2017 (10) TMI 846 - HC - Central Excise

SSI exemption - threshold exemption limit - it was found that CMP-Unit I, had sold both exempted and dutiable goods, during the period from 2002-03 to 2005-06 and the aggregate turnover, exceeded 300 lakhs (prior to 01.04.2004)/400 lakhs (after 01.04.2016) - whether, on the basis of the facts pleaded, the assessee is entitled to the benefit of SSI exemption, under N/N. 8/2003-CE, dated 01.03.2003, excluding certain clearance/turnover from the aggregate clearance computed, as per the Notification? Held that - the assessee has not offered any explanation, on suppression of facts and considering the decisions relied on by the respondent, notification, under which, exemption was claimed, the Commissioner of Central Excise, Chennai-II Commissionerate, Chennai, has held that the assessee is not eligible for the benefit of exemption, on the basis of value of clearances, in a financial year, in terms of N/N. 08/2003-CE, dated 01.03.2003, as amended for the packing cartons and boxes manufactured and cleared by them, during the period from 2003-04 to 2006-07 (upto 12/2006). Show cause notice, dated 13.06.2007, has been issued, seeking for an explanation for imposing duty, interest and penalty. All the issues, including invoking of extended period, have been considered by the adjudicating authority in Order-in-Original, dated 11.09.2007. When the Tribunal has remitted the matter to the adjudicating authority, to re-do the matter afresh and to pass a reasoned order, on all legal and factual plea, further directions that no penalty should be imposed on the respondent, upon re-adjudication, would be amount to pre-judging the issue, by the Tribunal, on the issue of penalty. When the entire matter is directed to be adjudicated afresh, there cannot be a finding by the Tribunal, on one of the issues, raised in the show cause notice, viz., penalty. Order of the Tribunal is contrary to the exercise to be done, afresh by the adjudicating authority and the same requires to be set aside. Final order directing the matter to be adjudicating authority to re-do the adjudication, is sustained. Appeal allowed in part.

Issues Involved
1. Eligibility for SSI exemption under Notification No. 08/2003-CE.
2. Invocation of the extended period of limitation.
3. Imposition of duty, interest, and penalties under various sections of the Central Excise Act, 1944, and Central Excise Rules, 2002.
4. Consideration of deemed export and branded goods in computing the SSI exemption limit.
5. Directions for re-adjudication by the Tribunal.

Detailed Analysis

1. Eligibility for SSI Exemption under Notification No. 08/2003-CE:
The core issue was whether the assessee was entitled to the benefit of SSI exemption under Notification No. 08/2003-CE, dated 01.03.2003. The Commissioner of Central Excise denied this benefit, asserting that the assessee's aggregate turnover exceeded the prescribed limits, making them ineligible for exemption. The assessee argued that certain clearances should be excluded from the aggregate turnover, including deemed exports and non-dutiable goods. The Tribunal remanded the matter for a thorough scrutiny to determine the appropriate quantum of turnover on each count and to ascertain if any cenvatable inputs were used.

2. Invocation of the Extended Period of Limitation:
The Commissioner invoked the extended period of limitation under Section 11A of the Central Excise Act, 1944, citing suppression of facts by the assessee. The Tribunal did not provide a specific finding on this issue, and no appeal was filed by the assessee regarding this. The High Court noted that the issue of invoking the extended period should be reconsidered during the re-adjudication process.

3. Imposition of Duty, Interest, and Penalties:
The Commissioner imposed a duty of ?79,65,089, along with interest under Section 11AB and penalties under Section 11AC of the Central Excise Act and Rule 25 of the Central Excise Rules, 2002. The Tribunal's decision to remand the case included a direction to refrain from imposing penalties, which the High Court found to be pre-judging the issue. The High Court set aside this direction, allowing the adjudicating authority to reconsider the imposition of penalties during the re-adjudication process.

4. Consideration of Deemed Export and Branded Goods:
The assessee claimed that clearances to units exporting ultimate goods should be treated as deemed exports and excluded from the aggregate turnover. They also contended that the printed leaflets were branded goods and should be excluded from the SSI exemption limit. The Tribunal found that the leaflets were not branded goods as they were not traded for purchase by the general public. This finding was to be considered during the re-adjudication to compute the SSI exemption limit accurately.

5. Directions for Re-adjudication by the Tribunal:
The Tribunal remanded the matter to the adjudicating authority to re-do the adjudication afresh, considering all legal and factual pleas raised by the assessee. The High Court upheld this remand but set aside the Tribunal's direction not to impose penalties, emphasizing that the adjudicating authority should decide on penalties based on the fresh adjudication.

Conclusion
The High Court partly allowed the appeal, sustaining the Tribunal's decision to remand the matter for fresh adjudication but setting aside the direction not to impose penalties. The adjudicating authority was directed to provide a reasoned and speaking order, considering all legal and factual pleas, including the issue of penalties. The substantial question of law regarding the imposition of penalties was answered in favor of the appellant.

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