2004 (8) TMI 209 - AT - Central Excise

Summary

Issues:
1. Demand of Rs. 14,12,269 on the appellants for Enriched Pressmud Compost (EPC) under Rule 57CC of the Central Excise Rules, 1944.
2. Whether the demand on the appellants for EPC is sustainable as they did not manufacture the commodity but supplied "Pressmud" as input to a Joint Venture for manufacturing EPC.

Analysis:
The judgment by the Appellate Tribunal CESTAT, CHENNAI dealt with a demand of Rs. 14,12,269 on the appellants concerning Enriched Pressmud Compost (EPC) for the period Sept. '97 to Mar. '02 under Rule 57CC of the erstwhile Central Excise Rules, 1944. The appellants sought waiver of pre-deposit and stay of recovery for the said amount and an equal penalty. The counsel for the appellants argued that the demand was unsustainable as the appellants did not manufacture EPC; it was manufactured by a Joint Venture of three companies, including the appellants, who only supplied "Pressmud" as input. The Tribunal acknowledged that a Joint Venture is a separate legal entity from its constituents, and as such, no demand can be raised on the appellants for a product manufactured by the Joint Venture. The appeal was taken up for final disposal after dispensing with pre-deposit.

Upon examining the records and submissions, the Tribunal found that the demand on the appellants for EPC was unjustified under Rule 57CC or otherwise. Citing legal precedents like New Horizons Ltd. v. UOI and IVRCL Infrastructures & Projects Ltd. v. C.C., Chennai, the Tribunal emphasized the juristic personality of a Joint Venture and ruled that any demand should have been raised on the Joint Venture, the manufacturer of EPC, as a distinct legal entity. As the demand on the appellants was deemed illegal, the penalty was also vacated. The impugned order was set aside, and the appeal was allowed, absolving the appellants from the demand and penalty.

In conclusion, the judgment by the Appellate Tribunal CESTAT, CHENNAI clarified that the demand on the appellants for Enriched Pressmud Compost (EPC) was unsustainable as they were not the manufacturers of the product but merely a part of a Joint Venture. The legal principle of the separate legal entity of a Joint Venture was upheld, leading to the setting aside of the demand and penalty imposed on the appellants. The ruling underscored the importance of correctly attributing liability based on the entity responsible for manufacturing the goods in question.