1. This appeal has been filed by M/s. Tamil Nadu Steels Ltd., Arakonam against the order-in-appeal passed by the Collector (Appeals), Madras by which he has rejected the appeal filed by the appellants before him against the order in original passed by the original authority demanding duty of Rs. 3,08,563.80. The appellants are holders of L4 licence No. 1/84 and are manufacturers of goods falling under chapter 72 to the Central Excise Tariff Act, 1985 out of waste and scrap of steel with the aid of electric furnace. They had obtained steel waste and scrap at nil rate of duty as per Notification No. 55/56 from M/s.
Arakonam Castings and Forgings Ltd. by following the procedure set out in Chapter X on the strength of CT-2 certificate and L-6 licence No.2/84 obtained by them. Notification No. 55/86, dated 10-2-1986 permits clearance of waste and scrap of steel at nil rate of duty subject to fulfilment of the conditions viz.: (ii) an officer not below the rank of an Assistant Collector of Central Excise is satisfied that such waste and scrap is intended to be used in the manufacture of goods falling under sub-heading Nos.
7206.20, 7207.20 and 7307.20 with the aid of electric furnace; and (iii) the procedure set out in Chapter X of the said rules is followed." 2. Waste and scrap received at nil rate of duty were used in their Electric furnace to obtain molten steel and thereafter cleared to M/s.
Arakonam Castings and Forgings which is adjacent to their premises after the castings were made in that premises. The goods falling under the above subheadings are7207.20 : Billets or Blooms7307.20 : Castings The case of the department was that castings were not manufactured in the present appellants' premises, but were manufactured in the premises of M/s. Arakonam Castings and show cause notice was issued for the contravention of Rules 192 and 194 on the allegation that the goods were not used for the purpose and in the manner in which the application has been made under the Rules cited and the appellants were found to have availed wrongly NIL rate of duty on the steel waste and scrap to the tune of Rs. 3,08,563.70 for a quantity of 845.380 MT of steel waste and scrap during the period from 1-3-1986 to 28-2-1988.
This amount of duty was demanded from the appellants under Rule 196 of the C.E. Rules, 1944 and the same was confirmed by the original authority and confirmed in appeal by the Collector (Appeals) against which the present appeal has been filed.
3. Heard Shri V.S. Venugopalan, learned Counsel for the appellants who submitted that the order of the Collector (Appeals) based on the observations that the castings should have been manufactured in the premises of the present appellants i.e. Tamil Nadu Steels Ltd. is not correct in law as chapter X procedure has been followed and the goods under Notification No. 55/86 stipulate that the goods should be used in the manufacture of the specified items mentioned therein and the Notification does not specify the premises where such manufacture should take place. It is the case of the appellants that the molten steel manufactured in their premises were thereafter transferred to their adjacent factory where the castings falling under subheading 7307.20 were manufactured and cleared after payment of duty. This aspect of the matter has been completely lost sight of by the lower authority and no findings have been arrived at that the goods which have been manufactured out of duty free goods received have been utilised and/or used for the manufacture of the items specified under sub-heading 7307.20. He relied upon the ruling in the case of Delhi Cloth and General Mills Co. Ltd. v. U.O.I. as reported in 1988 (36) E.L.T. 486,. Tata Oil Mills Co. Ltd. v. CCE, as reported in 1989 (43) E.L.T. 183 (S.C.), Special Bench decision in the case of MRF v. CCE as reported in 1987 (32) E.L.T. 579, Special Bench decision in the case of Victors Sperry of India v. CCE as reported in 1989 (40) E.L.T. 202, Hyderabad Allwyn Industries v. CCE as reported in 1990 (45) E.L.T. 584 and the decision of the Larger Bench in the case of Arti Paints and Chemicals Industries, Bombay v. CCE as reported in 1984 (15) E.L.T. 206 which has been followed in the case of Shalimar Chemical Industries Ltd. v. CCE as reported in 1996. (81) E.L.T. 248 to submit that in view of the grant of L-6 licence, no demands can be made against them as the facts in their case are on all fours as in the case of Arti Paints and Chemicals (supra) and in any case in their case there is no allegation that the goods have not been used to manufacture the castings.
Therefore, the benefit of the Notification has been correctly availed and no demand of duties can be made under Rule 196 of the C.E. Rules.
The learned Counsel also made a feeble attempt to submit that time-bar under Section 11A(1) should be read into Rule 196. But on being shown the decision of the Hon'ble Supreme Court in the case of CCE, Jaipur v.Raghuvar (India) Ltd. reported in 2000 (118) E.L.T. 311 (S.C.) he conceded that he has no case to submit on limitation.
4. Shri S. Kannan, learned DR for the department reiterated the order impugned and submitted that the Notification is very clear and the intentment is that for the manufacturer of castings and/or the other two items mentioned therein, the chapter X procedure should be followed which does not envisage further transfer of the goods to another licensee. Therefore, the CT-2 certificate issued for removal between Arakonam Castings and the present appellants to cover the molten steel removed from the appellants' premises will not be documents to consider for grant of the benefit of the Notification and the demands confirmed should be upheld. There is also no bar of limitation for demanding duty in view of the Special Bench decision in the case of Arti Paints & Chemicals Industries (supra). He prays for confirmation of the order of the Collector (Appeals) in totality.
5. We have considered the rival submissions and after considering the material on record, we find that: (a) Facts in this case are similar to the facts in the case of Arti Paints & Chemicals Ltd. (supra). The Special Bench in this case was considering the receipt of certain material for the benefit of Notification No. 35/73 which goods were required to be used in the manufacture of paints and the allegation was that the material so used was not utilised in the manufacture of paints but was removed after certain physical treatment. In the present case, similar Notification 55/86 prescribes waste and scrap to be used in the manufacture of ingots, Blooms and/or billets and castings. In this case, the appellants, as in the case of Arti Paints & Chemicals (supra) had submitted documents regarding actual use of the molten steel for manufacture of billets etc. in the adjacent factory i.e.
M/s. Arakonam Castings which was ignored by the lower authority. We find no reason in the present case not to allow the benefit in view of the decision of the larger bench in the case of Arti Paints & Chemicals (supra) wherein on similar facts it was held that L-6 licence holder cannot be blamed for misuse of licence. In the present case we cannot hold that the appellants who are L-6 licence holders have misused the Notification.
(b) In view of the submission of the learned Counsel regarding the issue of time-bar and the decision of the Hon'ble Supreme Court in the case of Raghuvar (India) Ltd. (supra) we do not uphold the plea on bar of limitation made out by the appellants.
6. In view of our findings and in view of the decision of the larger bench in the case of Arti Paints & Chemicals, we set aside the impugned order and allow the appeal. Ordered accordingly.