ORDER
K.S. Venkataramani, Vice President
1. These appeals are directed against the adjudication order captioned above passed by the Commissioner of Central Excise, Mumbai-I.
2. The brief facts are that the appellants manufacture VNE oils falling under Item 12 of Central Excise Tariff. The department found from the monthly RT 12 returns filed by the appellants in respect of VNE oils that they had cleared quantities of refined Sal oil for the manufacture of the product called Covo during the period 1975 to December, 1981 without payment of Central Excise duty due thereon because they had manufactured and cleared refined sal oil without determination and payment of Central Excise duty and without cover of Central Excise documents. 7 show cause notices were issued as follows:
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Sl. No. SCN demand Period Qty Duty
Notice No. & date removed involved
(M.T.)
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1. CEX.13.VNE/Sal/HLL 1975 to 1979 7164=520 7,52,274.60
/80/29-5-1980 2,90,395.56
2. CEX.13.VNE/Sal. July 1979 to 2765=672
79-80 18-3-1980 Jan. 1980
3. CEX.13.VNE/Sal/HLL Feb. 1980 to 648.775 68,121.37
/80/2167/5-11-1980 July, 1980
4. CEX.13.VNE/HLL/81/ Sept. 1980 702.337 73,745.38
198/30-1-1981 to Nov.
1980
5. CEX.13.VNE/HLL/81/ May, 1981 1=000 105.00
7704/30-9-1981
6. CEX.13.VNE/HLL/81/ Sept. 1981 525.104 55,135.92
2074/25-11-1981 to Oct. 1981
7. CEX.13.VNE/HLL/82/ Nov. 1981 574.895 60,863.97
803/31-3-1982 to 25-12-
1981
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3. The appellants resisted the demand and mainly contended that the product covo was exclusively meant for export after being assessed to duty under Item 12 CET and the exports were made under Rule 12 of Central Excise Rules under claim for rebate of the duty paid. For resisting the duty demand on the portion of Sal oil used in the production of covo, they also relied upon the Trade Notice No. 38/89 dated 17-4-1989 of Bombay-H Collectorate according to which no duty need be collected on intermediate goods produced and used in the same factory in the manufacture of finished goods exported under bond. The Commissioner did not accept the contention and confirmed the demand totalling Rs. 13,00,142 under Rule 10/Section 11A of the Central Excise Act. However, he refrained from imposing penalty on the appellants.
4. Shri M.H. Patil, the ld. Counsel for the appellants submitted that the process of manufacture of the final product has been given in the flow chart, from there it is seen that raw sal oil is taken up for processing and as a result of that processed sal oil emerges which is used in the manufacture of soap and is hence exempted under Notification No. 33/63. Side by side, the processing also results in sal stearine which the appellants are exporting under the brand name Covo. It was submitted that sal stearine is not a new product and it remained as sal oil only. The Supreme Court judgment in the case of Collector v. jayant Oil Mills Pvt. Ltd. -1989 (40) E.L.T. 287 (S.C.) was cited in support. IT was further argued that no duty can arise on sal stearine exported as Covo because the entire quantity is exported under claim for rebate. The ld. Counsel urged that the Commissioner in the impugned order has misdirected himself in saying that the Trade Notice 38/89 will apply only to exports under bond in terms of Rule 13 and not to exports under rebate as per the Rule 12 of the Central Excise Rules. The further observation of the Commissioner in para 12 of his order that the appellants have not produced proof for having exported covo under rebate is also not well-founded because the appellants have been regularly submitting RT 12 returns in which they have been indicated the monthly quantity of covo produced and exported giving reference to the GPs under which the duty was paid. The ld. counsel contended that the conclusion of the Commissioner, is therefore, bad in law. The further argument was that the first 3 show cause notices are barred by limitation as there is no ground for the department to invoke the longer period beyond six months for demanding duty because the show cause notices themselves show that the demand is based on the scrutiny of the RT 12 returns submitted from time to time by the appellants. When there is a disclosure of information by way of RT 12 returns, there could be no charge of suppression of facts. Reliance was placed in this regard on the Calcutta High Court judgment in the case of Jayashree Textiles & Industries v. Collector of Central Excise – 1985 (22) E.L.T. 708 (Cal.) The High Court had held that clandestine removal cannot be alleged when there is a submission of monthly RT 12 returns of the manufacturer, for demanding duty under Rule 9(2). Another point urged on limitation was that the Commissioner himself in the impugned order has held that it is not a fit case for imposing penalty.
5. Shri Ramtake, the ld. DR contended that the product called covo which emerged as an intermediate product is distinct from sal oil and it has different use and characteristic. Therefore, facts are distinguishable from that of Jayant Oil Mills Ltd. decided by the Supreme Court. The ld. DR also relied upon the judgment in the case of J.K. Spinning & Weaving Mills v. U.O.I, of the Supreme Court [1997 (32) E.L.T. 234] holding that Rules 9 and 49 of the Central Excise Rules relating to clearances from the place of production would apply equally to clearance for captive consumption. The ld. DR also urges that the charge in the show cause notices is one of clandestine removal in violation of Rule 9 and the demand is under Rule 9(2). Therefore, the condition for invoking the proviso to Section 11A will not be attracted. The demands are, therefore, not hit by limitation.
6. We have carefully considered the submissions. We find that the demand is in respect of sal stearine which was emerged while processing raw sal oil. The appellants have given the process of manufacture in their appeal memorandum. It is seen that raw sal oil is subjected to treatment with caustic soda for removing free fatty acid content. Thereafter, it is subjected to a process of bleaching. The resulted oil is cooled and then to introduce into a press. When pressure was applied to such mass of oil, the olien component of the oil is released and the stearine component continues to remain in the press which is removed, melted, packed in drums for export. Sal oil portion is admittedly to the use of soap and the dispute is regarding duty on sal stearine. Sal stearine as cleared with this portion of the processed oil does not go in the manufacture of soap or on any other items of the Tariff mentioned in the notification which are items 13,14, and 15 of the Central Excise Tariff for claiming exemption. This is the basis for demand for duty. We are not impressed by the appellants’ argument that sal stearine is not a new product as even according to appellants, it has different name, use and characteristic. It is a cocoa butter substitute. However, we find force in the contention that the entire quantity of sal stearine is exported on payment of duty under Tariff Item 12 of Central Excise Tariff and that there is effectively no case for demanding duty because on proof of export of the quantity the appellant is entitled to claim rebate of duty as per Rule 12 of the Central Excise Rules. The Trade Notice of the Collectorate will be relevant in this regard. It relates to a doubt raised regarding goods which are exported without payment of duty under bond in terms of Rule 13 of the Central Excise Rules and it says – “a doubt has been raised as to whether duty is required to be paid in respect of raw materials used in the manufacture of goods exported under bond under Rule 13, in view of the provision of Clause (ii) of Explanation II to the said Rule. The matter has been examined. It has been decided that no duty need be collected on intermediate goods produced and used in the same factory in the manufacture of finished excisable goods exported under bond, irrespective of the fact whether there is any provision in the Central Excise Rules permitting either deferment or non payment of duty on these intermediate goods.” On a perusal of the Trade Notice, it would appear that the rationale behind to this will be equally applicable irrespective of whether the export in question is under Rule 13 or under Rule 12. In this context, the ld. counsel submits that in effect both the rules have the same objective and are only two facets of the same facility. In such a view of the matter, the conclusion of the Commissioner in the impugned order that the Trade Notice will apply only to export under bond and not to export under rebate, has to be rejected. The Commissioner has further rejected the contention of the appellants on finding that they have not produced any evidence before him to prove that covo had been exported under rebate. This conclusion of the Commissioner has not considered the particulars given by the appellants in their RT 12 returns, some of which have been perused. It clearly shows that covo classified under Item 12 of CET manufactured during the month has been exported giving reference to the Gate Passes under which duty has been paid thereon. This is a verifiable data and the Commissioner could have had verified to see whether the claim is substantiated. There will be a further corroborative evidence of such claim by way of sanction of their rebate claim by the concerned Maritime Collector because the rebate is granted only on production of proof of export of the goods.
7. Arguments have also been addressed on limitation with which we are inclined to agree because it is clear that the short levy charged in the show cause notice has been made out on the basis of particulars in the RT 12 returns already filed by the appellants and in such a context and in the light of the Calcutta High Court judgment cited by the appellants, the charge of clandestine removal will not be sustainable and when this is so, there will be no case for invoking the longer period. The further fact that the adjudicating authority has not found it a fit case for imposing penalty on the appellant would also support their claim on limitation. Therefore, it is held that the first 3 show cause notices will be barred by limitation in this case.
8. In the result, we hold that the claim of the appellants that the duty is not payable on the product covo exported will have to be considered in detail by reference to the varifiable facts regarding such export of the consignment in question during the material period with reference to the documents with the department as well as those that the appellants would produce to the authority to substantiate their claim in this regard. The demand in respect of the first 3 show cause notices mentioned above is hit by limitation. The Commissioner while redetermining the demand may also give the appellants an opportunity of personal hearing to substantiate their claim.