TMI Blog1989 (2) TMI 245X X X X Extracts X X X X X X X X Extracts X X X X ..... , and the bond executed by the appellants, was barred by limitation? 2. The brief facts of the case, as stated in the Order-in-Original dated 5-12-1986 passed by the Assistant Collector of Central Excise, Rourkela, are as follows :- M/s. Steel Authority of India Limited, Fertilizer Plant, Rourkela (in short SAIL ) obtained Raw Naphtha falling under Item No. 6 of the Schedule to the Central Excises Salt Act, 1944 on which the excise duty at a concessional rate of Rs. 4.40 P. per K.L. was paid under Notification No. 187/61-C.E., dated 23-12-1961 in terms of the Licence in form L-6 No. I/MOTOR SPIRIT/ ROURKELA/63, for use in the manufacture of the fertilizer, Calcium Ammonium Nitrate . In the process of manufacture of the said fertilizer, SAIL, first manufacture Ammonia Gas from the Raw Naphtha. Ammonia Gas is also manufactured from Coke Oven Gas as and when obtained from Rourkela Steel Plant. There are, therefore, two sources of raw materials for manufacturing Ammonia Gas viz. Raw Naphtha and Coke Oven Gas. Ammonia produced from both the sources are stored in the same Storage Tank. From this stock of Ammonia, a part is sold to outside parties and a part is used in the man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dewan, learned Advocate for the appellants and Shri V.M. Doiphode, learned S.D.R. for the respondent. Shri Dewan has argued that the appellants manufactured Calcium Ammonium Nitrate (In short CAN). This was a fertilizer and a final product. Naphtha was used as raw material. This Naphtha was obtained by the appellants at concessional rate of duty under Notification No. 187/61-CE. Due to shortage of supply of electricity of Orissa State Electricity Board, the appellants had to shut down their Ammonia Plant, but Naphtha Reformation Plant was kept active and the Naphtha Reformation gas produced in the Reformation Plant had to be vented out for the safety of plant and human life. Raw Naphtha had to be burnt in the Reformation Gas Plant for keeping the plant in continuous run so that the Ammonia Plant would be switched on as soon as the supply of electricity revived. If the Plant was shut down on the stoppage of supply of electricity and then restarted when the supply of electricity revived, there could be a loss of 12 days as the heat in the Ammonia Plant had to be decreased and again increased gradually and the production of fertilizer could not be started immediately after the powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Raw Naphtha was actually used. Raw Naphtha obtained at concessional rate satisfied both the conditions of the notification and the concessional rate of duty should be allowed. 4. Shri Doiphode has argued that the quantity of Naphtha for which the Central Excise duty of Rs. 8,16,50,990.69 has been demanded, was used for the maintenance of the plant and not for manufacture of fertilizer as required under the notification. The goods were cleared from the refinery at the concessional rate for use for the manufacture of fertilizer. At that stage it was intended for use in the manufacture. Therefore, the notification laid down the condition that the Chapter X procedure was to be followed. Appellants are L-6 Licence holder and they executed a bond. C.T. 2 certificate was issued in their favour. Chapter X procedure required actual use for the intended purpose. In the application under Rule 192 of the Central Excise Rules, it was mentioned that the Raw Naphtha would be used in the manufacture of fertilizer. If the goods are not used for the purpose for which these were cleared under the notification, duty is payable under Rule 196 of the Central Excise Rules on demand. There is no tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Litre at fifteen degrees of Centigrade thermometer, provided that :- (i) it is proved to the satisfaction of an officer not below the rank of an Assistant Collector of Central Excise that such Raw Naphtha is intended for use in the manufacture of fertilizers; (ii) the procedure set out in Chapter X of the Central Excise Rules, 1944, is followed. (2) The exemption contained in this notification shall also apply in respect of such Raw Naphtha used in the manufacture of Ammonia, provided such Ammonia is used elsewhere in the manufacture of fertilizers and the procedure set out in Chapter X of Central Excise Rules, 1944 is followed." For availing of the concessional rate of duty on Raw Naphtha, the Notification has provided for two conditions. The first condition is that such Raw Naphtha is intended for use in the manufacture of fertilizers and this fact is to be proved to the satisfaction of an officer not below the rank of Assistant Collector of Central Excise. The second condition is that the procedure set out in Chapter X of the Central Excise Rules, 1944 is followed. Shri Doiphode has rightly argued that at the time of clearance of the Raw Naphtha from the refinery at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sable goods manufactured from such goods in store at the factory. According to this rule, duty is to be paid if the goods which have been obtained at concessional rate of duty are not approved to have been used for the purpose and in the manner stated in the application under Rule 192 unless it is shown to the satisfaction of the proper officer that the said goods have been lost or destroyed by natural causes or by unavoidable accident during transport from the place of procurement to the applicant s premises or during handling or storage in the premises approved under Rule 192 It is not the case of the appellants that the impugned quantity of 36,297.718 K.L. Raw Naphtha was lost or destroyed. This Raw Naphtha was burnt in the Naphtha Reforming Plant of the appellants for keeping the plant in a continuous run so that the Ammonia Plant could be switched on to action immediately after revival of the supply of power. The gas thus produced by burning the impugned Raw Naphtha did not even reach the Ammonia Plant as the reformed gas was vented out into the atmosphere. This quantity of Raw Naphtha cannot be said to have been used for the manufacture of fertilizer. The contention that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of the goods by the assessee and hence it cannot be said that the cashew shells used as fuel were consumed in the manufacture of other goods for sale or otherwise. 7. The learned Advocate has relied on the judgment of the Supreme Court, reported in AIR 1988 SC 342 in the case of The State of Haryana v. Dalmia Dadri Cement Ltd., in which it was held by the Hon ble Supreme Court that the expression for use must mean intended for use . It was held that it was not necessary for the assessee to show that cement was actually used for the purpose to claim the exemption. This judgment of the Hon ble Supreme Court cannot be applied to the present case as the facts are entirely different. In the present case, the notification provides for a specific condition that the procedure laid down in Chapter X of the Central Excise Rules should be followed and according to the provision of the said Chapter X it should be proved that the goods, i.e., Raw Naphtha, have been actually used for the manufacture of fertilizer. 8. The next question relates to the limitation of demand for duty. The learned .dvocate has argued that the time-limit for six months prescribed in Section 11A of the Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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