ORDER
1. Appeal under Section 35B of the Central Excises and Salt Act, 1944 praying that in the circumstances stated therein, the Tribunal will be pleased to set aside the orders of the lower authorities.
2. This appeal coming up for orders upon perusing the records and upon hearing the arguments of Shri Balamurugan, representative of the appellant and upon hearing the arguments of Shri J.M.K. Sekhar, Senior Departmental Representative for the respondent, the Tribunal makes the following order :
3. By his order C. No. IV/16/24/80 dated 7-10-80, the Assistant Collector of Central Excise, Madras I Division, has demanded a sum of Rs. 20,72,953.42 being the differential duty on certain quantities of TOFS removed during the period 17-11-79 to 10-1-80 from the warehouse of the appellant at Madras to M/s. Sharavathy Petro Chemicals (P) Ltd., Bangalore and M/s. Raj Lubricants, Madras, for the manufacture of transformer oil. In doing so, the Assistant Collector has observed that the appellant had not followed the procedure set out in Chapter X of the Central Excise Rules, 1944, a requirement under Notification No. 287/79-C.E., dated 17-11-79. An appeal against this order to the Appellate Collector of Central Excise, Madras, was rejected by that authority on the ground that the appellants have not claimed that they had satisfied the conditions but attributed their failure to a communication gap; the appellants are one of the biggest companies in India and they could know the issue of any notification then and there. He also brushed aside the appellant’s plea that even departmental officers came to know of the provisions only in January, 1980. As the third condition of the notification (observance of Chapter X procedure) had not been complied with by the appellants, the Appellate Collector rejected the appeal vide his order C. No. V/ll A/2/81 dated 16-3-81. A revision application filed by the appellants against this order before the Government of India stands transferred to the Tribunal for being dealt with as an appeal in terms of Section 35P of the Act.
4. Before us, the representative of the appellants makes three points :-
(1) By fortuitous circumstances, the two parties who received TOFS during the period in question had done so under the cover of CT2 certificates issued by the jurisdictional officers. The goods had in fact been received by the parties who held L-6 licences. The Superintendents of Central Excise have certified that the full quantity of TOFS removed during the period had in fact been used in the manufacture of transformer oil. Hence there is substantial compliance of the procedures under Chapter X of the Cantral Excise Rules, 1944.
(2) Clearances were not made under cover of AR-3As but of Gate Passes and invoices. However, this is not a requirement under Chapter X but something that has developed by custom.
(3) In similar circumstances, the Special Bench of the Tribunal has held that substantial compliance with Chapter X is sufficient for the grant of concession under the Rules vide Order No. B-719/83 dated 6-8-83 in the case of National Mechanical Works, Calcutta v. Collector of Central Excise, Calcutta-1983 E.L.T. 2370 (CEGAT), and Order No. 11O3-B/83 dated 1-12-83 in the case of Friends Enterprises, Jamshedpur v. Collector of Central Excise, Patna-1984 (16) E.L.T. 360 (Tribunal)= 1984 ECR 1016 (CEGAT). Following the rationale of the orders of the Tribunal, the present case would also merit admission.
5. We note that Notification No. 287/79 requires observance of the procedure set out in Chapter X of the Rules. The essential features of this procedure are that the Department is put on notice about the intended removal of excisable goods from the factory of production to the factory of beneficiary users; the goods are transported in an approved manner; the goods on receipt are stored and utilised for the purposes permitted under an exemption notification issued by the Government; and accountal of the use of the quantities removed is rendered to the Assistant Collector of Central Excise and that Officer is satisfied that the goods have in fact been used for an approved purpose. To facilitate the working of this procedure, beneficiaries receiving goods from a manufacturer execute bonds with the Collector having jurisdiction over their factory and obtain what is termed a ‘CT2’ certificate. This certificate is addressed to the officer having charge of the manufacturing factory, indicating the nature of the goods that can be removed, the quantum of goods that are likely to be needed during the course of the year etc. After the goods are actually removed, an account is maintained at the receiving end to enable the departmental officers to be satisfied about the actual use. We presume whatever checks are needed by way of supervision, challenge etc. could be part of the procedure.
6. We note from the evidence on record that the recipient factories have L-6 licence and they had also obtained CT2 certificates for the transport of goods from the appellants’ factory to theirs. Two certificates have been produced, one dated 26-8-81, issued by the Superintendent of Central Excise, K.R, Puram Range, Bangalore in favour of Sharavathy Petro Chemicals Pvt. Ltd., Bangalore and Anr. from the Superintendent of Central Excise, Range I, Madras I Division, in favour of Raj Lubricants, indicating that the removals of TOFS from the appellant’s factory to the respective units had been used for the manufacture of transformer oil. These certificates would indicate that the department is satisfied about the actual use of TOFS which was removed from the appellants’ factory and the attendant documentation that is necessary before such a certification can be made was available to the certifying officers. We agree that, AR-3A not being statutorily prescribed, removal on gate passes instead of AR-3A; is not an irregularilty of a serious nature. The two precedents cited by the appellants lend support to a liberal view being taken in such circumstances.
7. In the result, we allow the appeal with consequential benefit to the appellants.