2002 (1) TMI 529 - AT - Central Excise

Summary

Issues Involved:
Whether the value of clearances of excisable goods affected by another entity is to be included in the value of clearances of excisable goods manufactured and cleared by the Appellants.

Analysis:

Issue 1: Inclusion of Clearances by Another Entity
The appeal questioned whether the value of clearances of excisable goods affected by M/s. N.G. Industries should be part of the Appellants' clearances. The Appellants, a partnership firm manufacturing stainless steel utensils, argued that the goods produced by M/s. N.G. Industries should not be considered in their clearances. They emphasized that there was no evidence to prove that M/s. N.G. Industries was a dummy entity, and the relationship between the two firms was not on a principal-to-principal basis. Legal precedents were cited to support the argument that the raw material supplier is not the manufacturer, and control and supervision over manufacturing activities are crucial in determining liability. The Appellants relied on various court decisions and a Board Circular to strengthen their case.

Issue 2: Contention Regarding Mutual Interest
The Respondent contended that both firms were interconnected through a common partner holding significant shares in each. It was argued that M/s. N.G. Industries functioned solely for the Appellants and, therefore, their clearances should be included in the Appellants' total value. Legal references were made to support the position that financial interdependence and shared control indicate the need for clubbing clearances. The case of UK Machines Tools Pvt. Ltd. was cited to illustrate the principle of clubbing clearances based on financial interdependence. The Respondent also referenced a Supreme Court decision to support their argument.

Judgment
After considering both parties' arguments, the Tribunal clarified that the supplier of raw materials is not automatically deemed the manufacturer unless specific conditions are met. The Tribunal highlighted that mere partnership between the two firms does not establish the Appellants as manufacturers of goods produced by M/s. N.G. Industries. Legal precedents were cited to emphasize the importance of control and supervision in determining manufacturing liability. The Tribunal ruled that in the absence of evidence proving M/s. N.G. Industries as a dummy unit, their clearances cannot be combined with the Appellants' clearances. Consequently, the impugned order was set aside, and the appeal was allowed.