1996 (9) TMI 332 - AT - Central Excise

Summary

Issues Involved:
1. Jurisdiction of the Collector, Central Excise.
2. Clubbing of clearances and capital investment for exemption under Notification No. 77/85.
3. Distinctness of M/s. Applied Research & Engineering Pvt. Ltd. and M/s. ARE Educational Equipment Pvt. Ltd.
4. Imposition of penalty.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Collector, Central Excise:
The appellants argued that the Collector, Central Excise lacked jurisdiction to adjudicate the case, as the demand fell within the six-month period typically under the purview of the Assistant Collector. However, the Tribunal found that under Section 11A, while the Assistant Collector is competent to handle such cases, there is no prohibition in the Central Excise Rules preventing the Collector from adjudicating. The Collector can exercise powers vested in any subordinate officer, thus the question of jurisdiction was answered in the negative.

2. Clubbing of Clearances and Capital Investment for Exemption under Notification No. 77/85:
The appellants contended that the Collector had erroneously mixed up the issues of exemption and capital investment. The Tribunal clarified that Notification No. 77/85 contains two distinct provisos: one dealing with capital investment (not exceeding Rs. 20 lacs) and the other with the aggregate value of clearances. The Tribunal found no confusion in these provisos. The Collector's decision to club the clearances and capital investment of the two units was challenged by the appellants, who argued that they were distinct entities with separate registrations and licenses. The Tribunal referred to various case laws, including the judgments in Shree Packaging and Bhagwan Das Kanodia, which supported the appellants' contention that the two units should not be clubbed for the purpose of exemption.

3. Distinctness of M/s. Applied Research & Engineering Pvt. Ltd. and M/s. ARE Educational Equipment Pvt. Ltd.:
The Tribunal examined whether the two units were distinct entities. The appellants argued that despite some common factors, the units were separate legal entities with different registrations and management structures. The Tribunal noted that the period covered by the show cause notice was from 1-4-1985 to 31-1-1986, during which only one unit was operational with an investment of Rs. 4 lacs, well below the threshold. The Tribunal concluded that the Collector's finding of a combined value exceeding Rs. 20 lacs was erroneous. The Tribunal held that the two units were distinct and independent, eligible for separate exemptions under Notification No. 77/85.

4. Imposition of Penalty:
Given the Tribunal's finding that the two units were distinct and eligible for separate exemptions, the imposition of penalty on the firm was deemed unwarranted. The Tribunal noted that there was no suppression of facts or misdeclaration by the appellants, thus setting aside the penalty imposed by the Collector.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeals, holding that M/s. Applied Research & Engineering Pvt. Ltd. and M/s. ARE Educational Equipment Pvt. Ltd. are distinct entities eligible for separate exemptions under Notification No. 77/85. The jurisdiction of the Collector was upheld, but the clubbing of clearances and imposition of penalty were found to be erroneous.