2017 (6) TMI 666 - AT - Central Excise

Clandestine manufacture and removal - diesel engine sets - SSI Exemption - Held that - the dealers have stated that either they have issued only invoices to the farmers to clearing loan from the banks or in most of the cases they have purchased loose kits from the respondent and, thereafter, assembled the same sold to the farmers where the dealers have assembled the diesel engine sets, in that case, dealers became the manufacturer, admittedly no demand notice has been issued to the dealers to pay duty being manufacturer, the proceedings against the respondent is not sustainable - the respondent is entitled for SSI Exemption limit - appeal dismissed - decided against Revenue.

Summary

Issues:
Clandestine removal of goods without payment of duty; Manufacturing and sale of diesel engine sets and loose kits; Eligibility for SSI Exemption limit.

Analysis:
The case involves an appeal by the Revenue against an impugned order regarding the manufacturing and sale of ISI marked diesel engine sets and loose kits by the respondent. The investigation revealed allegations of clandestine removal of goods without payment of duty. The respondent, engaged in manufacturing diesel engine sets, sold them through dealers who issued invoices directly to farmers. The respondent claimed to have availed the Small Scale Industries (SSI) Exemption limit and argued that the dealers themselves assembled the loose kits before selling them to farmers. The matter was taken to the Hon'ble High Court, which remanded it back to the adjudicating authority. The charge of clandestine removal of goods against the respondent was set aside. The Revenue appealed against this decision.

The ld. AR for the Revenue contended that the invoices issued by dealers showed that the diesel engine sets were manufactured by the respondent, as they were ISI marked with the respondent's brand name. Therefore, the charge of clandestine removal of goods by the respondent was deemed sustainable. On the other hand, the Ld. Counsel for the respondent supported the impugned order.

After hearing both parties and considering their submissions, the Member (Judicial) found that during the investigation, dealers either issued invoices to farmers for loan clearance or purchased loose kits from the respondent and assembled them before selling to farmers. In cases where dealers assembled the diesel engine sets, they effectively became the manufacturers. Since no demand notice was issued to dealers to pay duty as manufacturers, the proceedings against the respondent were deemed unsustainable. Consequently, the respondent was held entitled to the SSI Exemption limit. The impugned order was upheld, and the appeal filed by the Revenue was dismissed.

In conclusion, the judgment clarified the manufacturing and sale process of diesel engine sets and loose kits, addressing the issue of clandestine removal of goods and the eligibility for the SSI Exemption limit. The decision highlighted the importance of proper investigation and the legal implications of dealer involvement in the assembly and sale of goods.