1998 (11) TMI 229 - AT - Central Excise

Insufficient Evidence of Solvent Use in Manufacturing Leads to Appeal Success

SINGHAL PAINTS (P) LTD. Versus COLLECTOR OF C. EX., ALLAHABAD

SINGHAL PAINTS (P) LTD. Versus COLLECTOR OF C. EX., ALLAHABAD - 1999 (106) E.L.T. 38 (Tribunal) Issues:1. Whether the appellants provided sufficient evidence to prove the actual use of Solvent C-IX in the manufacture of plastics.2. Whether the department's invocation of a larger period for investigation was justified.3. Whether the appellants misused the exemption by diverting Solvent C-IX for purposes other than specified in the notification.4. Whether the appellants maintained proper records to support their claim of using Solvent C-IX for the manufacture of synthetic resins.Issue 1:The Order-in-Original held that the appellants failed to provide documentary evidence establishing the actual use of Solvent C-IX in the manufacture of plastics, despite holding L-4 and L-6 licenses. The burden of proof under Chapter X was on the assessee, which they failed to discharge. Consequently, a recovery amount and penalty were imposed due to the lack of cogent evidence supporting the use of Solvent C-IX for plastics manufacturing.Issue 2:The appellants argued that the department wrongly invoked a larger investigation period, claiming that they followed all necessary procedures and submitted required returns and documents. The Tribunal found that the department did not justify the invocation of a larger period, as the necessary documents like RG 16, AR 3s, and RT 11 returns were duly checked, signed, and accepted by the authorities. Therefore, the invocation of a larger period was deemed unsustainable.Issue 3:The department alleged that the appellants diverted Solvent C-IX for unauthorized purposes instead of using it for manufacturing synthetic resins, as specified in the notification. The Additional Collector upheld the demand, but the Tribunal found that there was no concrete evidence to support the misuse allegation. The Collector's order lacked substantial analysis of the statutory registers and documents provided by the appellants, leading to the set aside of the impugned order and acceptance of the appeal.Issue 4:The appellants contended that they used Solvent C-IX for manufacturing synthetic resins, following Chapter X procedures. The department's claim of diversion for unauthorized purposes was not substantiated with concrete evidence. The appellants maintained records like RT 11 returns and RG 6, which showed receipt and use of solvents for the specified purpose. The Tribunal emphasized that the department failed to challenge the accuracy of these documents, shifting the burden back to the department to substantiate its charges. Consequently, the impugned order was set aside, and the appeal was accepted.