1. The issue involved in the appeal filed by M/s. I.B.P. Co. Ltd. is about the availability of benefit of exemption in respect of site mixed slurry explosives under Notification No. 191/87, dated 4-8-1987.
2. Shri R.P. Singh, learned Consultant submitted that the appellant company set up a plant as per agreement with M/s. Hindustan Zinc Ltd. (HZL) for mixing/preparation of such ingredients as needed to be done and for making arrangements for loading/transportation of the mixed/prepared and unmixed/unprepared ingredients; that they were specifically told that M/s. HZL had been exempted from payment of Central Excise duty under Notification No. 191/87 and M/s. HZL had sent them a copy of L-6 licence for obtaining the explosive for industrial purposes without payment of duty. He further, submitted that in their classification list filed by them, they had clearly mentioned that HZL is exempted from Excise duty as per Notification No. 191 /87; that the present proceedings had arisen out of a misconception that the benefit of Notification was claimed by them whereas the undisputed fact was that it was M/s. HZL who claimed the benefit of the Notification; that they had made clearances on the basis of CT-2 certificates issued by the proper Central Excise Officer; that they had no reason to doubt correctness of L-6 licence and CT-2 certificate and, which to the best of their knowledge and belief, they were lawfully bound to do for which they could not be penalised; that order for provisional assessment was bad in law and it was an act of coercion to make them execute B-13 Bond. He also contended that HZL had undertaken to pay duty on the goods if finally determined as leviable as they had maintained that the goods would be used in the manufacture of zinc/lead; that mis-statement, if any, has been made by HZL and it has nowhere been alleged that any mis-statement had been made by the appellants. He contended that it was not for the appellant to doubt and question the correctness of L-6 licence and CT-2 certificate. He relied upon the Instruction No. 21/85, dated 4-6-1985 issued by the Central Excise Collectorate, Chandigarh in which it was clarified that under Rule 196 of the Central Excise Rules, if any excisable goods obtained under Chapter X procedure are not duly accounted, the L-6 licensee is responsible for this and the manufacturer of excisable goods has no role to play. He also referred to the decision in the case of CCE v.Ferro Alloys Corporation -1994 (71) E.L.T. 931 (Tribunal) in which the Tribunal held that "The moment the goods are cleared from the factory under a valid L-6 licence, the responsibility for accountal gets shifted to the consignee...after the goods have been despatched the consignor, the manufacturer in this case, has no control over the goods, therefore, and there is no provision in law holding him responsible for ensuring that the goods ultimately reach the consignee's end." The learned Consultant also relied upon the following decisions in support of his contention that the duty liability is on beneficiary consignee and not on manufacturer from whom goods were obtained by the users :-Fertiliser Corpn. of India Ltd. v. CCE -1990 (50) E.L.T. 494 (Tribunal) (iv) CCE, Madras v. Madras Rubber & Pressing Ltd. -1994 (69) E.L.T. 409 (Tribunal).
3. Countering the arguments, Shri H.K. Jain, learned SDR reiterated the findings of both the Assistant Collector and the Collector (Appeals).
He specifically referred to the findings of the Adjudicating Officer as contained in para 16 of the order dated 10-5-1994 in which it was mentioned that "it was obligatory on the part of the assessee to see that the explosives are not supplied for any purpose other than for use in the manufacture of zinc/lead concentrate as mentioned in CT-2 issued by the Suptd.... The exemption Notification No. 191/87 is applicable only to such explosives which are used in the manufacture of zinc/lead concentrate and not to the explosives used for the blasting obtained for excavation of zinc/lead ores. The liability of M/s. Hindustan Zinc Ltd. might have arisen in case such explosives, after obtaining from the assessee and proper accountal would have been used by M/s.
Hindustan Zinc Ltd. for a purpose other than mentioned in CT-2. But in the instant case the assessee is supplying the explosives himself at the mine site knowing fully well that the same are being used for blasting of mines only for excavating the zinc/lead ores and not in the manufacture of zinc/lead concentrate." 4. We have gone through the submissions of both the sides. Notification No. 191/87-C.E., dated 4-8-1987 exempted goods falling within Chapters 28,29,36 and 38 of the Schedule to the Central Excise Tariff Act, if used in the manufacture of zinc/lead concentrates subject to following the procedure set out in Chapter X of the Central Excise Rules. Chapter X provides a procedure if a person wishes to obtain remission of duty on inputs used in a specified industrial process. According to the procedure contained in Rule 192 of the Central Excise Rules, such a person has to make an application in the proper form stating the estimated annual quantity of the excisable goods required and the purpose for and the manner in which it is intended to use them and declaring that the goods will be used for such purpose and in such manner. The permission will be granted only if the proper officer is satisfied that the applicant is a person whom the concession can be granted without danger to the revenue, and if he is satisfied by inspection that the premises are suitable and contain a secure store-room for the storage of the goods. The rule also provides for execution of a bond with surety or sufficient security. Rule 194(2) of the Rules also provides for submission of quarterly report by such person showing the nature and quantity of goods used and of commodities manufactured the manner of manufacture and such other particulars as the Board or Collector may require. It is thus evident that the responsibility for getting the excisable goods for specified industrial use without payment of duty or at concessional rate of duty and their use in the intended purpose is on the person holding the L-6 licence.
This is further confirmed from the provisions contained in Rule 196 which provides for demand of duty and confiscation of not only excisable goods but also the goods manufactured from these goods if the excisable goods obtained under Rule 192 are not duly accounted for as having been used for the purpose and in the manner stated in the application. The appellants herein have supplied the goods to M/s.
Hindustan Zinc Ltd. on the basis of the licence issued to M/s. HZL and CT-2 certificate given by the excise authorities in charge of M/s. HZL.
The appellants have rightly contended that they did not have any reason nor locus standi to doubt and question the correctness of L-6 licence and CT-2 certificates. The Rules provide the authority to the Excise officers to demand not only the duty but also to confiscate the goods if excisable goods obtained under Rule 192 are not used for the purpose and in the manner stated in the application. Rule 196 even vests the power with the proper officer to withdraw the concession if a breach of rules is committed by the L-6 holder. Accordingly the demand of duty cannot be raised against the appellants who had done nothing but acted on the basis of L-6 licence and CT-2 certificate. The similar views were held by the Tribunal in all cases relied upon by the learned Advocate for the appellants. The Tribunal in the case of Fertilizer Corporation of India Ltd. v. CCE, reported in 1990 (50) E.L.T. 494 was dealing with a situation in which the ammonia obtained free of duty was not shown to have been used for the specified purpose. The Tribunal held that the recipient of the goods, namely the holder of L-6 licence, who had undertaken to use the goods for the specified purpose and had executed a bond to ensure compliance with the notification, was responsible for payment of duty in such circumstances. In the present instance, the demand for duty has been raised against the manufacturer and not the consumers of ammonia. On this ground also, the demand raised against the appellants is not sustainable.
5. In view of these facts and circumstances, and following the ratio of the decisions relied upon, we hold that the fact that assessment was made provisional at appellants' end, would not make the appellants liable to pay duty if the excisable goods supplied by them was not used by M/s. Hindustan Zinc Ltd. for the intended purpose. Accordingly we set aside the order and allow the appeal.