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TMI Blog2002 (4) TMI 750X X X X Extracts X X X X X X X X Extracts X X X X ..... e for procuring metal containers without payment of Central Excise Duty. 3. The product Dairy Whitener was being classified as Skimmed Milk Powder and was chargeable to Nil rate of duty. In the budget for the year 1989-90, duty was levied on the Skimmed Milk Powder. The appellants started clearances of their product Dairy Whitener by paying duty under protest. They also moved a Civil Writ Petition in the High Court of Punjab & Haryana at Chandigarh and argued that the Whitener for packing of which the metal containers were to be used by them was partially skimmed milk powder which was different from skimmed milk powder. The Hon'ble Punjab & Haryana High Court held that the whitener manufactured by the appellants was partially skimmed milk powder. The Department observed that with the above findings of the Hon'ble Punjab & Haryana High Court, all the benefits/exemptions as available to the whitener as Skimmed Milk Powder were no longer available to the appellants and the benefit of procuring metal containers without payment of duty under Notification No. 181/88-C.E., dt. 13-5-88 was not admissible to the noticees. As the concession is available only if such metal containers an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ictly in accordance with the Asstt. Collector's order dt. 24-3-87. 5. Arguing the case for the appellants Shri B.L. Narasimhan, ld. Counsel submits that the entire case giving rise to the issue of the SCNs and the impugned orders passed by the ld. Commissioners, is that Notification No. 181/88-C.E., dt. 13-5-88 is available only for packing of skimmed milk powder and since Dairy Whitener is partially skimmed milk powder and therefore, the benefit of this Notification was not available to the appellant on partially skimmed milk powder. 6. Ld. Counsel submits that Rule 196 is totally inapplicable to the facts of the present case; that Rule 196(1) stipulates that if the goods obtained under Rule 192 are not duly accounted for or not having been used for the purpose and the manner stated in the application or are not shown to the satisfaction of the proper officer, to have been lost or destroyed by natural causes etc., duty is payable by the appellant on such goods; that in the present case, it is not the case of the Department that the metal containers received by the appellant under Chapter X Procedure by availing the benefit of Notification No. 181/88-C.E. were not duly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturer of Metal Containers and not from the receiver of the Metal Containers like the Appellants; that duty demand which arises on account of erroneous grant of exemption and not on account of mis-use or non-accountal of the Metal Containers cannot be sustained against the appellants that the appellants are not the manufacturers of metal containers; that it was well settled position in law that any short levy or non-levy of duty can be raised only against the manufacturer of the goods and not against the buyers. 10. Ld. Counsel also submitted that present proceedings are hit by the principles of res judicata inasmuch as SCNs were issued by the Department denying the exemption to the appellants and demanding duty; that these notices were adjudicated by the Asstt. Collector of Central Excise, Moga; that on appeal by the appellant the order of the Asstt. Collector was set aside by the CCE, Chandigarh; that no appeal has been filed against this order and hence that order has attained finality; that on the very same issue, notices have been issued to the present appellant which have been dropped and that in view of these facts, fresh proceedings on the same set of facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use elsewhere than in the factory of its production. At the hearing the ld. Counsel for the department argued that Chapter X procedure is envisaged for the removal of the finished thinners from the thinner manufacturer to the paints manufacturer but we are not able to agree with this. The Chapter X procedure must be followed for the movements of the motor spirit from the motor spirit manufacturer to the person who uses motor spirit as solvent or diluent or thinner for the manufacture of paints. The Central Excise authorities were in error when they allowed this concession to Arti Paints because Arti Paints had clearly declared in their application that they would be manufacturing thinners from the toluene, benzene, xylene, which they wanted to obtain at concessional duty under Notification No. 35/73-C.E. That error continued till the very end and nobody appears to have discovered it. The adjudication says that the goods were not used for the intended purpose as Notification No. 35/73-C.E., but this conclusion appears to have been arrived at because the Asstt. Collector held that the thinners manufactured by Arti Paints were not used in the manufacture of paints. Knowing it as they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s given wrongly when it should not have been given at all, it is from the manufacturer of the goods cleared at concessional duty i.e. motor spirit, toluene, xylene, etc. etc. that the short recovered duty can be recovered. We must, therefore, pronounce the order of the Appellate Collector to be wrong and unlawful and set it aside and allow the appeal." 15. Ld. Counsel also submitted that in a recent judgment in the case of CCE, Chandigarh v. R.K. Machine Tools Mills Ltd. - 2000 (124) E.L.T. 794 referred to the decision of the Tribunal in the case of Arti Paints & Chemicals, Bombay v. CCE, Bombay observing that the demand for short recovery could not be made under Rule 196 if permission has been given by mistake under Rule 192 of the Central Excise Rules. Ld. Counsel, therefore, submitted that their case is squarely covered by the decisions of the Tribunal in the case of Arti Paints & Chemicals Ltd., Bombay v. CCE, Bombay and R.K. Machine Tools Mills cited above. He, therefore, prayed that the appeal may be allowed. 16. Ms. Ananya Ray, ld. DR submits that examination of the appellants' application dt. 27-4-87 shows that the appellants had been granted L-6 Licence for obt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR that since the use of metal containers for the specified purpose was not established by the appellant, therefore, there was no necessity of raising the demand under Rule 192 of Central Excise Rules on the manufacturers of metal containers. 19. Ld. DR also submitted that since Rule 196 was a self contained code and there was no necessity for invoking proviso to Section 11A. The demand was not hit by limitation as was held by the Apex Court in the case of Raghuvar India. 20. Ld. DR submits that this Tribunal in the case of Dalmia Industries Ltd. v. CCE, Jaipur reported in 1995 (79) E.L.T. 120 relying on the decision of this Tribunal in the case of Arti Paints & Chemical Industries v. Collector observed in para 9 as under : "9. The appellants for the purpose of claiming exemption under Notification No. 181/88-C.E., and for complying with the formalities under Chapter X Procedure, declared their product as SMP. In the B8 Bond dt. 13-3-89, executed by them, they declared that the metal containers will be used for packing of, among others, SMP. There was no reference to partially SMP. They had also declared that the said metal containers will not be used for any pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions have to be construed strictly as per the plain language used therein. There is no room for intendment, while deciding upon the availability or non-availability of the exemption as provided by the Central Government in exercise of the powers conferred on them by the legislature. In para 2 of their judgment in the case of Union of India v. Wood Papers Ltd.- 1990 (47) E.L.T. 500 (S.C.), the Hon. Supreme Court have held - "In fact an exemption proviso is like an exception and on normal principle of construction or interpretation of statutes it is construed strictly either because of legislative intention or on economic justification of inequitable burden or progressive approach of fiscal provisions intended to augment State revenue." Under exemption Notification No. 181/88-C.E., dt. 13-5-88 (as amended), the exemption was available to only those metal containers which were intended to be used for packing of the SMP (among various other products with which we are not concerned). No exemption was available to the metal containers which were intended to be used for packing of the partially SMP. In the case of Food Specialities Ltd. v. Union of India referred to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 is incorrect. 2. Demand is barred by limitation. 3. Duty demand cannot lie against the appellant. 4. Proceedings are hit by Res judicata. 5. Penalty not imposable. 25. We note that in the SCNs the allegation against the appellants was that they were not entitled to obtain ½ kg. metal containers free of duty under Chapter X Procedure for packing of Everyday Dairy Whitener Milk Powder (partially skimmed milk powder) for tea and coffee, as this product manufactured by them was neither whole milk powder nor skimmed milk powder. Therefore, they were called upon to show cause as to why Central Excise Duty for the period from 24-2-89 to 31-1-91 and 30-7-91 to 31-12-91 should not be recovered from them under Rule 196 and Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A of the Central Excises & Salt Act, 1944 by invoking the extended period of limitation and why penal action should not be taken. One of the contentions of the appellants was that since L-6 Licence was granted to the appellants for procuring ½ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence the longer period beyond six months appears to have rightly been invoked. The matter is being referred to Larger Bench. 28. The third issue is about duty demand - the contention of the appellant was that, duty, if any, should be demanded from the manufacturers in terms of Rule 142. We note in the instant case that the applicant used the ½ kg. metal containers in contravention of provisions of Rule 196 inasmuch as the condition of use for the purpose and in the manner has not been complied with and hence duty appears to have correctly been demanded under Rule 196. However, the matter is being referred to Larger Bench. 29. In so far as the question of the proceedings purported to be hit by Res judicata are concerned, we note that the ld. Collector (Appeals) in his order dt. 30-10-92 held that since the appellant had purchased the metal containers, there was no question of demand of duty from them and that recovery can be made from the manufacturer and not from L-6 holders. That appeal was upheld on technical grounds and not on merits. Accordingly, the issue cannot be held to have attained finality in view of the decision in the case of T. Tobacco Co. v. AC - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 196 read with proviso to Section 11A of the Act. This non-mentioning of Section 11A of the Act in the show cause notice will not vitiate the proceedings and the demand. In this connection, reference may be made to the Tribunal's decisions in the cases of (i) A. Nazi Mutheen v. Collector of Central Excise, Madras, 1988 (35) E.L.T. 519 (Tri.), (ii) Borivli Hosiery Mills v. Collector of Customs, 1991 (56) E.L.T. 76 (Tri.) and (iii) Shally Thapar v. Collector of Customs, 1993 (64) E.L.T. 31 (Tri.)". 36. In para 12 of the same order, this Tribunal held - "The appellants have pleaded that if any Central Excise duty is to be demanded, then it should be demanded from the manufacturer of the metal containers, and not from them. Under the scheme of the Chapter X of the Rules, the liability in case of misuse of the concession is cast on the L-6 Licencee who uses the goods, and not the manufacturer of the said goods. The Tribunal in the case of Hindustan Insecticides Ltd. v. Collector of Central Excise, Cochin, 1988 (33) E.L.T. 575 (Tri.) had held (in the context of Notification No. 34/73-C.E., where Chapter X Procedure was required to be followed for exemption in favour of Benzene) i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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