ATUL PRODUCTS Vs. CCE

JUDGEMENT

(1.) THE issue involved in the appeal filed by M/s. Atul Products Ltd. is regarding availability of benefit of Notification No. 432/86 -CE dated 6.10.1986. Shri Lalit Patni, General Manager Excise and Customs of the appellants, submitted that the appellants manufacture Dye, Dye -intermediates, bulk drugs, chemicals, etc. Notification No. 432/86 dated 6.10.1986 exempted Dye -intermediates falling under Chapter 29 of the Schedule to the Central Excise Tariff Act from so much of the duty of excise as is equivalent to the excise duty already paid on Naphthalene falling under sub -heading 2707.40 of the Tariff. As no procedure was prescribed in the Notification for availing the exemption, they followed the procedure prescribed in Rule 56A of the Central Excise Rules for availing of proforma credit. The Superintendent Central Excise, however, under order dated 3.4.1987 ordered for disallowing the set off under Notification No. 432/86 for not following the procedure prescribed under Trade Notice No. 126/81 dated 22.5.1981. This order was set aside by the Collector (Appeals) under order dated 30.6.1988 and matter was remanded to the Assistant Collector to redetermine the issue and pass speaking order after following the principles of natural justice. In special civil application No. 5495 of 1990 filed by them, the Gujarat High Court directed, under order dated 7.8.1990, the Assistant Collector to dispose of the matter within 4 weeks. The Assistant Collector, under order dated 19.11.1990, disallowed the credit amounting to Rs. 2,13,77,868.50 p. holding that Notification No. 432/86 was not like the credit allowed under proforma credit or Modvat credit; that set off scheme provides that only so much duty on the final product could be set off as the duty paid on the quantity of inputs used; that it was a requirement to get the input -output ratio approved by the Assistant Collector and that they did not follow the procedure prescribed in the trade notice No. 126/81. Again the Collector (Appeals), under order dated 28.8.1991 ordered that no one to one co -relation is required and directed the Assistant Collector to allow the set off of duty as per para 4 and para 6.1 of enclosure II to Board's letter F. No. 201/3(W)/77 dated 1.4.1981. Thereafter, they wrote letter dated 4.9.1991 to Assistant Collector for availment of credit of input already issued and got accumulated. As no reply was received, they started availing credit for input already issued. The Assistant Collector seized 3 trucks loaded with goods on 17.9.1991 as the final products were cleared by adjusting the entire duty amount from credit amount accumulated by them instead of restricting the set off to the duty paid on inputs used in the manufacture of goods. The Collector Central Excise, under the impugned order dated 23.2.1994, confirmed demand of Rs. 5,34,463.07 on final goods removed; imposed a penalty of Rs. 50,000/ - on the appellants and released the seized goods and trucks unconditionally. The Collector also allowed the set off under Notification No. 432/86 on the inputs Naphthalene issued for manufacture of the goods on which duty was demanded.

(2.) THE learned General Manager, further, submitted that no condition was specified in the Notification No. 432/86 for availing of the exemption provided by it; that the only requirement was that Naphthalene should be used in the manufacture of Dye -intermediate which has been complied by them. He relied upon the Appellate Tribunal's final order No. 180/92 -C dated 5.6.1992 in the case of M/s. Atic Industries Ltd. v. CCE, Vadodara wherein the issue involved was also the availment of benefit of Notification No. 432/86 in respect of Naphthalene which was sent by them for purification to other manufacturer before using the same for specified purpose. While allowing the appeal by way of remand, the Tribunal mentioned that while adjudicating the case afresh, the Assistant Collector "will no doubt keep in mind observations made by us with regard to the admissibility of the benefit of the set off notification to the appellants." He contended that they were eligible for the benefit of notification without following the procedure prescribed in the trade notice. He, further, mentioned that Collector (Appeals) had allowed them set off of duty on inputs as provided for in para 4 and para 6.1 of Enclosure II to Board's letter dated 1.4.1981; that said para 4 provided that approval of input -output ratio by the Assistant Collector should be a pre -requisite to avail of the set off; that in their case the Assistant Collector had approved the input -output ratio which is evident from Superintendent (Tech)'s letter dated 29.10.1990 in which it was mentioned that the Assistant Collector had approved the input -output ratio for the set off claimed under Notification No. 432/86 by M/s. Atul Products, on the basis of verification report given by Range Superintendent. He also mentioned that said para 6.1 provided that set off was to be taken on the quantity of duty paid excisable goods that had been issued for the manufacture of the finished excisable goods and was not to be confined to the duty on the quantity actually contained in the finished excisable goods. He finally placed reliance on the decision in Indian Petro Chemicals Ltd. v. CCE,, 1992 (61) ELT 138 (T) in which it was held that Notification No. 225/86 did not stipulate maintaining set off register and in absence of any statutory or mandatory condition of maintaining a set off register, "the Department cannot insist upon it and deny the benefit solely for that reason. Strict compliance of Trade Notice 126/81 cannot be insisted upon......"