TMI Blog2005 (12) TMI 199X X X X Extracts X X X X X X X X Extracts X X X X ..... refore on this account is emerging on baseless material cannot be upheld. DGTD vide letter, have listed Vanadium Pentoxide as a catalystic agent. The Commissioner's reliance on EXIM Policy definition thereof is not called for and be a cause to upset the position of Vanadium Pentoxide to be a catalyst. Catalysts are covered as capital goods of Exim Policy and therefore when use of such capital goods will not impugned eligibility to the benefit of notification as applicable to DTA clearances in this case. It is found that the benefit of notification cannot be denied by the use of Vanadium Pentoxide to the imported catalyst and no material exist to positively conclude that Phthalic Anhydride that was cleared under claim of the said notification was made by use of ortho-xylene which onus is vested on the department and has not been discharged. The duty demands cannot be confirmed. Clearances made under Serial No. 3 to Notification cannot be impugned. Once duty demands cannot be confirmed, and the clearances as effected cannot be impugned, the penalties as imposed on the EOU along with interest demand u/s 11AB penalty under Rule 26 on the other appellant herein cannot be sustained a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tho-xylene and air. The air is being drawn from the atmosphere with centrifugal blowers. Ortho-xylene is procured by Noticee No. 1 from indigenous sources (Reliance Industries Ltd., Jamnagar) or by import. Noticee's claim that separate records are maintained by them recording the manufacture of the finished product wholly out of indigenous raw material and imported raw material. Leave aside Vanadium Pentoxide which is imported by the Noticee, whether they will be able to maintain separate record in respect of ortho-xylene which is both imported and indigenously procured? The process of manufacture followed by Noticee No. 1 is a continuous process and not a batch process. Naturally, it will not be possible to identify whether the end product is manufactured wholly out of indigenous raw material or imported raw material because of the continuous process nature of manufacturing process. They cannot stop their manufacturing activity in a continuous process just to identify what is being manufactured is out of indigenous ortho-xylene or imported ortho-xylene. Even if they are keeping any records to this effect it can never be the true records but falsified ones as it is humanly impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss, whether they have actually been previously manufactured or are processed or are still in a raw natural state. Exim policy gives a very broad definition for the term Raw Material - Raw material is any material or goods which are required for the manufacturing process. And the said definition given in the Exim Policy covers Vanadium Pentoxide used as catalyst in the reaction process without which the manufacturing process cannot take place at all. Since the 100% EOU functions based on the Exim Policy the definition given in the Exim policy holds goods for them than any other interpretation. Notification No. 8/97-C.E. dated 1-3-1997 provided for exemption on similar grounds as in Notification No. 23/2003-C.E. dated 31-3-2003 (Sr. No. 3) and provides EOU with a level playing held viz. a viz. DTA units are regards to payment of duty on goods cleared in DTA. However the said notification is not applicable to units which manufacture the goods from both imported or indigenous raw materials. Vide circular No. 442/8/99 CX. Dated 4-3-1999, the benefit of Notification No. 8/97-C.E. dated 1-3-1997 was extended to units importing as well as indigenously procuring raw materials provided, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Phthalic Anhydride. Hence Vanadium Pentoxide is nothing but the raw material in the process of manufacture. Even if it is treated as a consumable, the Noticee is not eligible for the benefit of Notification No. 8/97 C.E. dated 1-3-1997 (present Notification No. 23/2003-C.E. dated 1-3-2003 (Sr.No. 3) in terms of Board Circular dated 31-1-2002. Therefore, the goods cleared in DTA are liable to Central Excise Duty in terms of Sr.No. 2 of Notification No. 23/2003-C.E. dated 31-3-2003 (erstwhile Notification No. 2/95-C.E. dated 4-1-1995). Noticee No. 1 had taken ineligible benefit under the said notification intentionally for defrauding Govt. Revenue and hence they are liable to penally. Also they are liable to pay interest. Shri J.K. Saboo, (Noticee No. 2) was aware of availing inadmissible exemption as he is the Executive Director of Noticee No. 1 and all major decisions regarding Excise matters are taken by him or with his approval. Hence he has played an integral part in Noticee No. 1 availing ineligible benefit under the said notification and intentional defrauding the Govt. of Revenue. He is therefore liable to penalty under Rule 26 of Central Excise Rules 2002. And therefore the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f excisable goods. In the case of Kusum Products - 1988 (38) E.L.T. 523, it was held that catalyst used were neither raw materials nor component parts. This settled law on the subject and the Supreme Court upholding the decision in the case of Kusum Products Ltd. would lead only to the inescapable conclusion that the use of Vanadium Pentoxide, which is imported catalyst in the manufacture of Phthalic Anhydride, in this case, cannot be found to be a cause to deny the benefit of the notification. Since the notification serial No. 3 as extracted hereinabove in the order of the Commissioner impugned before us was clearly stipulating the condition would be eligible only if the goods were manufactured wholly from the raw materials produced or manufactured in India, the basic raw material admittedly of Phthalic Anhydride are ortho-xylene and air. The air if drawn from the atmosphere with centrifugal blowers ortho-xylene is indigenously sound. Therefore, when catalyst is not considered to be used in the manufacture and is used in any manner as other than raw materials, the benefit of notification cannot be denied on the grounds that the Catalyst Vanadium Pentoxide were imported. 5. Conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a heap, the obvious mode would be to distribute the whole heap in shares proportionate to the quantity of wheat belonging to the respective owners. But it might happen that the wheat mixed together was not all of the same quality, and therefore the owner of the better kind of wheat would lose by having a share determined in amount only by the quantity of his wheat; and the judge therefore was permitted to exercise his judgment how great an addition ought to be made to his share to compensate for the superior quality of the wheat orginally belonging to him. In Williams on Personal Property (18th Ed.) at p. 50, it is observed : The acquisition of ownership by accession or confusion of substances also presupposes a previous title. Thus the young of a domestic animal belong to the owner of the mother. If any substances, for instance tallow, belonging to various owners be mixed by consent or accidentally, the mass appears to belong to the owners of its parts in common. And if the confusion be made wilfully by one without the other's leave, the mass belongs to the latter, whose ownership is thus unlawfully invaded. Dealing with the same topic it is observed in Halsbury's Laws of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord to this effect, it can never be the true records but falsified ones as it is humanly impossible to identify manufacture out of indigenous raw material or imported raw material in a continuous process cannot be upheld. The reason adduced and relied to deny the benefit of the notification on grounds of mixture of imported Indian ortho-xylene, when the law on mixed goods is well established, and that also without examining the records by an a bras finding terming the same as false is not a process of unbiased adjudication and or application of mind, the Commissioner was required to follows and take the recourse and arrive at his own conclusions that the records were false and were not possible to be maintained could be omitted only after a detailed notice decision after hearing the appellants. It any case, there is no positive findings that no records whatever produced. It is an established practice and extensive instructions issued on mixed tank components of liquids and the principle of first in first out is well established to be applied in such cases. The goods cannot be therefore established to have been manufactured from imported Ortho-xylene only. This exercise should have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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