2003 (4) TMI 413 - AT - Central Excise

Dutiability - SSI Exemption - Value of clearances - Clubbing of - Demand - Limitation - Valuation

Summary

Issues Involved:
1. Clubbing of clearances for Small Scale Exemption.
2. Excisability of the goods.
3. Determination of assessable value based on Depot Sale prices.
4. Time-barred nature of the demand.
5. Validity of duty demand against dummy units.

Detailed Analysis:

1. Clubbing of Clearances for Small Scale Exemption:
The primary issue was whether the clearances of M/s. Dujodwala Industries (DI), M/s. Dujodwala Udyog Ltd. (DUL), and M/s. Rosin & Terpene Industries (RTI) should be clubbed for Small Scale Exemption. The Commissioner held that all three units were controlled by Shri S.V. Dujodwala, with common ownership and operational control, and thus denied the SSI exemption. The Tribunal upheld this, noting significant evidence of common management, financial interdependence, and shared resources. The Tribunal cited various precedents, including U.K. Machine Tools Pvt. Ltd., to support the conclusion that the units were not independent and their clearances should be clubbed.

2. Excisability of the Goods:
The appellants argued that since the raw materials and final products fell under the same tariff headings, no further excise duty was chargeable. The Tribunal rejected this, referencing the Supreme Court's decision in Empire Industries and Laminated Packings (P) Ltd., which held that duty liability arises if the process results in a new, distinct, and marketable commodity, even if it falls under the same tariff heading. The Tribunal concluded that the derivatives of Rosin and Turpentine were distinct products and thus exigible to excise duty.

3. Determination of Assessable Value Based on Depot Sale Prices:
The appellants contended that the assessable value should be based on factory gate prices, as substantial sales were made directly to independent buyers. The Tribunal found merit in this argument for the period from 1-4-87 to 31-3-88, noting that the Revenue did not dispute the factory gate sales to independent buyers. However, for the remaining period, the Tribunal remanded the matter to the Commissioner for re-determination, as sufficient information was not available on record.

4. Time-Barred Nature of the Demand:
The appellants argued that the extended period of limitation could not be invoked as there was no suppression of facts. They claimed that the Department was aware of the commonalities among the units through various inspections and approvals. The Tribunal disagreed, holding that the extended period was applicable due to the deliberate intent to evade duty by fragmenting the main unit into separate entities to avail of SSI exemption. The Tribunal cited the Supreme Court's decision in Madras Petro Chem Ltd. to support the invocation of the extended period under Section 11A of the Central Excise Act.

5. Validity of Duty Demand Against Dummy Units:
The Tribunal held that once RTI and DUL were deemed dummy units of DI, no separate duty could be demanded from them. This was based on the principle established in Bijoli Grill Aerated Water Co. and Ramsay Pharma (P) Ltd., which stated that demands should not be raised against dummy units if they are found to be part of the main unit. Consequently, the demands against RTI and DUL were set aside.

Conclusion:
The Tribunal upheld the clubbing of clearances for the purpose of SSI exemption, confirmed the excisability of the goods, and partially accepted the appellants' argument regarding factory gate sales for valuation. The extended period of limitation was deemed applicable, but the separate duty demands against dummy units were set aside. Penalties were imposed on DI and Shri S.V. Dujodwala, but reduced in amount, while penalties against Shri O.P. Garg and Shri M.D. Kedia were set aside.