2018 (7) TMI 242 - AT - Central Excise

Failure to take registration and payment of duty - SSI Exemption - Department was of the view that as the value of clearances from the yard exceeded 50 lakhs for the financial year 1999 2000 at the time of first clearance of poles by respondents they are not eligible for SSI exemption and is liable to pay duty - Held that - When the contractors are independent contractors and each contractor is undertaking the process of manufacture independently merely because the yard of TNEB is used as the premises for undertaking the process of manufacture it cannot be said that all these manufacturers are doing their activity within a factory so as to attract condition No. (vii) of para 2 of N/N. 8/1999. The show cause notice has been issued alleging that the value of clearances effected from TNEB Yard Samayanallur exceeded the exemption limit. When each contractor has to be considered as an independent manufacturer the demand raised against one contractor stating that clearances effected from yard including the clearances made by other contractor is exceeding the prescribed limit cannot sustain. Appeal dismissed - decided against revenue.

Summary

Issues: Department's appeal against setting aside demand and penalties by Commissioner (Appeals) regarding Central Excise registration and SSI exemption for manufacture of RCC/PSC Poles.

In this case, the Department filed an appeal before the Appellate Tribunal CESTAT CHENNAI challenging the decision of the Commissioner (Appeals) who had set aside the demand and penalties imposed on a contractor for manufacturing RCC/PSC Poles without obtaining Central Excise registration and allegedly crossing the SSI exemption limit. The Department contended that the Commissioner (Appeals) erred in not considering the clearance of poles for home consumption and the terms of the agreement between the contractor and TNEB. The Department argued that the possession of manufactured poles by TNEB constituted clearance for home consumption, making the contractor ineligible for SSI benefit due to exceeding the exemption limit. The Department highlighted that multiple contractors were manufacturing poles in the same yard, and the aggregate value of clearances from the yard exceeded the exemption limit, justifying the duty demand.

The Tribunal noted that the show cause notice alleged non-registration and failure to pay excise duty by the contractor for manufacturing poles in the TNEB yard, where multiple contractors operated. The Department's basis for demanding duty was that the total value of clearances from the yard surpassed the SSI exemption limit, making the contractor liable for duty payment. However, citing precedents such as Kerala State Electricity Board case and judgments from higher courts, the Tribunal emphasized that each contractor was an independent manufacturer, and duty demand on poles from the Electricity Board was not sustainable. The Tribunal rejected the Department's argument that all contractors in the yard should be considered as a single factory for exemption purposes, stating that the contractors were independent entities eligible for SSI benefit. Consequently, the Tribunal upheld the Commissioner (Appeals)' decision, dismissing the Department's appeal and affirming that each contractor should be treated as an independent manufacturer, thereby rejecting the duty demand based on the aggregated value of clearances from the TNEB yard.

In conclusion, the Appellate Tribunal CESTAT CHENNAI ruled in favor of the contractor, upholding the decision of the Commissioner (Appeals) to set aside the demand and penalties imposed by the Department. The Tribunal emphasized the independent nature of each contractor operating in the TNEB yard for manufacturing poles, rejecting the Department's argument of considering all contractors as a single entity for SSI exemption purposes. The judgment highlighted the importance of treating each contractor separately and upheld that duty demand on the contractor for exceeding the exemption limit was not justified.