1991 (9) TMI 170 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility for concessional rate of duty under Notification 75/84-C.E., as amended by Notification 27/89-C.E., and Notification 28/89-C.E.
2. Time-barred nature of the demands.
3. Justifiability of the entire duty demanded.
4. Justifiability of the penalty imposed under Rule 173Q of Central Excise Rules, 1944.

Issue 1: Eligibility for Concessional Rate of Duty

The Collector of Central Excise, Baroda, confirmed a duty demand of Rs. 24,41,99,988.77 on the quantity of 107786.895 KL of Raw Naphtha obtained at a concessional rate but utilized for manufacturing petroleum resins, not specified in Notification No. 27/89 during the period from 1-10-1989 to 31-8-1990. The appellants contended that Raw Naphtha was fully utilized for the production of specified goods listed in the notifications, and the residual Pyrolysis Gasolene used in the production of Petroleum Resins was incidental and unavoidable. However, the Collector rejected these contentions, holding that Pyrolysis Gasolene diverted for manufacturing products not specified in the notification forfeited the concession. The Tribunal found that Pyrolysis Gasolene, after several products were extracted, continued to be raw naphtha of a different grade, and thus, the residual Pyrolysis Gasolene used for manufacturing petroleum resins was not eligible for the concessional rate of duty.

Issue 2: Time-Barred Nature of the Demands

The appellants argued that the demands were time-barred as there was no suppression of facts. They maintained RT 16 and RT 11 statements, and the details of receipt of Raw Naphtha and products manufactured were noted in the register. However, the Tribunal upheld the invocation of the larger period under proviso to Section 11A of the Central Excises and Salt Act, 1944, due to the appellants' deliberate misdeclaration and misleading the Department, thus justifying the extended period for claiming the duty.

Issue 3: Justifiability of the Entire Duty Demanded

The appellants contended that the duty calculation was incorrect as it was based on the entire Pyrolysis Gasolene removed to the Petroleum Resin Plant. They argued that duty should only be calculated on the residue of Pyrolysis Gasolene after extracting Benzene and Toluene, which were entitled to concessional duty. The Tribunal found merit in this contention and directed the Collector to reconsider the duty calculation by hearing the appellants and verifying fresh particulars.

Issue 4: Justifiability of the Penalty Imposed

The Collector imposed a penalty of Rs. 5 crores under Rule 173Q(a), (b), (d) of Central Excise Rules, 1944. The Tribunal upheld the imposition of the penalty due to the clear violation of Rule 173Q and the appellants' intention to evade full duty payment. However, considering the likely reduction in the duty element, the penalty was reduced to Rs. 10 lakhs.

Conclusion

The Tribunal partly allowed the appeal, directing the Collector to reconsider the duty calculation and reducing the penalty to Rs. 10 lakhs. The appellants' contention that Pyrolysis Gasolene was a residue and not raw naphtha was rejected, and the invocation of the extended period under proviso to Section 11A was upheld due to deliberate misdeclaration and suppression of facts.