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CASE NO.:

Appeal (civil) 2159 of 1991

PETITIONER:

COLLECTOR OF CENTRAL EXCISE, BOMBAY

RESPONDENT:

SHALIMAR CHEMICAL INDUSTRIES PVT. LTD.

DATE OF JUDGMENT: 11/01/2001

BENCH:

B.N. KIRPAL & RUMA PAL & BRIJESH KUMAR

JUDGMENT:

JUDGMENT

2001 (1) SCR 333

The Judgment of the Court was delivered by

KIRPAL, J. The challenge in this appeal is to the judgment of the Customs,

Excise and Gold (Control) Appellate Tribunal (CEGAT) which had come to the

conclusion that the respondent was entitled to the benefit of an exemption

notification dated 1st March, 1984 insofar as it related to manufacture of

the goods described therein.

It is not in dispute that the respondent does not itself manufacture

Benzene, Toluene and Xylene but is products the same in accordance with the

procedure set forth in Chapter X of the Central Excise Rules, 1944 which

allows the removal of the goods without payment of excise duty by the

applicant on the applicant satisfying the conditions which would entitle it

to the exemption.

By the notification of 1st March, 1984, the effective rate of duty on

various items mentioned in the said notifications was reduced. The

notification provides that such reduction of the rate of duty would be

subject to the specified intended use or the conditions laid down in the

corresponding entry in column (5) of the notification. The proviso to this

notification with which we are concerned in this case reads as follows:

"Provided that where any such exemption is subject to the intended use, the

exemption in such case shall be subject to the following conditions,

namely:-

(i) that it is proved to the satisfaction of an Officer not below the rank

of the Assistant Collector of Central Excise that such goods are used for

the intended use specified in column (5) of the said Table; and

(ii) where such use is elsewhere than in the factory of production, the

procedure set out in Chapter X of the Central Excise Rules, 1944, is

followed." item No. 6.10 makes reference to Benzene, Toluene and Xylene

alongwith other items with which we are not concerned and in column (5)

against the said items it is provided that these goods should be intended

for use "as solvent or diluent or thinner for the manufacture of paints,

varnishes, lacquers and allied materials......."

In the instant case, the respondent did not produce the User Certificate

showing the manufacture of paints, varnishes, lacquers etc., from the

Benzene which was obtained by it and as such its claim for the benefit of

this notification dated 1st March, 1984 was not accepted. The appeal to the

Collector having failed, the respondent filed a Second Appeal before CEGAT

and the Tribunal came to the conclusion that the notification of 1st March,

1984 was similar to the earlier notification of exemption of 1973 relevant

portion of which was as under: - "an officer not below the rank of

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Assistant Collector of Central Excise is satisfied that the Motor Spirit is

intended for use as solvent Or diluent or thinner for the manufacture of

paints, varnishes, lacquers and allied materials or for use in painting;

for the manufacture of adhesives, rubber solution, water proofing

compositions and similar products, in the production of plastics; for

decreasing or cleaning."

The Tribunal then proceeded to hold that the respondent had obtained L-6

licence for manufacturing solvent based on Benzene and Toluene and all

types of thinners and there was no justification to insist oh the end use

certificate in terms of the notification of 1984. It was held that what was

important was that Benzene, Toluene, etc., should be intended for use in

the manufacture of paints, varnishes, etc., and the respondent was entitled

to the benefit thereof.

We are unable to agree with the aforesaid conclusion of the Tribunal. A

bare reading of the notification dated 1st March, 1984 leaves no manner of

doubt that the Assistant Collector of Central Excise had to be satisfied,

on proof being adduced, that the goods mentioned in the said notification

were such goods that are used for the intended use specified in column (5).

The intended use specified in column (5) of Benzene, Toluene and Xylene was

inter alia for Use as solvent or diluent or thinner for the manufacture of

paints, varnishes, lacquers and allied materials. It was incumbent upon the

respondent to satisfy the officer that there had been actual use of

Benzene, etc., in the manufacture of paint, varnish, etc. One mode of

satisfying the officer was to produce the end user certificate which was

not done. No other evidence was also led to show that the conditions laid

down by the said notification of 1st March, 1984 had been satisfied. In the

absence of any proof with regard to the actual user of Benzene, etc.; in

the manufacture of paint, varnish, lacquer, etc., no relief could have been

granted to the respondent under this notification.

For the aforesaid reason, this appeal is allowed and the judgment dated

24th October, 1990 of CEGAT is set aside.

There will be no order as to costs.