ORDER
V.P. Gulati, Member (T)
1. By this application, the appellants have sought for dispensation of pre-deposit of duty of Rs.18,74,115 demanded in terms of the impugned order and also a penalty of Rs. 2.00 lakhs levied in terms of the said order.
2. The learned Consultant pleaded that the appellants manufacture Sulphamethaxazole and for the manufacture of which various inputs are used at different stages of processing. During the course of manufacture some solvents are recovered and also effluents are generated. Some of the effluents generated have some organic chemicals in sufficient quantities to be usable, while other effluents generated on account of their composition do not have any saleable value. He pleaded that the demand is based on the private records maintained by the appellants in respect of the solvents and effluents. This record he pleaded has entries regarding the details of the effluents and the solvents, namely quantity, persons who received the consignments, name of the consignee and also the signature of the representative of the consignee. He pleaded against some of these entries in the private records the rate per KG and the total amount received is also noted, while against others no such particulars have been entered. He pleaded that such of those consignments which had saleable value by virtue of these chemical contents were sold for a consideration, while the others which had no sale value and were not marketable were sent out of the factory for being let out as effluents. He pleaded that the learned lower authority had presumed that since there were sale particulars in respect of some consignments, the goods relating to other entries in the book were also sold even though no sale particulars as such have been entered in respect of the same. He pleaded that no evidence had been brought on record in respect of these consignments to show that the appellants had in fact sold these goods to anybody for any consideration or that these had been used as goods by anybody after clearance from the factory. To appreciate the appellants pleas, the learned DR was asked to get instructions on the nature of the processes carried as also the nature of the effluents, etc. emerging in the process. The appellants were also asked to file a flow chart and also copies of the private note book records. When the matter was taken up the learned DR did not have any instructions and the appellants had filed copies of the sheets in the note book which form the basis of the demand. The learned Consultant also pleaded that the departmental authorities had also made enquiries, and statements were also recorded from the consignees indicated in the sheets and one of the buyers M/s. Manjunatha Chemicals have stated that they had not purchased any solvents from the appellants and arranged tankers for draining out the solvents, while the another firm had admittedly purchased certain solvents. He pleaded that the learned lower authority has not entered any reasoned findings based on the enquiries particularly when the authorities were relying on the entries in the note book which formed the basis on which the duty had been demanded in respect of the goods covered by the entries where no sale amount has been shown. He pleaded that there is no proper appreciation of the appellants pleas that some of the recovered solvents and effluents were not marketable and had been taken out for draining when the Department on enquiry has ascertained that some of the solvents and effluents cleared were only for draining out purposes. In this connection, he referred us to the findings of the learned lower authority in Paras 16, 17 & 18 of the impugned order. Our attention was particularly drawn to the observations of the learned Collector as under :-
“The solvent is a bye-product derived during the process. It may be true that the solvent is a weak organic compound. Nevertheless, it retains the characteristics of the solvent to certain extent and it is usable in certain industries. The goods should have been cleared only on payment of duty. If they were unfit for consumption they should have been destroyed with the knowledge of the department.”
He pleaded that the duty has been demanded based on a presumption. He pleaded that they are prepared to pay the duty as demanded in respect of the entries which bear the sale value and also some of the inputs which were cleared as such and pleaded that his prayer is only for dispensation of pre-de-posit of Rs.17,66,914.
3. After hearing the pleas of the learned Consultant and taking into consideration the findings of the learned Collector in Para 18 of the impugned order, it was felt that the matter for consideration lay in a short compass and with the consent of both parties it was decided to decide the appeal on a short point of law dispensing with the pre-deposit of the duty and penalty as pleaded by the learned Consultant above.
4. The learned DR pleaded that the learned Collector has given reasons for demanding the duty in Paras 16,17 & 18 and stated that notwithstanding the non-discussion of all the evidence, the learned lower authority’s order is maintainable in law.
5. We have considered the pleas made by both the sides. We observe that the duty demanded from the appellants is based on their own private records which reflect the production of the recovered solvent and the effluents on day-to-day basis. Entries also show the names of the consignees and in some cases the amounts recovered by way of sale of these goods. The enquiries made by the authorities also show that some of the consignees to whom the goods had been sent have stated the goods in fact were let out as effluents. There is no finding in the order of the learned lower authority as to why these statements have been rejected. It is seen that the appellants had maintained record of the movement of the goods in the private records and the evidence of the lorry drivers and others who were engaged in the transport of the goods also merited to be considered. Further, we observe that in a case where chemical processes are involved the process of manufacture of the chemicals should have been taken note of to ascertain as to the nature of the bye-product and effluents that would be emerging and if felt necessary by taking the opinion of chemical examiner or by obtaining a technical write-up from the appellants themselves. As directed by us, the appellants have filed the flow charts showing the different stages in the process of manufacture and the stages at which effluents, etc. emerged. The learned lower authority should have approached the issue by analysing the manufacturing process before coming to his conclusions. It is quite likely that the solvents which emerged as bye-product were usable in the case of manufacture of certain batches, while these might not be usable or marketable when produced in other batches. As to what emerged cannot be left to a conjecture in a situation like this and an’ indepth analysis should have been done. The learned lower authority while holding against the appellants, has observed as under :-
“The solvent is a bye-product derived during the process. It may be true that the solvent is a weak organic compound. Nevertheless, it retains the characteristics of the solvent to certain extent and it is usable in certain industries. The goods should have been cleared only on payment of duty. If they were unfit for consumption they should have been destroyed with the knowledge of the department.”
It is seen that the learned lower authority has conceded that the solvent as such emerged after the reaction was a weak organic compound and that it retains the characteristics of the solvent to certain extent. This itself shows that what emerged as a bye-product was prima facie in the nature of a spent solvent. The plea of the appellant should have been decided by analysing the chemical process involved and the strength of the solvent as it emerged after taking due notice of the evidence brought on record by the enquiries of the department regarding the actual use of the materials. In view of the above, we hold that the order of the learned lower authority is not proper and has to be set aside and the matter remanded for de novo consideration. The matter is, therefore, remanded to the learned lower authority for de novo consideration after giving the appellants an opportunity of hearing in the light of the above observations. The appeal is, therefore, allowed by remand.