1989 (2) TMI 245 - AT - Central Excise

Raw Naphtha Excluded from Concessional Rate; Duty Demand Not Time-Barred

STEEL AUTHORITY OF INDIA LTD. Versus COLLECTOR OF C. EX.

The tribunal upheld the Collector (Appeals)'s decision that Raw Naphtha used to keep the plant operational did not qualify for the concessional rate under ... Goods used for special industrial purposes Issues Involved:1. Eligibility of Raw Naphtha for concessional rate under Notification No. 187/61-C.E.2. Limitation period for the demand of duty under Rule 196 of the Central Excise Rules.Issue-wise Detailed Analysis:1. Eligibility of Raw Naphtha for Concessional Rate:The primary issue was whether Raw Naphtha obtained at a concessional rate of Central Excise duty for the manufacture of fertilizer, but used to keep the plant running without being actually utilized in the manufacture of Calcium Ammonium Nitrate (CAN), is eligible for the benefit of Notification No. 187/61-C.E. The appellants argued that the Raw Naphtha was intended for the production of CAN and was used to keep the plant operational during power shortages, which was a technological necessity. They contended that the notification did not require actual use in the manufacture of fertilizer but only intended use.The tribunal examined the notification, which exempts Raw Naphtha from excess excise duty provided it is intended for use in the manufacture of fertilizers and the procedure set out in Chapter X of the Central Excise Rules is followed. The tribunal concluded that the Raw Naphtha used to keep the plant running did not meet the conditions of the notification as it was not actually used in the manufacture of fertilizer. The tribunal emphasized that the notification required actual use for the intended purpose, and the appellants' argument that the Naphtha should be 'deemed to have been used' was not acceptable.2. Limitation Period for the Demand of Duty:The second issue was whether the demand for duty raised in the show cause notice dated 23-4-1984 for the Raw Naphtha used during the period from 1-4-1981 to 31-10-1983 was barred by limitation. The appellants argued that the time-limit of six months prescribed under Section 11A of the Central Excises and Salt Act, 1944 should apply, and since the show cause notice was issued after six months, the demand was time-barred.The tribunal referred to previous decisions, which held that there is no time-limit for demanding duty under Rule 196 of the Central Excise Rules. The tribunal upheld this view, stating that the duty was demanded under Rule 196 read with the bond executed by the appellants, and therefore, the demand was not barred by limitation.Conclusion:The tribunal upheld the order of the Collector (Appeals), concluding that the Raw Naphtha used to keep the plant running did not qualify for the concessional rate under Notification No. 187/61-C.E. and that the demand for duty was not barred by limitation. The appeal was dismissed.