2017 (8) TMI 583 - AT - Central Excise

Area Based Exemption - N/N. 50/2003-CE dated 10.06.2003 - Job-work - denial of notification on the ground that neither the goods manufactured by them on job work were used in or in relation to the manufacture of final products nor the said goods have been cleared on payment of duty from the Roorkee unit - lack of proper evidence - Held that - the learned Commissioner have erred in confirming the demand ignoring the documentary evidence on record and relying on the various statements which have got no evidentiary value. Further such statements recorded during investigation cannot be relied upon without the witnesses being examined in the course of proceedings as provided by Section 9 D of the Central excise Act. We further find that all the transactions are properly recorded in the books of accounts maintained in the ordinary course of business and the returns filed with the Department. The evidences on record particularly the inspection report and delivery order issued by the respective buyer (Electricity distributing Companies) corroborates the stand of the appellants as to manufacture inspection and sale at the Roorkee unit - further there is no test report brought on record by revenue in support of their contention that the appellant have not removed the Transformer- spares parts but have removed complete transformer. Thus the whole case of the revenue is based on presumption and assumptions which falls flat in view of the overwhelming documentary evidence - none of the persons whose statement was recorded have made an averment that the Transformer components have not moved from Sahibabad Ghaziabad unit to their Roorkee unit. The whole case of the revenue is based on presumption which has not been corroborated in view of overwhelming documentary evidences on record - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Levy of duty and penalty on the manufacture of transformers and parts.
2. Invocation of the extended period of limitation.
3. Compliance with Section 9(D) of the Central Excise Act.
4. Applicability of Notification No. 214/86-CE and Notification No. 50/2003-CE.
5. Validity of statements and documentary evidence.

Detailed Analysis:

1. Levy of Duty and Penalty:
The appellants, manufacturers of transformers, were accused of evading central excise duty by showing the manufacture and supply of semi-finished transformer parts instead of complete transformers. The Ghaziabad unit was allegedly manufacturing complete transformers for their Roorkee unit, which availed area-based exemption under Notification No. 50/2003-CE. The Ghaziabad unit was found liable to pay central excise duty on the transformers manufactured on job work, as they were neither used in the manufacture of final products nor cleared on payment of duty from the Roorkee unit.

2. Invocation of Extended Period of Limitation:
The show cause notice dated 28th March 2011 demanded duty for the period 2007-08 to 2010-11, invoking the extended period of limitation. The revenue claimed that the appellants suppressed facts with the intent to evade duty, justifying the extended period.

3. Compliance with Section 9(D) of the Central Excise Act:
The appellants argued that the order was vitiated as it violated Section 9(D) of the Central Excise Act. None of the persons whose statements were relied upon by the revenue were examined or cross-examined during the proceedings. The Tribunal agreed, stating that statements recorded during investigation cannot be relied upon without the witnesses being examined in the course of proceedings.

4. Applicability of Notification No. 214/86-CE and Notification No. 50/2003-CE:
The appellants contended that the procedure for job work under Notification No. 214/86-CE was not applicable as their Roorkee unit was availing area-based exemption under Notification No. 50/2003-CE. The Tribunal found that the Ghaziabad unit received raw materials on behalf of the Roorkee unit, manufactured components and parts of transformers, and transported them to the Roorkee unit for final assembly and testing. The Tribunal held that the revenue's case was based on assumptions and lacked corroborative evidence.

5. Validity of Statements and Documentary Evidence:
The Tribunal found that the documentary evidence, including road permits, invoices, and inspection reports, supported the appellants' claim that the Ghaziabad unit only manufactured components and parts, which were then sent to the Roorkee unit for final assembly and testing. The Tribunal noted that the revenue's case was based on presumptions and assumptions, without any test reports or substantial evidence to prove that complete transformers were cleared from the Ghaziabad unit.

Conclusion:
The Tribunal allowed the appeals, set aside the impugned order, and granted consequential benefits to the appellants. The Tribunal emphasized the importance of documentary evidence and the requirement to follow due process, including the examination of witnesses, as per Section 9(D) of the Central Excise Act.