Commissioner of C. Ex. Vs. Godavari Explosives Ltd. - Court Judgment

Excerpt:
1. this is an appeal at the instance of the revenue challenging the order dated 21-10-97 passed by the commissioner of customs & central excise, hyderabad.2. the commissioner in the above order took the view that the demand of central excise duty against the respondent herein to the extent of rs. 47,11,087/- is not sustainable both on merits as well as on the issue of limitation. the assessee is manufacturing prepared explosives falling under chapter 36 of the central excise tariff act. they are also manufacturing spent nitric acid falling under tariff sub-heading 2808.10. they filed classification list and accordingly their products namely, petn and spent nitric acid are being cleared on payment of duty and also for captive consumption. one of the allegations in the show cause.....

Judgment:
1. This is an appeal at the instance of the Revenue challenging the order dated 21-10-97 passed by the Commissioner of Customs & Central Excise, Hyderabad.

2. The Commissioner in the above order took the view that the demand of Central Excise duty against the respondent herein to the extent of Rs. 47,11,087/- is not sustainable both on merits as well as on the issue of limitation. The assessee is manufacturing prepared explosives falling under Chapter 36 of the Central Excise Tariff Act. They are also manufacturing Spent Nitric Acid falling under Tariff sub-heading 2808.10. They filed classification list and accordingly their products namely, PETN and Spent Nitric Acid are being cleared on payment of duty and also for captive consumption. One of the allegations in the show cause notice issued against assessee was that there was discrepancy in the particulars of clearance in the log sheets with reference to RG-1 for the period from July 1991 to November 1993. Excess quantity of clearance for captive consumption was shown in the log sheets than the quantity recorded in RG-1. It was also alleged that the assessee had shown certain quantities of PETN and Spent Nitric Acid as cleared for other purposes without payment of duty for the period July 1991 and October, 1991 to December, 1993. Even though the assessee claimed that those quantities were cleared for captive consumption, there is no gate pass in support of their claim. It was on the basis of the above allegation the demand as mentioned above was raised against the assessee.

2. It was contended by the assessee before the Commissioner that the excess quantity worked out on comparison of the quantity accounted in RG-1 with the quantity as per log sheets was due to the fact that prior to October, 1991 the quantities captively consumed were not shown in the RG-1 register as they were under the belief that since PETN was used in the manufacture of prepared explosives within the factory, it need not be accounted for in RG-1. The correct quantity of such material was shown in the log sheets which was due to the fact that PETN was consumed at the various stages of its use. It was also contended by the assessee that in the facts of the case the larger period of limitation cannot be invoked as there was no suppression of production or clearance of PETN and Spent Nitric Acid for captive consumption. The two products were accounted for captive consumption in the RG-1 register and were also-reflected in the monthly RT-12 returns.

It was pointed that these informations were reflected in RG-1 and RT-12 for the period from December, 1991 to December, 1994. Since such information was within the knowledge of the department there is no reason for invoking the proviso to Section 11A.3. The Commissioner took the view that the department had not made any further investigation into the explanation offered by the assessee namely that the alleged excess production was captively consumed. The Commissioner further observed that department had no proof that the alleged excess goods were not cleared for captive consumption but were cleared outside the factory. He also held in favour of the assessee on the issue of limitation.

5. We do not find any reason to interfere with the findings of the Commissioner. The entire materials point only towards captive consumption of the alleged excess goods. Sufficient materials were available with the department to examine whether the explanation offered by the assessee was factually correct or not. Without making such inquiry it is not fair or proper to reject its explanation. On the question of limitation also we find that the Commissioner is fully justified in taking the view that proviso to Section 11A cannot be invoked in the facts of the case. The show cause notice is dated 26-9-94. In the RT-12 returns filed by the assessee even in July 1991 showed clearance of PETN and Spent Nitric Acid for other purposes without payment of duty. Once clearance of goods without payment of duty was openly declared, there is nothing more which is expected from an assessee to bring the matter to the department's notice. Therefore, the allegation of suppression is totally without any basis. In fact, this is a case of full disclosure of facts. Under these circumstances, invocation of the larger period of limitation is totally unjustified.

The grounds taken in this appeal by the Revenue are devoid of any merit. We, therefore, confirm the order impugned and dismiss the appeal.