2005 (10) TMI 18 - AT - Central Excise

Central Excise SSI Exemption (1) Clearance of limited companies not to be clubbed (2) Demand (3) Limitation (4) Pharmaceutical product (5) Fertilizer (6) Interest and Penalty not imposable

Issues Involved:
1. Clubbing of clearances for SSI exemption.
2. Manufacture of Econeem by MBC.
3. Repacking of Pheromones.
4. Classification of Ecoderma and Ecohume.
5. Applicability of the longer period under proviso to Section 11A.
6. Imposition of penalties and interest under Sections 11AC and 11AB.

Issue-wise Detailed Analysis:

1. Clubbing of Clearances:
The primary issue was whether the clearances of M/s. P.J. Margo (P) Ltd. (PJM) and M/s. Margo Biocontrols Pvt. Ltd. (MBC) should be clubbed for determining eligibility for SSI exemption. The Tribunal noted that both PJM and MBC are separate private limited companies, each a distinct legal entity. The Board's Circular dated 29-5-1992 clarified that limited companies are separate entities and entitled to separate exemption limits. The adjudicating authority's decision to club clearances was found unwarranted and against the Board's Circular. The Tribunal set aside this finding, stating there were no grounds for clubbing the clearances. The Supreme Court's decision in Gammon Far Chems. Ltd. was distinguished as it was based on a different context involving the phrase "on behalf of a manufacturer," which was not applicable in the present case.

2. Manufacture of Econeem by MBC:
The Tribunal found no evidence that MBC manufactured Econeem. The documents indicated only a proposal to manufacture, with no tangible evidence of actual manufacturing. Moreover, MBC did not have the facilities to manufacture Econeem, and PJM was the licensed manufacturer. The charge of clandestine manufacturing and clearance was not sustained due to lack of evidence, aligning with the precedent set in Durga Trading Company v. CCE.

3. Repacking of Pheromones:
The Tribunal noted that MBC imported and sold Pheromones in smaller packs without repacking, except in one instance. There was no labeling or relabeling, which are essential for the process to amount to manufacture as per Chapter Note 2 of Chapter 38. The Tribunal's decision in Ammonia Supply Company v. CCE supported the view that repacking without labeling does not constitute manufacture. Hence, the charge of repacking amounting to manufacture was set aside.

4. Classification of Ecoderma and Ecohume:
- Ecoderma: The Tribunal agreed with the appellants that Ecoderma, being a culture of micro-organisms, should be classified under Chapter Heading 30.02. The Chemical Examiner's report was not reliable as the department's laboratory did not test for fungus and bacteria. The classification under Chapter 30 was upheld based on technical literature and certifications from recognized institutes.
- Ecohume: The Tribunal found that Ecohume, an animal and vegetable fertilizer, should be classified under Chapter Heading 31.01. The product did not contain essential fertilizing elements (nitrogen, phosphorus, potassium) in significant quantities, thus not fitting under Heading 31.05. Even if classified under 31.05, the product was exempted under relevant notifications. The classification under 31.01 was upheld.

5. Applicability of the Longer Period under Proviso to Section 11A:
The Tribunal considered the appellants' evidence that they had informed the department about MBC's manufacturing activities and the shareholding structure. Job work permissions were also taken. Given these disclosures, the Tribunal found no suppression of facts. The case laws cited by the appellants supported their contention, and the invocation of the longer period under Section 11A was not justified.

6. Imposition of Penalties and Interest under Sections 11AC and 11AB:
Given the findings on the above issues, the Tribunal concluded that there was no intention to evade duty. Consequently, penalties under Section 11AC and interest under Section 11AB were not applicable. The charges against the appellants were set aside, and the appeals were allowed with consequential relief.

Conclusion:
The Tribunal allowed all five appeals, setting aside the order-in-original, and provided consequential relief to the appellants. The findings on clubbing of clearances, manufacture of Econeem, repacking of Pheromones, classification of Ecoderma and Ecohume, and the applicability of the longer period and penalties were all in favor of the appellants.

← Previous Next →