2014 (12) TMI 114 - AT - Central Excise

Manufacture of patta and patti - Compounded levy - SSI exemption - Captive consumption - Appellant misconceived that it was eligible to the exemption and wrongly availed the benefit - violation of Notification No. 214/86-CE, dated 25-3-1986 - Held that - Fiction was only created by the appellant that SS circles were not marketable goods. Such plea was discarded by learned Adjudicating Authority when buyers thereof confirmed that they had purchased such goods from the appellant. To determine the assessable value of SS circles, department did not resort to any arbitrary process but followed the guidelines of CAS 4. Law is very clear that benefit of compounded levy is extendable subject to compliance to the procedure of law, which cannot be given go-by. Admittedly, the appellant not being registered manufacturer under the law, failed to avail the benefit of compounded levy scheme, if any applicable. Prima facie, Appellant failed to succeed on its claim of SSI exemption benefit, due to unregistered status and due to dubious practice followed. Learned authority determined assessable value of hot rolled Patta Patti following CAS 4 guideline. This shows that the authority has not acted arbitrarily. He has given appropriate concession to the traded goods to determinate the value of dutiable goods. From the material facts and evidence on record, it appears that balance of convenience tilts in favour of Revenue for which dispensation of pre-deposit shall cause prejudice to the interest of Revenue. Therefore considering totality of the facts and circumstances of the case and also considering quantum of duty of ₹ 2,37,56,152 levied followed by equal amount of penalty and interest, appellant is directed to make deposit of ₹ 1,50,00,000 within 4 weeks of receipt of this order and make compliance on 4-8-2014. - Following decision of Benara Valves Ltd. v. CCE - 2006 (11) TMI 6 - SUPREME COURT OF INDIA - Partial stay granted.

Summary

Issues Involved:
1. Duty demand and eligibility for SSI exemption.
2. Compliance with Central Excise Rules.
3. Manufacturing process and excisability of SS circles.
4. Job work and Notification No. 214/86-CE compliance.
5. Investigation findings and evidence.
6. Valuation of goods and SSI exemption eligibility.
7. Adjudication and procedural fairness.
8. Pre-deposit requirement and stay of recovery.

Detailed Analysis:

1. Duty Demand and Eligibility for SSI Exemption:
The Revenue alleged that the appellant manufactured and cleared 20,58,229.53 kgs of SS circles without paying duty, consuming SS cold rolled sheets valued at Rs. 13,36,66,945.48 and clearing scrap worth Rs. 3,72,79,499/-. The appellant claimed SSI exemption, which the Revenue contested, stating the appellant was ineligible for such exemption during the financial years 2006-07 to 2008-09. The adjudicating authority rejected the appellant's contention, noting that central excise procedures were not followed, and thus, no notification benefit was admissible.

2. Compliance with Central Excise Rules:
The appellant was accused of not registering with the Central Excise department, not filing returns, and failing to discharge duty liability from 2006-07 to 2010-11. Violations of Rules 4, 6, 8, 9, 10, 11, and 12 of the Central Excise Rules, 2002, were alleged. The investigation confirmed the manufacturing processes and resultant duty liability, which the appellant failed to comply with.

3. Manufacturing Process and Excisability of SS Circles:
The investigation revealed that the appellant's processes resulted in the manufacture of SS hot rolled sheets, SS cold rolled sheets, and SS circles, which were cleared without duty payment. The appellant's argument that SS patta/patti was not dutiable was rejected, as these were used to manufacture dutiable SS circles. The adjudicating authority found that distinct excisable goods emerged at different stages, confirming the duty liability.

4. Job Work and Notification No. 214/86-CE Compliance:
The appellant's claim of manufacturing SS cold rolled sheets on a job work basis was found to be in violation of Notification No. 214/86-CE. The investigation demonstrated that the appellant acted as a job worker, and the job-worked goods were liable to duty. The adjudicating authority noted that the appellant failed to comply with the notification's provisions, leading to duty liability.

5. Investigation Findings and Evidence:
Statements from various individuals and buyers confirmed the purchase of SS circles and SS scrap from the appellant. The appellant's claim of insufficient manufacturing capacity was not supported by credible evidence. The investigation also examined the appellant's eligibility for SSI exemption and found that the transaction value was determined according to Rule 8 of the Central Excise Valuation Rules, 2000, in line with CAS-4 guidelines.

6. Valuation of Goods and SSI Exemption Eligibility:
The adjudicating authority determined the transaction value of SS patta/patti captively consumed and examined clearances for each financial year to assess SSI exemption eligibility. The appellant's contention regarding the valuation method was rejected due to a lack of evidence. The investigation confirmed that the appellant was a job worker, and the job-worked goods were liable to duty.

7. Adjudication and Procedural Fairness:
The appellant argued that certain documents were not provided for rebuttal, and the seizure of goods was unlawful. The adjudicating authority found no merit in these arguments, noting that the appellant's claims were unsupported by evidence. The authority considered the appellant's trading activities and excluded traded turnover from the clearance of excisable goods. The adjudication was based on objective assessment and compliance with legal procedures.

8. Pre-deposit Requirement and Stay of Recovery:
The Tribunal directed the appellant to deposit Rs. 1,50,00,000/- within four weeks and stayed the recovery of the balance duty and penalty during the pendency of the appeal or for six months, whichever is earlier. The decision was guided by the Apex Court's ratio in Benara Valves Ltd. v. CCE to protect the Revenue's interest, noting that the appellant failed to demonstrate undue hardship.

Conclusion:
The Tribunal found in favor of the Revenue, confirming the duty demand and rejecting the appellant's claims for SSI exemption and procedural unfairness. The appellant was directed to make a substantial pre-deposit, with the balance recovery stayed pending the appeal. The judgment emphasized compliance with central excise procedures and the excisability of SS circles manufactured by the appellant.