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TMI Blog1997 (8) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... d Certificates, it was clearly mentioned that the same authorised the appellants to obtain Motor Spirit namely Benzol, Toluol, Light Solvent Naphtha, Ethyl Benzene, Toluene and Mixed Xylene consisting of Ortho xylene, Meta Xylene, Para Xylene and Ethyle Benzene falling under Tariff Item 6 of Central Excise Tariff Act at concessional rate of duty under Notification No. 75/84-C.E., dated 1-3-1984 for the manufacture of paints, varnishes, thinners, resins etc. Accordingly, the appellants procured the specified inputs on concessional rate of duty and consumed the same for the manufacture of thinners which were sold by them to the outside parties. 1.3 That subsequently, the appellants were issued a show cause notice dated 5-10-1989 seeking to deny the benefits of concessional rate of duty in terms of Notification No. 75/84-C.E. on the alleged ground that the procured inputs were used by them in the manufacture of thinners which were sold by them to the outside parties and the same were not used in the manufacture of paints, varnishes and as such, the benefit of the Notification in question was not available to them. 1.4 After the usual adjudication proceedings, the Additiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resin". (c) Chambers Science and Technology Dictionary "Thinners : Volatile liquids added to paints to dilute and make the material more fluid and workable. Thinners should not alter the original colour of the paint and should evaporate on drying. Thinners aid penetration of priming coats but are often detrimental when added unnecessarily to finishing coats". (d) Larousse Dictionary of Science and Technology "Thinners : Volatile liquids added to paints to dilute and make the material more fluid and workable. They should evaporate on drying and not alter the original colour of the paint. They aid penetration of priming coats but finishing coats may be damaged by excess." (e) Academic Press Dictionary of Science and Technology "Thinner : Materials, any liquid, such as turpentine, that is used to dilute another liquid, such as a paint or varnish". (f) IS : 1303-1983 (Indian Standard Glossary of Terms Relating to Paints) "Thinner : Volatile liquids added to paints and varnishes to facilitate application and to aid penetration by lowering the viscosity. They should be miscible with the paint or varnish at ordinary temperatures and should not cause precipitat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cence issued by the Department. There was neither any allegation in the show cause notice nor was there any finding of the adjudicating authority justifying the invoking of the longer period of limitation for five years. He also submitted that there was no warrant for imposition of penalty upon the appellants herein. 4. In support of his above submissions, he relied upon the various Tribunal decisions. 5. Countering the arguments of the learned Advocate, Shri S.N. Ghosh, learned JDR for the Revenue submitted that no doubt that in the CT 2 Certificates, thinners were also mentioned as an item for the manufacture of which the procured material was to be used. Nevertheless, the Department is at liberty to undo the wrong done by the Department and adopt the correct interpretation of the Notification. Referring to the Notification, he submitted that the only purpose for which the inputs can be procured against Serial No. 9 of the Notification is - if the same are used as solvent or diluent or thinner for the manufacture of paints, varnishes, lacquers and allied materials. Arguing on the expression - "allied materials" - he submitted that it is clear from the preceding expres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes. He submitted that in any case, the Department cannot go beyond a period of six months when there is no suppression by the appellants herein. In support of his above submission, he referred to the Tribunal's decision in the case of Rajasthan Navsagar Chemical Works, Dhule v. Collector of Central Excise, Pune reported in 1987 (30) E.L.T. 969 (Tribunal) as also to the Tribunal's decision in the case of Hindustan Petroleum Corporation Ltd. v. Collector of Central Excise, Bombay-I reported in 1986 (26) E.L.T. 578 (Tribunal). 8. We have carefully considered the submissions of both sides. The dispute revolves around the interpretation of Serial No. 9 of the Notification No. 75/84-C.E. For better appreciation, the disputed entries are reproduced below :- " ........... In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts goods of the description specified in column (2) of the Table hereto annexed and falling under Chapter 22 or 27 or 29 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), from so much of the duty of excise leviable thereon under the Central Excises and Salt Act, 1944 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e paints, varnishes and lacquers cannot be put to their requisite uses. We also find that initially, the Department was probably of the view that the thinners manufacture out of the goods procured under concessional rate of duty, are entitled to the benefit of Notification No. 75/84-C.E. and that is why the requisite CT 2 Certificates were issued to them. We also find that prior to the period involved in this case, the appellants were enjoying the concessional rate of duty granted to the same goods under Notification No. 35/73, dated 1-3-1973. The question whether the Notification No. 35/73 is pari materia with the Notification No. 75/84, came up for consideration before the Tribunal in the case of Shalimar Chemical Industries Pvt. Ltd. referred to by the learned Advocate for the appellants. In the said Judgment, the Tribunal came to the conclusion that the two Notifications are pari materia. It was observed in that decision that while dealing with the Notification No. 35/73-C.E., dated 1-3-1973, the Government had clarified that the end-use material like thinners is not necessary once they are cleared out of L 6 premises and the same is not warranted in terms of the above Notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under Notification No. 35/73-C.E., it is pointless to blame them for the misuse of the licence on the ground that they did not use Toluene in the manufacture of the paints. 11. In the said case also, the benefit of the Notification No. 35/73 which is pari materia to the Notification under consideration was extended to the appellants. 12. The reasoning of the adjudicating authority that the benefit to the specified goods is not available as the same is required to be extended when the same are used "as thinners" and not in the manufacture of thinners. We find that the Notification talks about the intended use of the goods "as thinners" in the manufacture of the "allied materials". The use of the procured inputs in the manufacture of thinners is not disputed. The same goods can be used as thinners in the manufacture of thinners when the ultimate thinner manufactured consists of the mixture of two or three inputs. As we have already observed in the preceding paragraphs that the thinners are covered by the expression - "allied materials" - and stand on the same platform on which the paints, varnishes and lacquers stand. We also find that the appellants were entitled to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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