2015 (9) TMI 294 - AT - Central Excise

Manufacture of semi finished battery management systems electrical panels, air-cooling systems and regulators on Job work basis - Marketability - Exemption under Notification No.50/2003-CE - Simultaneous availment of exemption under Notification No.214/1986-CE - Held that - If the goods being cleared by M/s.MI Telecom are incomplete battery management system, electrical panel, air-cooling system and line regulators and complete goods emerged only in the premises of M/s. Acme, the incomplete goods being cleared by M/s.MI Telecom cannot be presumed to be marketable and hence excisable unless the Department leads the evidence in this regard, which we do not find in this case. In such a situation the judgment of Tribunal in the case of M/s. AIumeco India Extrusion Ltd. 2009 (5) TMI 402 - CESTAT, BANGALORE would be applicable. The impugned order is, therefore, set aside and the matter is remanded to the Commissioner for de-novo adjudication for giving a specific finding after considering the appellant s plea based on the documents produced by them that the goods which are being cleared by them, to M/s.Acme are incomplete battery management systems, incomplete electrical panel, incomplete air-cooling system and incomplete line regulators and as such are not marketable and, therefore, are non excisable. - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
- Duty exemption eligibility for goods manufactured on job work basis
- Marketability of goods for excisability determination
- Burden of proof on department for marketability

Analysis:

Issue 1: Duty Exemption Eligibility for Goods Manufactured on Job Work Basis
The case involved appeals arising from an order passed by the Commissioner, Central Excise, Delhi-II, confirming duty demand against a manufacturer (MI Telecom) for goods manufactured on job work basis for another manufacturer (Acme). MI Telecom was availing SSI exemption while Acme was availing full duty exemption under Notification No.50/2003-CE. The dispute arose from the contention that goods manufactured by MI Telecom for Acme would not be eligible for exemption under Notification No.214/1986-CE due to Acme's duty exemption status. The Commissioner imposed duty demand, interest, and penalties on MI Telecom and Acme. The appellants argued that the goods sent by MI Telecom to Acme were incomplete and non-marketable, thus not excisable. They relied on a Tribunal judgment in a similar case to support their plea.

Issue 2: Marketability of Goods for Excisability Determination
The Tribunal analyzed the manufacturing process undertaken by MI Telecom for Acme, which involved fitting components into cabinets for various systems. It was observed that the complete goods, such as battery management systems, electrical panels, air-cooling systems, and regulators, only came into existence at Acme's premises. MI Telecom's role was limited to fitting certain components, and the goods sent by MI Telecom were incomplete. The Tribunal noted that no evidence was presented by the Department to establish the marketability of the incomplete goods cleared by MI Telecom. Relying on the principle that incomplete goods may not be presumed marketable unless proven otherwise, the Tribunal set aside the impugned order and remanded the matter to the Commissioner for a specific finding on the marketability of the goods.

Issue 3: Burden of Proof on Department for Marketability
The Tribunal emphasized that the burden of proving the marketability of goods cleared on job work basis rested with the Department. In the absence of evidence demonstrating the marketability of the incomplete goods sent by MI Telecom to Acme, the Tribunal held that duty liability could not be imposed. The appellants' argument regarding non-marketability of the goods and the applicability of a previous Tribunal judgment in a similar context were considered valid, leading to the decision to remand the case for further adjudication by the Commissioner.

In conclusion, the Tribunal's decision focused on the lack of evidence regarding the marketability of goods manufactured on job work basis, highlighting the importance of establishing excisability based on complete and marketable goods. The case underscored the need for a specific finding on marketability to determine duty liability accurately.