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2018 (2) TMI 1455 - HC - Central ExciseBenefit of exemption - actual user condition - Whether benefit of N/N. 6/2002-CE as amended or N/N. 6/2006-CE read with N/N. 21/2002-Cus dated 1st March, 2002 which was available to “naphtha” used in the manufacture of “fertilizer”, is available to the respondent for that quantity of “naphtha” which was manufactured and cleared by it to M/s. Rashtriya Chemicals and Fertilizers Ltd availing the benefits under the said notifications, but admittedly, not used by RCF in the manufacture of “fertilizers”? Whether the CESTAT was correct in holding that Central Excise Duty can be demanded from a person other than manufacturer of the excisable goods in a situation where the goods are locally procured under N/N. 6/2002-CE or 6/2006-CE, the liability to pay the duty would be that of the user manufacturer who in the present case is RCF? Held that: - It is common ground that the naptha was supplied by the respondent-assessee by resort to the international competitive bidding process. The naptha brought for this supply was claimed to be exempted by the assessee. The tribunal noted that naphtha is exempt from payment of excise duty if supplied against international competitive bidding and used in the manufacture of fertilizers - The tribunal came to the conclusion that the notifications read together would reveal that in the present case, the naphtha supplied against competitive bidding was not entirely consumed for the manufacture of fertilizers by the RCF. In the present case, for such failure, the manufacturer, where the goods were intended to be used is required to pay differential duty. If the user and manufacturer are one and the same, there is no difficulty. The tribunal gave an illustration, as can be found completely consistent with the case at hand. If the importer of the goods is 'A' but the goods are to be used in the factory of 'B', then, in such situation also, though the goods may be imported by 'A' but the liability to pay the differential duty in the event of failure to use the goods is on 'B'. The question is not of local procurement and the tribunal found, therefore, that M/s. HPCL, at the time of clearance, has satisfied both the pre-conditions, namely, the goods were supplied against international competitive bidding and for the manufacture of fertilizers. The actual use of the goods is post clearance condition and which is required to be fulfilled by the buyer/user, which is the RCF. Hence, the assessee cannot be expected to ensure the precise use of the goods by M/s. RCF. Appeal dismissed - decided against appellant.
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