1981 (9) TMI 282 - Board - Central Excise

Summary

Issues:
Classification of rock phosphate powder as fertilizers for duty imposition during 1974-75, applicability of penalty under rule 173-Q of the Central Excise Rules, time-barred demand for duty, reliance on undisclosed evidence by the Collector, establishment of clandestine clearance, impact of the Purulia factory's practices on the case, absence of evidence on the fineness of the fertilizers cleared by the appellants.

Analysis:
The judgment revolves around an appeal concerning the classification of rock phosphate powder as fertilizers for duty imposition during 1974-75 and the imposition of a penalty under rule 173-Q of the Central Excise Rules. The Collector of Central Excise, Indore had demanded duty on the clearances of rock phosphate by M/s. Sadhna Enterprises, considering them as fertilizers. The appellants contended that the rock phosphate powder, being of 30/40 mesh, was not classifiable as fertilizers. They argued that the department failed to establish their product as fertilizers, making the duty demand baseless. Additionally, they claimed that the demand for duty was time-barred under old rule 10, and they were not involved in clandestine clearances, negating the applicability of rule 173-Q.

During the appeal, the appellants presented their case, highlighting that they voluntarily obtained a Central Excise license in December 1975 due to doubts about their product's dutiability. They clarified that they started paying duty as fertilizers from January 1976 and had made improvements to their product's fineness by installing additional screens in December 1975. The appellants emphasized that only 100 mesh products qualified as fertilizers under the Fertilizers (Control) Order, indicating that their earlier clearances of coarse material did not fall under the dutiable category.

The judgment also addressed the issue of undisclosed evidence relied upon by the Collector, including invoices describing the goods as fertilizers and references to a factory in Purulia. The Board found that the Collector's reliance on undisclosed evidence and the Purulia factory's practices, which came into existence later, were not justifiable. Moreover, the absence of clear evidence regarding the fineness of the fertilizers cleared during 1974-75 rendered the duty demand legally unsustainable.

Ultimately, the Board concluded that the Collector's orders were legally untenable due to insufficient evidence supporting the classification of the rock phosphate powder as fertilizers. The demand for duty was deemed time-barred, and the appeal was allowed, setting aside the Collector's orders.