Ashok Organic Industries Ltd. Vs. Collector of C. Ex. - Court Judgment

Excerpt:
1. for hearing the applicants appeals on merits, they are required to.deposit rs. 1,23,38,268/- (in e/stay-2880) towards duty vide order-in-original no. 4/demand/93[v.(ch. 22) 15-4/oa/87], dated 28-6-1993 and to deposit rs. 3,13,23,010.00 (in e/stay-2881) towards duty vide order-in-original no. 5/demand/93 [f. no. v. (ch. 22) 15-1/oa/91] dated 28-6-1993 both passed by the collector of central excise, baroda.2. the issue relates to demand for duty in respect of rectified spirit (industrial alcohol) containing 6% water which was cleared subject to state excise control. the allegation is that this can be used as fuel for internal combustion engine and hence duty was sought to be demanded as per the rate applicable under t.i. 6 (old tariff) and ch. 2204 of the new central excise tariff. shri patel pleaded that apart from the contention that this type of alcohol because of its water content, cannot by itself be used as fuel for internal combustion engine, the demand is clearly hit by time bar. in the aforesaid cases show cause notice was issued on 18-2-1988 covering the period december, 1985 to february 1987 and another show cause notice was issued on 17-6-1992 covering the period april 1987 to february 1989. in this connection, he also referred to their letter dated 15-5-1986 wherein they sought for l-4 licence of fusel oil. in that letter, they have clearly mentioned that they are manufacturing in their distillery industrial alcohol (rectified spirit) which is subject to state excise control, but fusel oil which is a waste product is not covered by the state excise control and hence they would seek for issue of the central excise licence so that this product can be cleared on proper central excise duty. there was also another letter to the department on 30-7-1986 reminding them to issue the licence. in this letter also they have clearly mentioned that their manufacturing activity is rectified spirit (industrial alcohol). with these letters in the hands of the department and the manufacturing activities going on in their presence, when the officers also had paid a number of visits to the applicants factory, where one of the waste product is under the central-excise control, the department cannot allege suppression of any material factor for invoking the extended period. strangely, though crores of rupees of demands have been confirmed, no penalties have been imposed. this itself indicates the collector's moral satisfaction regarding the absence of mens rea on their part. all the same, he has invoked the extended period for demanding the duty.3. shri mondal, the ld. sdr, however, refers to the findings of the collector in the adjudication order to point out that they have not specifically indicated the manufacture of ethyl alcohol of the type suitable for fuel for the internal combustion engine indicating the possibility of its use as motor spirit. hence this fact has not! been specifically brought to the notice of the department.4. after hearing both the sides and on a perusal of the correspondences, we are prima facie satisfied that their manufacturing activities are well within the knowledge of the department, especially when they have applied for a licence for fusel oil stating that it is a waste product of their main manufacturing activity being industrial alcohol which is subject to state excise control, if the department had any objection for the dutiability on the main manufacturing activity, nothing stopped them from directing the applicants to take out a licence and follow the central excise procedures. this itself indicates that the department was also not sure of the ground and possibly were under the impression that the rectified spirit is subject to state excise control/levy. this is also confirmed by the circular issued by the cbec, under their letter no. 83/12/89, dated 18-9-1989, wherein the board takes note of the dispute since long and directed the authorities not to enforce the demand, till the matter is finally decided by the supreme court. in the circumstances, the allegation that the manufacturing activity was kept away from the scrutiny of the departmental authorities deliberately does not prima facie appeal to us. this is the prima facie view we have taken in a few other cases, where the demands of duty on industrial alcohol was raised. hence following the same approach, we direct the applicants to furnish a personal bond covering the duty amounts, within a period of four weeks from the date of communication of this order and report compliance within five weeks failing which their appeals are liable to be rejected. on compliance, there shall be stay and waiver of deposit of the duty amounts, till the disposal of the appeals.

Judgment:
1. For hearing the applicants appeals on merits, they are required to.

deposit Rs. 1,23,38,268/- (in E/Stay-2880) towards duty vide Order-in-Original No. 4/Demand/93[V.(Ch. 22) 15-4/OA/87], dated 28-6-1993 and to deposit Rs. 3,13,23,010.00 (in E/Stay-2881) towards duty vide Order-in-original No. 5/Demand/93 [F. No. V. (Ch. 22) 15-1/OA/91] dated 28-6-1993 both passed by the Collector of Central Excise, Baroda.

2. The issue relates to demand for duty in respect of rectified spirit (Industrial Alcohol) containing 6% water which was cleared subject to State Excise Control. The allegation is that this can be used as fuel for Internal Combustion Engine and hence duty was sought to be demanded as per the rate applicable under T.I. 6 (old Tariff) and Ch. 2204 of the New Central Excise Tariff. Shri Patel pleaded that apart from the contention that this type of alcohol because of its water content, cannot by itself be used as fuel for internal combustion engine, the demand is clearly hit by time bar. In the aforesaid cases Show Cause Notice was issued on 18-2-1988 covering the period December, 1985 to February 1987 and another Show Cause Notice was issued on 17-6-1992 covering the period April 1987 to February 1989. In this connection, he also referred to their letter dated 15-5-1986 wherein they sought for L-4 Licence of Fusel Oil. In that letter, they have clearly mentioned that they are manufacturing in their distillery industrial alcohol (rectified spirit) which is subject to State Excise Control, but fusel oil which is a waste product is not covered by the State Excise Control and hence they would seek for issue of the Central Excise Licence so that this product can be cleared on proper Central Excise duty. There was also another letter to the Department on 30-7-1986 reminding them to issue the licence. In this letter also they have clearly mentioned that their manufacturing activity is rectified spirit (industrial alcohol). With these letters in the hands of the Department and the manufacturing activities going on in their presence, when the officers also had paid a number of visits to the applicants factory, where one of the waste product is under the Central-Excise Control, the Department cannot allege suppression of any material factor for invoking the extended period. Strangely, though crores of rupees of demands have been confirmed, no penalties have been imposed. This itself indicates the Collector's moral satisfaction regarding the absence of mens rea on their part. All the same, he has invoked the extended period for demanding the duty.

3. Shri Mondal, the Ld. SDR, however, refers to the findings of the Collector in the adjudication order to point out that they have not specifically indicated the manufacture of Ethyl Alcohol of the type suitable for fuel for the Internal Combustion Engine indicating the possibility of its use as motor spirit. Hence this fact has not! been specifically brought to the notice of the Department.

4. After hearing both the sides and on a perusal of the correspondences, we are prima facie satisfied that their manufacturing activities are well within the knowledge of the Department, especially when they have applied for a licence for fusel oil stating that it is a waste product of their main manufacturing activity being industrial alcohol which is subject to State Excise Control, If the Department had any objection for the dutiability on the main manufacturing activity, nothing stopped them from directing the applicants to take out a licence and follow the Central Excise Procedures. This itself indicates that the Department was also not sure of the ground and possibly were under the impression that the rectified spirit is subject to State Excise Control/levy. This is also confirmed by the Circular issued by the CBEC, under their letter No. 83/12/89, dated 18-9-1989, wherein the Board takes note of the dispute since long and directed the authorities not to enforce the demand, till the matter is finally decided by the Supreme Court. In the circumstances, the allegation that the manufacturing activity was kept away from the scrutiny of the Departmental authorities deliberately does not prima facie appeal to us. This is the prima facie view we have taken in a few other cases, where the demands of duty on industrial alcohol was raised. Hence following the same approach, we direct the applicants to furnish a personal bond covering the duty amounts, within a period of four weeks from the date of communication of this order and report compliance within five weeks failing which their appeals are liable to be rejected. On compliance, there shall be stay and waiver of deposit of the duty amounts, till the disposal of the appeals.