2009 (8) TMI 522 - AT - Central Excise

SSI Exemption- Notification No. 7/97-C.E., dated 1-3-97- M/s. Shree Rubber Works are engaged in manufacture of Latex Rubber Thread, falling under Chapter 40 of the Schedule to CETA, 1985. During the relevant period, they were working under small scale exemption Notification No. 7/97-C.E., dated 1-3-97. , proceedings were initiated against appellant, alleging that the goods shown to have been cleared from the factory of M/s. Shree Ambica Rubber Co., were in fact, manufactured at M/s. Shree Rubber Works and cleared from there. Such clearances were shown in the name of two companies only to avail the benefit of small scale exemption notification. The goods were actually being manufactured in M/s. Shree Rubber Works out of the raw material purchased in the name of M/s. Shree Ambica Rubber Works. Accordingly, show cause notice proposing to confirm the demand on the above allegations for the period 1995-96, 1996-97 and 1997-98 and to impose penalty upon various noticees was issued. An order passed by the Additional Commissioner vide which he has confirmed the demand of duty along with imposition of penalty. Appeal against the above order did not succeed before Commissioner (Appeals).Held that- Admittedly, at the time of visit of the officers in the factory of M/s. Shree Ambica Rubber Co., no manufacturing activity was witnessed and the machinery installed therein was found to be in dis-mantled condition. Electricity connection was found to be disconnected and electric consumption as revealed by the Electricity department was found to be Nil. The cumulative effect of all the above evidences is that the goods were never manufactured in the factory of M/s. Shree Ambica Rubber Works during the relevant period. If the goods were not manufactured therein, the same could not have been cleared under the bills and invoices of the said company. As such, all the goods cleared under the name of the said company are actually manufactured in the factory of M/s. Shree Rubber Works.We find that there is enough evidence to uphold the findings against the appellant. We, accordingly, find no justification to interfere in the orders passed by the authorities below confirming demand and imposing penalty upon all the appellants. As a result, the appeals are rejected.

Summary

Issues:
- Allegation of misuse of small scale exemption notification
- Manufacturing activity in different units
- Clubbing of clearances from multiple units
- Evidence and findings supporting demand and penalty

Allegation of Misuse of Small Scale Exemption Notification:
The case involved M/s. Shree Rubber Works, engaged in manufacturing Latex Rubber Thread under small scale exemption Notification No. 7/97-C.E. During an inspection, excess stock of latex rubber was found, along with private records linking another unit, M/s. Shree Ambica Rubber Co., to the operations. The investigation revealed that both units were interconnected, with the machinery at M/s. Ambica Rubber Co. being old and non-functional. The authorities alleged that goods cleared under M/s. Ambica Rubber Co.'s name were actually manufactured at M/s. Shree Rubber Works to exploit the exemption. The demand of duty and penalties were confirmed based on these allegations.

Manufacturing Activity in Different Units:
The investigation uncovered that M/s. Shree Ambica Rubber Co. was not operational, with no manufacturing activity since 1995-96. Statements from various individuals confirmed that goods were being manufactured at M/s. Shree Rubber Works, not at M/s. Ambica Rubber Co. The physical state of the machinery and lack of activity at M/s. Ambica Rubber Co. supported the conclusion that goods were never produced there during the relevant period.

Clubbing of Clearances from Multiple Units:
The appellant argued against clubbing clearances from different units based on Tribunal decisions. However, the Tribunal found that the core issue was not about clubbing clearances but about goods being manufactured at M/s. Shree Rubber Works and cleared under M/s. Ambica Rubber Co.'s name. The evidence overwhelmingly pointed to the fact that all goods cleared under the latter's name were actually produced at the former's factory.

Evidence and Findings Supporting Demand and Penalty:
The Tribunal upheld the findings against the appellants, noting the incriminating statements and evidence collected during the investigation. The excess stock found at M/s. Shree Rubber Works, coupled with the non-operational status of M/s. Ambica Rubber Co., reinforced the conclusion that goods were falsely cleared under the latter's name to benefit from the exemption. No arguments were presented to refute the collected evidence, leading to the rejection of the appeals and the affirmation of the demand and penalties imposed by the authorities.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, Ahmedabad, highlighted the key issues, findings, and legal reasoning behind the decision, emphasizing the misuse of small scale exemption, manufacturing discrepancies between units, and the conclusive evidence supporting the demand and penalties imposed.