TMI Blog1988 (11) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... se Ash Plant on its way to the Silos for Soda Ash Light. Soda Ash from the STD, is picked up by the vacuum conveying system which discharges the material to 24 screw conveyer via primary and secondary cyclones. The 24 conveyer first feeds the Dense Ash Plant and conveys only the balance material to the silos for Soda Ash Light. Soda Ash Light coming from STD is directly flowing to Dense Ash Plant to complete the mechanical process of densification in a continuous, integrated and un-interrupted process and in this process, according to the appellants, there is process loss to atmosphere of Soda Ash Light and the loss can not be termed as removal. The appellants have submitted that this loss is worked out notionally on the basis of the formula adopted by them for judging the efficiency of the plant manufacturing this product. Upto April, 1984 the loss was notionally worked out to 2% of the dense ash produced. Thereafter, the appellants installed suction hood, centrifugal fans and bag filters in the dense ash plant to reduce the loss of soda ash into the atmosphere and by installation of these instruments the loss of 2% was estimated to have been reduced to 1% from 1-5-1984 and 1/2% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 20-9-1974 had permitted the appellants to show the quantity manufactured only after the same was packed. The learned advocate referred us to this letter of the Asst. Collector. He explained that the packing was in gunny bags for all the categories of soda ash. Resuming his arguments, the learned advocate stated that in 1978 the Production Based control was introduced in the Central Excise Department and as per the direction of the department the manufacturers were required to send to the Department the daily stock reports of goods manufactured by M/s. Tata Chemical Ltd. The Collector s show cause notice, dated 26-1-1986 had based the allegations on the manufacturers daily stock position reports. The learned advocate argued that the alleged loss took place only at the stage of the production of soda ash dense. He explained this with reference to the Flow chart filed in the appeal and the manufacturing process with reference to this chart. Shri Andhyarujina further urged that when the densification plant was closed there was no loss. He illustrated his point with reference to the respective reports. The learned advocate further contended that at the stage of steam tube drier, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a ash from this place. The learned advocate further urged that in view of the Asstt. Collector s permission granted in the year 1974 which was not withdrawn it was not proper for the Collector to ask the manufacturer to account for the production at the stage of the steam tube drier. 4. In the show cause notice issued by the Collector, the main allegation was regarding the deduction of the loss as shown in the daily stock position reports. The show cause notice had further alleged that the soda ash was capable of being weighed at this stage. Shri Andhyarujina while maintaining his contention that at that stage it is impossible to measure or weigh urged that even if it were to be held for the sake of argument that the Supdt. approved the place of manufacture of the excisable goods, the Supdt. s approval did not cover the accounting of the goods in the R.G. I register. The learned advocate drew our attention of the letter, dated 24-6-1981 of the Inspector and appellant s letter dated 16-7-1983 addressed to the Inspector of the Central Excise, Mithapur in which they had stated that there was no alternative but to continue the practice of reporting as followed by them so long. This l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred us to the definition of place of removal in Section 4(4)(b) of the Central Excises Salt Act, 1944. He further argued that the Supdt. s letter to treat the steam tube drier as the place of manufacture was unintelligible. The learned advocate further contended that the removal in terms of proviso to Rule 49 has to be a positive act and the process loss can not be treated as removal. In this behalf, he referred us to our decision in the case; of Dudhganga-Vedganga Sahakari Sakhar Karkhana Ltd. and Others reported in 1987 (29) E.L.T. 22. He also drew our attention to Para 55 of this order which referred to the decisions of the High Courts. The learned advocate also cited the decision of the Madras High Court in the case of G.N. Kasia Pillai reported in 1979 E.L.T. (3 617). The learned advocate further submitted that the Collector s finding that there was illicit removal is made light heartedly and has absolutely no basis whatsoever. Appellants in their daily production report voluntarily disclosed the notional loss of soda ash. In such circumstances, there was no question of illicit removal. The learned advocate submitted for our perusal a copy of the Supdt. s letter, dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossible to quantify the soda ash light at the silo stage Shri Senthivel had to concede that it was not possible having regard to the process involved. 12. We have carefully considered the submissions made on both the sides and perused the records of the case. 13. The points that fall for determination in this appeal are :- (i) Whether the Collector was not correct and was unjustified in holding that the appellants had suppressed the facts of production of soda ash with an intent to avoid payment of duty of excise and that the appellants had failed to maintain statutory accounts of production and removal. (ii) Whether the Collector s order confirm the demand of duty is illegal and erroneous. (iii) Whether the demand of duty for the period exceeding six months immediately preceding the date of show cause notice is barred by time. (iv) Whether imposition of penalty is unwarranted, unjustified and incorrect. As the points 1 to 3 are inter-related they are taken up for consideration together. 14. The allegations made in the show cause notice are :- (i) That the appellants have deducted the quantity of soda ash light at 2% upto 4-5-1984 and at 1% with effect from 5-8-19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he loss shown by the appellants in their Daily Production Report. If the appellants had not shown the loss in their Daily Production Report probably the proceedings which is under consideration would not have seen the light of the day. 17. Broadly, the appellants contentions are, that the demand of duty for a period exceeding six months immediately preceding the date of show cause notice is barred by time. Secondly, the loss claimed is manufacturing loss and not the alleged clandestine production and removal. 18. In order to appreciate the above two contention it is necessary to refer to certain undisputed facts. 19. The appellants are manufacturing soda ash light, soda ash dense, soda ash medium dense, soda ash granulator by adopting continuous and cyclic process. For the purpose of manufacturing soda ash dense, the mechanical process of densification is a continuous integrated and uninterrupted process. The vacuum conveying system which picks up soda ash from the Steam Tube Drier describe as STD in Exhibit A delivers part of the soda ash light. In the year 1981 the Superintendent of Central Excise for the purpose of Rule 9 specified the end of Steam Tube Drier as the pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the output from the Steam Tube Drier is diverted to Dense Ash Plant where it is subjected to process of densification upon which Dense Ash and Medium Dense Ash are produced. These are subsequently packed and declared as production along with Soda Ash Light packed from Silos. Dense Ash, Medium Dense Ash are also varieties of Soda Ash and any loss in the process of manufacturing, will not be accounted as part of production." 22. The Central Excise Superintendent by his letter, dated 14-9-1981 after referring to the letter of the appellants, dated 17-8-1981 pointed out to the appellants that finished soda ash in fully manufactured condition is diverted from silos to dense ash plant. The soda ash stored in silos is subsequently intended for bulk despatches and in view of the above the quantity of above diverted from silos for manufacture of variety known as Dense Ash Medium, Dense Ash can only be treated as further manufacture but the loss occurred at Dense Ash Plant will have to be accounted for the production of soda ash light variety and the same should be condoned by the competent authority. He further requested the appellants to clarify the matter. The appellants, however, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly preceding the period of show cause notice is cleared barred by time. 26. The next question for our consideration is whether duty can be demanded even for the period of six months immediately preceding the date of show cause notice? 27. The case of the department is simple. It contends that the fully manufactured soda ash light comes into being at the place specified by the Superintendent in the flow chart produced by the appellants. Any further use of the fully manufactured soda ash light in the manufacture of soda ash dense could amount to captive consumption. Therefore, having regard to the explanation to Rules 9 and 49 of the Central Excise Rule, the soda ash light consumed during manufacture of soda ash dense is liable to duty. Further contention of the department has been the so-called loss claimed by the appellants did not occur during manufacture of soda ash light but it occurred during manufacture of soda ash dense. Therefore, the appellants were required to seek condonation of the loss. No such condonation was sought or granted. The appellants, however, contended that there is neither physical removal nor deemed removal of soda ash light during the manufacture of so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired to pay duty on the quantity shown as loss. The appellants contention has been that there is no physical removal of the soda ash light. It was also urged that there was no deemed removal of soda ash light during the manufacture of soda ash dense. We agree that there was no physical removal of soda ash light in the course of manufacture of soda ash dense. But then, we are unable to agree that there is no deemed removal of soda ash light in the course of manufacture of soda ash dense. Admittedly the fully manufactured soda ash light comes into being at the end of the Steam Tube Drier. The manufacturing processes given by the appellants clearly establish that the soda ash from the STD is picked by the vacuum conveying system which discharges the material of 24 Screw Conveyor via primary and secondary cyclones. 24 conveyor first feed the dense ash plant and conveys only the balance material to the silos for soda ash light. Thus the soda ash light at the silos as well as the conveying of soda ash through the conveyer to the Dense Ash Plant takes place after the fully manufactured soda ash light. In the circumstances it cannot be said that there was no deemed removal. The contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly removed from the factory premises, there is no removal and, accordingly, no Excise duty is payable on the product, even if the product is used for the manufacture of another commodity inside the factory. The other view is that if at one stage a commodity known to the market is produced and is transferred within the factory for the manufacture of another commodity, there is removal within the meaning of Rules 9 and 49. Apart from the above two views, there is a third view which has also been expressed by the Delhi High Court, namely, that if an intermediate product is obtained in an integrated process of manufacture of a commodity, there is no removal and, therefore, such intermediate product although known to the market and comes under a particular tariff item yet, as there is no removal, there will be no question of payment of Excise duty on such intermediate product. 31. The Supreme Court also considered the decision of the Nagpur Bench of the Bombay High Court in Oudh Sugar Mills Ltd. v. Union of India - 1980 E.L.T. 327 as well as the decision of the Allahabad High Court in Oudh Sugar Mills Ltd. v. Union of India, 1982 E.L.T. 927 and also the decision of the Gujarat High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one place to another for the purpose of collection of excise duty, the Supreme Court observed It is submitted on behalf of the appellants that the Explanations to Rules 9 and 49 are ultra vires the provision of Clause (b) of Sub-section (4) of Section 4 of the Act inasmuch as place of removal" as defined therein, does not contemplate any deemed removal, but a physical and actual removal of the goods from a factory or any other place or premises of production or manufacture or a warehouse etc. This contention is unsound and also does not follow from the definition of place of removal . Under the definition place of removal may be a factory or any other place or premises of production or manufacture of the excisable goods etc. The explanations to Rules 9 and 49 do not contain any definition of place of removal , but provide that excisable goods produced or manufactured in any place or premises at an intermediate stage and consumed or utilised for the manufacture of another commodity in a continuous process, shall be deemed to have been removed from such place or premises immediately before such consumption or utilisation. Clause (b) of Sub-section (4) of Section 4 has defined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduct. 34. In the above decision the Supreme Court also consider the contention that even assuming that there can be fictional removal as provided in the Explanations to Rules 9 and 49, there cannot be such fictional or deemed removal without the specification of the place where the excisable goods are produced, cured or manufactured or any premises appurtenant thereto. 35. The Supreme Court observed It is true that under Rule 9(1) there is a provision for specification by the Collector, but the question is what has to be specified by the Collector. It is the contention of the appellants that the Collector has to specify the place of manufacture and also any premises appurtenant thereto. We are, however, unable to accept this contention. The place where the goods are to be manufactured by a manufacturer, that is to say, the site of the factory cannot be specified by the Collector It is for the manufacturer to choose the site or the place where the factory will be constructed and goods will be manufactured. Rule 9(1), in our opinion, does not require the Collector to specify the place where the excisable goods are produced, cured or manufactured. The words which may be specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
