ORDER
K.S. Venkataramani, Member (T)
1. This appeal is directed against the order dated 17-6-1988 passed by the Commissioner of Central Excise, Mumbai-III. The facts briefly are that the appellants herein applied for exemption under Notification 35/73 for obtaining Mixed Xylene from supplier IPCL at concessional rate. This notification exempted materials including Xylene from duty on condition inter alia that the jurisdictional Asstt. Commissioner is satisfied that the material is intended for use as solvent or diluent or thinner for the manufacture of paints, varnishes, lacquers and allied materials. The Department gathered intelligence that the appellants were clearing the petroleum products in its original form as thinner in bulk packing in the name of Sigma Stove Thinner. The officers visited the appellants factory on 7-8-1982 and conducted the enquiry which revealed that the appellants were receiving Mixed Xylene under concessional rate under Notification 35/73 for specified industrial use as for manufacture of varnishes and alkid, paints. Part of the material has been cleared as Sigma Stove Thinner in bulk to their factory at Andheri. The statements was given by the Production Manager of the Appellants on 7-8-1982 that Mixed Xylene received under the concessional rate has been sent to their Andheri factory and that the products Sigma Stove Thinner did not contain any ingredients other than Mixed Xylene itself. The Mixed Xylene was transferred from the tanks to the drums without adding any ingredients and the same was called Sigma Stove Thinner and was shown as produced in the batch cards. The Sigma Stove Thinner had been removed to their Andheri factory Without payment of duty. A scrutiny of record revealed that a quantity of 37,200 litres of Mixed Xylene has been removed in that manner from 3-12-1981 to 18-7-1982 involving duty of Rs. 66,267.35. A show cause notice was issued on 8-6-1983 to the appellant for contravention of Rules 192 and 196 of Central Excise Rules, 1944 and for demanding the duty of Rs. 66,267.35. The case was adjudicated by the Commissioner in which he found the charge of misuse of concessional rated material was established. He confirmed the demand for the amount as stated in the show cause notice under Rule 196 read with Section 11A of the Central Excise Act, 1944. He also imposed a penalty of Rs. 5,000/- under Rule 173Q on the appellant.
2. Shri Phadnis, the ld. Counsel for the appellant submitted that the appellant’s case is covered by the decision in the case of Shalimar Paints v. Commissioner – 1997 (95) E.L.T. 555 where the Tribunal has held that the concessional rate of duty under the Notification 75/84 will be available to thinner because the thinner is an allied material to the output goods mentioned therein. The ld. Counsel submitted that the Mixed Xylene was removed in drums to their factory at Andheri because that factory was not equipped to receive Mixed Xylene in bulk and the ld. Counsel pleaded that the ultimate object of the concessional notification was fulfilled because in their factory at Andheri the material is used for manufacturing of paints.
3. We have heard Shri V.K. Puri, the ld. DR who contended that the ratio of the Tribunal decision cited by the appellant is not applicable to the facts of the appellant’s case because in the case of the appellants the Mixed Xylene was removed as such without undergoing any process of manufacture because according to them the Mixed Xylene itself was thinner. In the case law cited by them there was a manufacturing process undertaken on the material to produce thinner within the factory of the appellant therein.
4. We have carefully considered the submissions made by both sides. The notification states that where the notification grants concessional rate of duty for the petroleum products stated therein which includes Mixed Xylene on condition that the Asstt. Collector is satisfied that it is intend for use in the manufacture of paints, varnishes, lacquers, allied materials as solvent or diluent. The case law cited by the ld. Counsel would also only support the proposition that thinner material can be brought under the, notification as being covered by the expression allied material mentioned therein. But the eligibility to be examined and determined only when such material is used as solvent or diluent or thinner for the manufacture of paints or allied materials. In the present case the admitted position is that the Mixed Xylene received by the appellant has not undergone any manufacturing process but had been repacked into smaller packing and sent to their Andheri factory without payment of duty. There is nothing on record to show that in respect of the Mixed Xylene the process of repacking itself would amount to manufacture. The appellants themselves have admitted that no process was undertaken on the Mixed Xylene sent to their Andheri factory. In such a situation the appellant’s case differs from the case law cited on the facts and for that quantity which they have sent to their Andheri factory, the fundamental requirement of the Notification namely use in the manufacture of materials mentioned therein was not satisfied as has been observed by the Commissioner and also that the L-6 licence granted to them does not cover the other factory. In these circumstances we see no reason to interfere with the impugned order.
5. The appeal is rejected.