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Konkan Synthetics & Chemicals Pvt Ltd, Santosh P. Mehta Versus Commissioner of Central Excise, Pune

2017 (12) TMI 265 - CESTAT MUMBAI

100% EOU - N/N. 53/97 customs dated 3-6-1997 and 1/95-CE dated 4-1-1995 - allegation was made that certain quantity of final product manufactured out of imported input has been cleared to DTA availing exemption under N/N. 8/97. Therefore demand of duty was made - imported Aniline oil used in manufacture. - Held that: - The report of the Indian Institute of Material Management does not state that all the clearances made to DTA were not out of purely indigenous material. All it says is that im .....

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e quantity of finished goods manufactured wholly or partly from imported raw material. The fact that Tribunal had directed to apply the principle of FIFO method, just because material got mixed, it cannot be said that entire quantity of finished goods was manufactured out of mixture of imported and indigenous raw material. The FIFO method has been suggested by the Tribunal to segregate the quantity relatable to finished goods manufactured out of indigenous and imported raw material - reference m .....

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eals have been filed M/s. Konkan Synthetics & Chemicals Pvt Ltd and Shri. Santosh P. Mehta against the Order of the Commissioner dated 29-12-2006. Revenue is also in appeal against the said order. 2. Ld. Counsel for M/s. Konkan Synthetics & Chemicals Pvt Ltd and Shri. Santosh P. Mehta argued that they are 100% EOU. He pointed out that they are engaged in manufacture and export of Sulphanilic Acid Technical(S.A.T.), Sulphanilic Acid White(S.A.W.), Sodium Salt of Sulphanilic Acid(S.S.) etc .....

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e Oil from the market. 2.1 He pointed out that in term of Notification No. 8/97-CE dated 1-3-1997 if an EOU manufacturers the products wholly from the indigenous raw materials, the duty liability would be same as that of a domestic unit. He further relied on Circular No. 442/8/99-CE dated 4-3-1999 and Circular No. 85/2001-Customs dated 21-12-2001. He argued that said circular prescribed that for availing these exemptions EOU should maintain separate records and need not have separate machinery, .....

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that the goods to be sold in DTA are manufactured out of indigenous raw materials only by way of maintenance of records, physical scrutiny/verification and the manufacturing process etc. The Circular also provides that in case where the inputs/final products are common, and manufacturing lines are not separate or if the inputs/final products are difficult to identify, benefit of the notification may be denied to avoid misuse of exemption notification. The stipulation of separate manufacturing li .....

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doubt that the goods to be sold in DTA are manufactured out of wholly indigenous raw materials by way of maintenance of records etc. as provided in the said Board s Circular. Maintenance of separate records would include, inter alia, separate raw material registers for indigenously procured goods and imported ones, separate finished goods registers - one for final products manufactured out of indigenously procured raw materials and the other for final products manufactured out of imported materi .....

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to be cleared in DTA. But the intention is certainly not to insist upon separate machinery, separate godowns and separate branches of manufacturing process (which would amount to establishing a separate factory within the factory) before extending the benefit of the above-said Circular. He argued that they have two separate tanks one of 20 Tons capacity and the other of 12 Tons capacity which were used for receiving Aniline oil. He argued that 20 tons capacity tank is used for storing imported A .....

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rough valves to control the supply. Ld. Counsel argued that manufacture of finished goods in a batch process with each batch size of 185 kgs of aniline oil and196 kgs of Sulphuric Acid in each ball mill. He pointed out that they have 14 such ball mills. He pointed out that they have capacity of store up to 76.019MT of oil in following manner: a) 20MT of receiving tank. b) 50.619 MT of 5 storage tanks c) 5.400 MT of 18 service tanks of 300 kgs capacity. He argued that in view of the above they we .....

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intimated range office in this regard while filing the returns for the month February, 2002 on 5-3-2002. Thereafter case was made by the Revenue against them alleging they are not entitled for Notification No. 8/97 for entire clearance to DTA as appellant did not have facility to store imported and indigenous aniline oil separately. During the investigation statements of Mrs. R.P Paresh and P.M Parekh, proprietor of M/s. Pravin Dye Chem were recorded wherein they stated that for certain quantit .....

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der Notification No. 8/97. Therefore demand of duty was made. The said demand was confirmed and the matter was agitated before this Tribunal. Tribunal vide Order No. A/1205- 1206/WZB/2005/C-II dated 28-10-2005 remanded the matter observing as follows: We find prima facie charge of Aniline oil of imported origin being used in the manufacture of the products cleared to DTA could be arrived only after detailed examination of the records said to be maintained by the assessee is made and the principl .....

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iew is arrived at on whether imported Aniline oil could have beenused in goods which were actually cleared to DTA. f) While getting this exercise done by an expert material management the issue of separate tanks being maintained could also be considered and the facts regarding the same determined . Consequently the matter was re-adjudicated. Complying with the direction of the Tribunal the issue was referred to the Indian Institute of Material Management(Mumbai Branch) who replied vide their let .....

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iline Oil At this juncture, we hasten to add, that at no point, the institute vouches for the authenticity of the Data furnished to us and our comments are being offered based purely on the information provided by us. Ld. Counsel argued that the report has been approved on the basis of worksheet indicating date wise receipt and consumption of aniline oil, which is both imported as well as indigenous and data of production of finished goods manufactured and cleared by the appellant. Ld. Counsel a .....

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-9-2006 explaining factual position. In the said affidavit all these employees had stated that indigenous and imported aniline oil was stored separately and through intricate network of tanks and pipelines and vavles material was kept stored. In view of the above Ld. Counsel argued that impugned order did not follow the direction given by the Tribunal and therefore is bad in law. 3. Ld. A.R. relies on the impugned order. He further argued that statements were given by following persons: (i) Mr. .....

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indigenous and imported aniline oil was not stored separately and therefore question of producing anything out of pure indigenous aniline does not arrive. He further pointed out that while writing to Shri. G.R. Apate, Chairman of Indian Institute of Material Management they had submitted all the chart showing date of receipt, consumption of aniline oil of both the category and also goods manufactured. They also pointed out that he was informed that records are available with Superintendent, Shri .....

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Aniline oil of imported origin being used in the manufacture of the products cleared to DTA could be arrived only after detailed examination of the records said to be maintained by the assessee is made and the principles of materials management especially FIFO principle applied. Thus it will require to be reworked out with the assistance of experts in the field of Material Management with the documents said to be available with the assessee for this purpose. Order is therefore required to be re .....

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same determined . Consequently certain data was sent to Indian Institute of Material Managements and report from the said institution was obtained. The said report reads as under: The Worksheets indicating date-wise Receipts, consumption of Aniline Oil(both imported as well as Indigenous) and also the finished goods manufactured as well as cleared by the assessee have been thoroughly studies by us. The formats used/applied for the datasheets to highlight the FIFO principles (primarily Receipts .....

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clearances made to DTA were not out of purely indigenous material. All it says is that imported Aniline oil has been consumed in excess of that which is required for production of exported goods. It does not automatically mean that entire quantity of goods manufactured and cleared in DTA has been manufactured out of mixed or imported Aniline Oil. The perusal of the show cause notice shows that it calculates the requirement of Aniline oil for manufacture of each product on per kg basis. Thereafte .....

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ured from indigenous aniline oil. The report of IIMM only states that some imported aniline oil has been used for goods cleared in DTA and that, however, does not lead to the conclusion that entire quantity of goods cleared in DTA were manufactured wholly or partly from imported aniline oil. 5.1 Ld. Commissioner has discarded the proposition made by the appellant regarding separate storage of aniline oil on the basis of statements of various employees who have categorically admitted that the imp .....

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