supplied was, in fact, used by the Board for activities not directly connected with the generation or distribution of electrical energy cannot make any difference regarding the availability of the exemption. Relying on this decision, the Ld. Sr.Counsel submits that the intended for use does not mean that t is to be used for the purpose. We find that in the cited case, demand was made again M/s. Dalmia Dadri Cement Ltd. who is the supplier and who had cleared the cement on the basis of certificates given by the Electricity Board that cement will be used for generation and distribution of electricity. As far as the supplier is concerned, he was required to satisfy that the Board required the cement for use in the generation and distribution of energy. In the absence of any material to show that the certificate was not genuine, Supreme Court held that the exemption cannot be denied to the supplier. In the present case before us, it is not the supplier of the naphtha who is proposed to deny the benefit of the notification. In this case, the demand is against the user of the goods and the question before us is whether the user is eligible for exemption or not. Therefore, the issue in Dalmia Dadri Cement Ltd.s case was entirely different and not the same as before us in the present case.
12. We find that the goods have been received by the appellants either under Chapter X procedure or under Central Excise (Removal of goods of concessional rate of duty for manufacture of excisable goods) Rules, 2001 and the appellant in their application has undertaken that such goods shall be used for manufacture of fertilizer and also undertaken to pay duty in the event of failure to use the goods for the manufacture of fertilizer and they have executed a Bond and Letter of Undertaking in this regard.
13. We also find that the relevant provisions of Chapter X procedure prevalent during the time and the provisions under Central Excise (Removal of goods of concessional rate of duty for manufacture of excisable goods) Rules, 2001 are as under:-
Rule 196: Duty leviable on excisable goods not duly accounted for - If any excisable goods obtained under Rule 192 are not duly accounted for as having been used for the purpose and in the manner stated in the application or are not shown to the satisfaction of the proper officer to have been lost or destroyed by natural causes or by unavoidable accident during transport from the place of procurement to the applicants premises or during handling or storage in the premises approved under Rule 192, the applicant shall, on demand by the proper officer, immediately pay the duty leviable on such goods. The concession may at any time be withdrawn by the Commissioner if a breach of these rules is committed by the applicant, his agent or any person employed by him. In the event of such a breach, the Commissioner may also order the forfeiture of the security deposited under Rule 192 and may also confiscate the excisable goods, and all goods manufactured from such goods, in store at the factory Rule 6. Recovery of duty in certain cases.- The said Assistant Commissioner or Deputy Commissioner shall ensure that the goods received are used by the manufacturer for the intended purpose and where the subject goods are not used by the manufacturer for the intended purpose, the manufacturer shall be liable to pay the amount equal to the difference between the duty leviable on such goods but for the exemption and that already paid, if any, at the time of removal from the factory of the manufacturer of the subject goods, along with interest and the provisions of Section 11A and Section 11AB of the Central Excise Act, 1944(1 of 1944) shall apply mutatis Mutandis for effecting such recoveries. Therefore, in this case the provisions of Rule 196 of Chapter X of the Central Excise Rules and Rule 6 of Central Excise (Removal of goods of concessional rate of duty for manufacture of excisable goods) Rules, 2001 are attracted under which they are required to pay the duty on the goods if the goods are not used in the manufacture of fertilizers. In view of the above, we hold that the duty had been rightly demanded on the quantity of naphtha not used in the manufacture of fertilizer or ammonia and accordingly we uphold this finding of the Commissioner in both the orders.
14. We find that in the Order No.31/Commr(KAP)/LTU/2009 dated 27.1.2010 the Commissioner has imposed a penalty of Rs. 4,67,01,876/- under Rule 173Q of the Central Excise Rules read with Sec.11AC and Rule 25 of the Central Excise Rules, 2002 and in the Order 32-56/Commr(KAP)/LTU/2009 he has imposed a penalty of Rs. 4,79,72,980/- under Rule 25 of Central Excise Rules, 2002 and a penalty of Rs.19,63,199/- under Rule 173Q of the Central Excise Rules in respect of show-cause notice dated 7.5.2002.
15. The provisions of Rule 173Q, Rule 25 of the Central Excise Rules and Sec.11AC of the Act are reproduced below:-
173Q Consifscation and penalty .- (1) subject o the provisions contained in Section 11AC of the Act and [ rule 57AH], if any manufacturer] producer, registered person of a warehouse or a registered dealer -
(a) removes any excisable goods in contravention of any of the provisions of these rules; or
(b) does not account for any excisable goods manufactured, produced or stored by him; or (bb) ------- ; or (bbb) ----- ; or
(c) ----- ; or
(d) contravenes any of the provisions of these rules with intent to evade payment of duty, Then, all such goods shall be liable to confiscation and the manufacturer, producer, registered person of a warehouse or a registered dealer, as the case may be shall be liable to a penalty not exceeding the duty on the excisable goods in respect of which any contravention of the nature referred to in clause (a) or clause (b) or clause (bb) or clause (bbb) or clause (c) or clause (d) has been committed, or ten thousand rupees, whichever is greater. Rule 25 - Confiscation and penalty (1) Subject to the provisions of Section 11AC of the Act, if any producer, manufacturer, registered person of a warehouse or a registered dealer, -
(a) removes any excisable goods in contravention of any of the provisions of these rules or the notifications issued under these rules; or
(b) does not account for any excisable goods produced or manufactured or stored by him; or
(c) engages in the manufacture, production or storage of any excisable goods without having applied for the registration certificate required under section 6 of the Act; or
(d) contravenes any of the provisions of these rules or the notifications issued under these rules with intent to evade payment of duty, then, all such goods shall be liable to confiscation and the producer or manufacturer or registered person of the warehouse or a registered dealer, as the case may be, shall be liable to a penalty not exceeding the duty on the excisable goods in respect of which any contravention of the nature referred to in clause (a) or clause(b) or clause (c) or clause(d) has been committed, or [rupees two thousand], whichever is greater.
Section 11AC Penalty for short-levy or non-levy of duty in certain cases - Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reasons of fraud, collusion or any willful mis-statement or suppression of facts or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (2) of Section 11A, shall also be liable to pay a penalty equal to the duty so determined.
16. We find that the appellants in this case are not manufacturer of raw naphtha which was received by them under Chapter X procedure and under Central Excise (Removal of goods of concessional rate of duty for manufacture of excisable goods) Rules, 2001. Therefore, we are of the view that they will not be covered under the definition of manufacturer. producer, registered person of a warehouse or a registered dealer as mentioned in Rule 173Q or Rule 25 of the Central Excise Rules. Therefore, they are not liable to penalty under the provisions of these Rules. However, we find that on going through Section 11AC, the person who is liable to pay duty as determined under sub-section (2) of Section 11A shall be liable to pay a penalty equal to the duty so determined. We also find that Section 11A has been made applicable to the recipient of the goods under Chapter X procedure and under Central Excise (Removal of goods of concessional rate of duty for manufacture of excisable goods) Rules, 2001 as Section 11A is separately mentioned in Rule 196 of the Central Excise Rules and in Rule 6 of Central Excise (Removal of goods of concessional rate of duty for manufacture of excisable goods) Rules, 2001. We, therefore, uphold the penalty imposed by the adjudicating authority in Order No.31/2009 dtd. 27.1.2010 under Sec.11AC of the Act on the appellants. However, penalty imposed under Rule 173Q and Rule 25 of the Central Excise Rules in Order No.32-56/2009 dtd. 5.2.10 is set aside.
17. Appeals are disposed of in the above terms.
(Pronounced in Court on 27/03/2012 )
S. S. Kang
Vice President
Sahab Singh
Member(Technical)
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