2007 (11) TMI 146 - AT - Central Excise

SSI exemption -Appellant got cement manufactured from 6 grinding units by supplying them clinker and then purchasing the cement manufactured by them revenue s plea that clearances of all the six grinding units should be taken as the clearances of the appellants is not justified because grinding units are independent as they have their own existence, labour, finance etc. so grinding units are entitled for exemption not. 8/01 & 9/01 and appellants entitled for the benefit of Not. 3/01

Summary

Issues:
- Appeal against Order-in De novo No. CE-11/2006 by Commissioner of Customs & Central Excise, Guntur.
- Demand of duty, penalty under Section 11AC, and Rule 173Q of the Central Excise Rules, 1944.
- Allegation of engineered device to remain within exemption limit.
- Claim of independent existence of six grinding units.
- Legal permissibility of supplying raw material and purchasing manufactured cement.
- Duty computation discrepancies.
- Revenue's argument of evasion of duty through grinding units.
- Consideration of independence of grinding units in duty liability.
- Entitlement to exemption Notifications.
- Justification of penalties imposed.

Analysis:
The case involves appeals against the Order-in De novo No. CE-11/2006 by the Commissioner of Customs & Central Excise, Guntur, demanding duty and imposing penalties under Section 11AC and Rule 173Q of the Central Excise Rules, 1944. The main appellant, a cement manufacturer, faced allegations of using an engineered device to stay within an exemption limit, leading to a dispute from April 2001 to October 2001. The Revenue claimed that the main appellant utilized six grinding units to manipulate clearances and evade duty.

The main argument presented was the independent existence of the grinding units, which were alleged to be separate entities with their facilities and operations. The appellant contended that supplying raw material and purchasing manufactured cement from these units was legally permissible, emphasizing the Supreme Court's decision in a similar case. Discrepancies in duty computation and the rightful application of exemption Notifications were highlighted to challenge the Revenue's claims.

On careful consideration, the Tribunal found that the grinding units were indeed independent entities entitled to exemption Notifications, along with the main appellant's concessional duty rate. The Revenue failed to establish a strong case for combining the clearances of these units with the main appellant's to deny the concessional duty rate. The Tribunal concluded that no violation of the Central Excise Act or Rules was proven, leading to the setting aside of the order and the appeals being allowed with consequential relief. The penalties imposed on the Director, main appellant, and the six independent units were deemed unjustified.