Full Judgment
The lower authority confirmed the demands under Rule 9 (2) made on the respondents, the L-4 licence holder, along with a penalty of Rs. 1 lakh under Rule 173Q on them.
"I have gone through the submissions of the appellants. The Addl.
Collector has confirmed the demand of duty against the appellants, manufacture of the goods, on the ground that Notification No. 43/88 did not grant an exemption from payment of duty if OPD was used in the manufacture of 2-HQ. It is observed from the CT-2 certificate that it was mentioned therein that M/s.Colac Pvt. Ltd., is authorize to obtain Orthophenylene Diamine for the manufacture of Quinolphos and goods can be procured from M/s. Arlabs, Maharashtra and four other manufacturers. The CT-2 certificate clearly mentions that the OPDA is to be used in the manufacture of Quinolphos Technical which falls under Chapter Heading 3808.10 and therefore M/s.Arlabs Ltd, were right in removing the goods without payment of duty under Notification No. 43/88 by virtue of this CT-2 issued by competent authority. If there is any contravention of the provisions of Rule 192 or 196BB, contravention has been made by the L6 holder, i.e.
M/s.Calac Pvt Ltd, and not by the appellants. It has been held by the Appellate Tribunal in the case of Bajaj Auto Ltd, v. Collector 1987 (31) ELT 970 (T), that "after the clearances, the responsibility for the duty is transferred by an elaborate procedure to the buyer .... User of the bounty fed goods. This is for reasons that are obvious. Once the property in goods changes hand, the manufacture, who is the prime target of duty recovery proceedings, fades out and loses control over the disposal of the goods. The gratuity achieves completion only by the use of the goods, and use is beyond the manufacturer's power. "Similar views were held by the Tribunal in the case of Fertilizer Corporation of India 1990 (50) ELT 494 as the Tribunal held that recipient of the goods, viz., the holder of L6 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. As the CT2 certificates in the present matter clearly mention that the OPD is to be used n the manufacture of product falling under 3808.10 through the intermediate product, basic condition of the notification has been satisfied. Merely because an intermediate product is a technological necessity, t will not mean that the OPD is not being used in the manufacture of product falling under 3806.10. In view of these facts, the decision in the case of Arti Paints & Chemicals v. Collector 1984 (50) ELT 206 is also not applicable as in that decision the Tribunal held that the duty is chargeable from the manufacturer as the permission given under Rule 192 was wrong. First of all it is not the case of the Department that the L6 licence was given wrongly to the L6 holder and no such allegation has been made in the show cause notice. If there was any misuse of the goods received tinder Chapter X procedure, it was by the L6 holder. As far as penalty is concerned, the appellant has rightly pointed out that show cause notice has never been issued for imposing the penalty. The show cause notice was issued only for demanding the duty In view of this, the question of imposing any penalty on the appellant doesn 7 arise. In any case as the appeal is allowed even in respect of confirmation of demand, the penalty doen't arise." a) The ground taken that the Commissioner (Appeal) has incorrectly accepted the contention that merely because an intermediate product was a technologically necessity should not mean that the material was not used in the fine product and that the misuse was at the L6 holders end cannot be a ground for allowing the Revenue's appeal, since both these issues are factually correct.
b) Since misuse, if any, has taken place at L6 holders end and the ground taken by Revenue is that L6 holders permission was not correct, the liability to duty on the 1$ holder in issuing the product, on a valid CT-3 would not arise. Demands if any are required to be made on L6 holder. There cannot be a cause to visit the L4 holder with a penalty under Rule 73Q. c) The demands and penalties are being found to be correctly set aside by the Commissioner (Appeals), as no valid grounds have been made out in the Revenue appeal herein to upset the same. Revenue appeal required to be rejected. Ordered accordingly.