2002 (10) TMI 666 - AT - Central Excise

Commissioner rules against Revenue in time-barred demand case; Department aware of HCL process.

COMMR. OF C. EX., MADURAI Versus DHARANGADHARA CHEMICALS WORKS LTD.

The Commissioner of Central Excise found that there was no suppression of material information by the assessee, the demand raised by the Revenue was ... Demand - Limitation - Modvat/Cenvat - Suppression of facts Issues Involved:1. Allegation of suppression of material information by the assessee.2. Determination of the correct concentration of Hydrochloric Acid (HCL) for duty purposes.3. Time-barred nature of the demand raised by the Revenue.4. Approval and scrutiny of classification lists and price lists by the Department.5. Process of manufacturing and accounting for HCL by the assessee.Issue-wise Detailed Analysis:1. Allegation of Suppression of Material Information by the Assessee:The Commissioner of Central Excise held that there was no suppression of material information by the assessee with an intent to evade payment of duty. The assessee had been declaring the price in the price list from time to time, which had been approved, and the RT-12 returns had been filed indicating the production, consumption of HCL with its value and duty paid. The Commissioner noted that the records disclosed that the assessee was maintaining production records of HCL on a 100% basis and that the Department was aware of this practice. Therefore, the allegation that the assessee concealed the actual production from the Department was not sustained.2. Determination of the Correct Concentration of Hydrochloric Acid (HCL) for Duty Purposes:The Revenue contended that the assessee had disclosed the concentration of HCL as 100%, while investigations revealed that the actual strength ranged from 30 to 33%. The Commissioner observed that the Department should have made it clear whether the approval was for a metric ton of 100% concentration or 30 to 33% concentration of HCL. The assessee argued that HCL cannot exist in a 100% form as it would be in a gaseous state and must be dissolved in water to form a 30 to 33% concentration. The Commissioner found that the process of manufacturing had been the same since 1963 and that the Department was fully aware of it.3. Time-barred Nature of the Demand Raised by the Revenue:The Commissioner held that the demand made for the period from 1-3-79 to 31-5-81 by the show cause notice dated 12-5-83 was time-barred. The Commissioner noted that the assessee had been filing the classification and price lists, which had been approved from time to time, and the RT-12 returns had been scrutinized and approved. Therefore, the demand raised by the Revenue was not sustainable due to the lapse of time.4. Approval and Scrutiny of Classification Lists and Price Lists by the Department:The Commissioner found that the classification lists and price lists filed by the assessee had been approved by the Department from time to time. The RT-12 returns indicating the production and consumption of HCL had also been regularly filed and scrutinized. The Commissioner noted that it was the duty of the proper officer to ascertain the manufacturing process and verify the declarations filed by the assessee before approving the classification list.5. Process of Manufacturing and Accounting for HCL by the Assessee:The Commissioner observed that the manufacturing process of HCL had been disclosed to the Department, and the Department officials had visited the assessee's firm and observed the manufacturing process. The process involved the absorption of HCL fumes with water to form HCL of 30 to 33% concentration. The Commissioner found that the Department was fully aware of the manufacturing process and that there was no mis-declaration, mis-representation, or suppression of material facts by the assessee.Conclusion:The Commissioner of Central Excise's order was upheld, and the Revenue's appeal was rejected. The Commissioner's findings that there was no suppression of material information, the demand was time-barred, and the Department was fully aware of the manufacturing process and accounting for HCL were deemed legal and proper. The order did not require any interference.