S.S. Sekhon, Member (T)
1. The appellants were given a notice contravention of rule 192 and 196 of Central Excise Rules, 1944 during the period 8/93 to 3/97 as it was observed that deliberately, by using the NGL received under Chapter X procedure on concessional rate of Notification 75/84 to be used in the manufacture of fertilizer or Ammonia deliberately used it in the generation of power for which neither the appellants had applied for not permitted by the department. Thus this diversion of 61454 K.L of NGL for generation of electric power which in turn was used for driving various motors, equipments in the plant as well as for factory services and lighting in site office, administrative building and were put to notice why the concession should not be withdrawn, the B-8 bond forfeited and differential duty of Rs. 2,94,46,288/- be recovered from them involving the provisions of extended period and penalty be imposed under Rule 173Q of Central Excise Rules, 1944.
2. The Commissioner found :-
“It is seen from the statement showing details of NGL received and consumed submitted by the party along with their defence reply dated 27.10.1998 that Captive Power Plant of NFL comprises of 2 Nos. of Gas Trubline (sic) Generators (GTGs) each connected to Heat Recovery Unit (HRU) boilers for production of steam, GTGs are capable of operation from Natural Gas or Liquid fuel namely NGL. Part of the total fuel intake in GTGs is utilised therein for power generation and rest of the heat is exhausted which is utilised in Heat Recovery Unit boilers to raise steam.
It is admitted by the Notice that NGL received for generation of Electricity GTGs to the extent of 36.98% and heat energy equivalent to remaining 63.02% of the quantity of Natural Gasoline Liquied fired in GTGs is transferred to steam generation plant for generation of steam for production of Ammonia and Urea fertilizers.
The notice has relied on Judgment of Hon’ble Supreme Court in the case of IFFCO Ltd. v. CCE, Ahmedabad [1996 RLT 495 (15) (S.C.)] which has been forwarded by them vide their letter dated 14.11.1998. Hon’ble Supreme Court has allowed the benefit of Notification No. 187/61 to raw Naptha used in manufacture of Ammonia which in turn may be used elsewhere in manufacture of fertilizer.
Ratio of the above Judgment and the Judgment in the case of Gujrat State Fertilizers v. CCE [1999 E.L.T. 91 (3) (S.C.)] is directly applicable to present case to the extent of physical quantity of NGL relating to heat which is ultimately transferred to steam generation manufacture of fertilizer. Ratio of other judgments can not be made applicable to present case, as fact of the case are different. Since the benefit to the extent of 63.02% is to be allowed. The Assistant Commissioner, Gwalior was asked to quantify the amount of duty recoverable from them, which has been done by him, a report to this effect was submitted. The actual amount of duty works out to Rs. 1,10,86,754.15.
They have also claimed that assessable value taken for consideration of duty liability is not correct and price of Indian Oil Corporation should be considered for arriving at duty liability. I find that the notice have obtained NGL from M/s. Gas Authority of India Ltd. under Chapter X procedure. Consigner, M/s. Gas Authority has shown value per M.T. in concerned invoices. Naturally, the value charged by the consigner in normal course has to be taken as basis for assessable value for calculation of duty liability.
As regards party’s contention of non-applicability of provisions related to extended periods it is clear from the application of the notice that they had applied and were permitted to obtain NGL on concessional rate of duty for the purpose specified in application only. The purpose shown in application was for producing steam for production of Urea fertilizer. The Notice suppressed material fact of generation of electricity from the NGL obtained under Chapter X Procedure from the department. It is only at the time of investigation that they disclosed the tact of use of NGL for production of electricity. They have nowhere mentioned in application for L-6 or at the time of personal hearing before the Assistant Commissioner, Central Excise, Gwalior at the time of granting L-6 License that this NGL will be used for the purpose other than those specified in the application which clearly proves beyond doubt their intention to avail concession willfully by mis-statement in order to evade payment of duty on the quantity of NGL used for generation of electricity. They are entitled to benefit of concessional rate of duty on the quantity of NGL used for generation of steam, only to the extent which was in turn used for production of fertilizer.”
and determined that the appellants were not entitled to obtain NGL for used for generation of electricity. Therefore, he confirmed an amount of duty of Rs. 1,10,86,954/- on NGL, the quantity admitted by the appellants to be used for generation of electricity and dropped the demand for duty on NGL used for generation of steam which in turn was used for production of fertilizers. A penalty of Rs. 2 crores was imposed on the notice under Rule 173Q read with Section 11 AC and ordered the recovery of interest under Section 11AB.
3. Heard the appellants and the DR and considered the submissions and the material on record we find :-
(a) The clearance in this case to the Public Sector Undertaking by Committee of Secretaries to proceed in this matter has been given only for penalty imposed and not to the duty amount involved. Accordingly, the appeal which was dismissed on 27.07.1998 was recalled and restored vide order dated 07.03.2000. Therefore, we are only limiting our findings the imposition of penalty in the present appeal which is being decided finally with consent of both the parties when it come up for stay.
(b) The present proceedings are for recovery of duty under rule 196 of the Central Excise Rules, 1944 read with proviso to Section 11 A(i) of the Act. The appellants have made submissions on time bar and relied upon documents to evidence, the knowledge on part of the departmental officers regarding the state of affairs. They have relied upon Steel Authority of India decision of 1996 (15) RLT 493 (S.C.) and other decision and the fact that being a Public Sector Undertaking there can be no mens rea for evading duty and penalty cannot be imposed. We have considered the submissions, relying on the decision of the SC in Gujrat State Fertilizer Co. v. Collector -1997 (91) E.L.T. 3 (S.C.) which the Commissioner found to be directly applicable, benefit of doubt should have been granted to the appellants as regards imposition of penalty when we find that a major part of the demand has been dropped, we are reinforced in our views that benefit of doubt regarding penalty should have gone to the appellant. Besides, we find from the order, the Commissioner has justified the application of extended period under proviso to Section 11A (1), yet there is no finding or reason arrived at as to why he considers the imposition of a penalty under rule 173Q read with Section 11AC called for in the facts of this case. Imposition of penalty without coming to a finding as to why it is considered necessary to invoke the penalty clause is bad in law and is required to be set aside on that ground.
(c) We also find that the plea of time bar raised and determined under proviso to Section 11A is not called for as duty on goods not accounted under rule 196 is not covered by the relevant date when demands of duty are not being determined under rule 196. We rely on Indian Farmers Fertilizers Co-op. Ltd. v. Collector – 1989 (41) E.L.T. 474-487. Therefore, the finding of applicability of proviso clause of Section 11A (1) is redundant. No time bar limitations of proviso clause arise in this ease.
(d) We find that in Ashok Layland Ltd. v. Collector – 1989 (44) E.L.T. 343 (T) ii: was held that for contravention of rule 192 of Central Excise Rules 1944 penalty under rule 173Q cannot be imposed as rule 196 itself makes provision for such a contingency of forfeiture of Bond and confiscation of goods received under Chapter X and manufactured from such goods following the same, we find that penalty imposed under rule 173Q in this case for violation of rule 192 is required to be set aside, as for the goods received under Chapter X, the appellants are not the manufacturer, workhouse keeper, or producer, Modvat availer/dealer who only are liable under 173Q.
(e) A common penalty under Section 11AC and 173Q in excess of what has been prescribed under Section 11 AC as in this case has to be set aside for that reason itself.
(f) We are temp -d to decide on the duty demand yet we find that since present appeal is permitted to be pursued regarding penalty only, we refrain to decide whether any penalty is called for in this case, if no demands are determined against the appellants. This aspect of no penalty can be determined, if and when the appellants get permission on pursue the appeal on demand.
4. In view of our findings the penalty under rule 173Q read with 11AC of Rs. 2 crores is set aside and appeal in this aspect allowed.