1997 (3) TMI 208 - AT - Central Excise

Summary

Issues Involved:
1. Entitlement to exemption under Notification No. 71/78.
2. Determination of the real manufacturer.
3. Clubbing of clearances.
4. Allegation of suppression of facts.
5. Applicability of the extended period of limitation.

Detailed Analysis:

1. Entitlement to Exemption under Notification No. 71/78:
The appellants, manufacturers of electric motors, claimed exemption under Notification No. 71/78. The Assistant Collector rejected this claim, arguing that the clearances of M/s. Automatic Electric Ltd. (AEL), who supplied raw materials, should be clubbed with the appellants' clearances. This would disqualify the appellants from the exemption as the total value exceeded Rs. 20 lakhs.

2. Determination of the Real Manufacturer:
The Assistant Collector treated AEL as the manufacturer under Section 2(f) of the Central Excise Act because they supplied raw materials and received the finished goods. However, the Collector (Appeals) held that the appellants and AEL are independent units, and the job worker (appellants) is the independent manufacturer. This was based on the principle that the supplier of raw materials does not become the manufacturer unless proven otherwise with evidence.

3. Clubbing of Clearances:
The Collector (Appeals) found no evidence of a nexus or flow-back between the appellants and AEL that would justify clubbing their clearances. The revenue failed to show that AEL was a dummy unit of the appellants. Consequently, the clearances of the two entities could not be clubbed, and the appellants were entitled to the exemption under Notification No. 71/78.

4. Allegation of Suppression of Facts:
The Collector (Appeals) noted that the show cause notice did not allege suppression of facts, and thus the demands were hit by limitation. The Assistant Collector's decision was based on grounds different from those alleged in the show cause notice. The Vice President, however, argued that the show cause notice did contain allegations of suppression, which justified the extended period of limitation.

5. Applicability of the Extended Period of Limitation:
The Member Judicial concluded that the demand was barred by time due to the absence of suppression allegations in the show cause notice. Conversely, the Vice President contended that the show cause notice did allege suppression, warranting the extended period. The President agreed with the Member Judicial, emphasizing that the clearances of specified goods did not exceed Rs. 15 lakhs in the previous year, thus entitling the appellants to the exemption.

Separate Judgments:

Member (J) - S.L. Peeran:
- Found no justification for clubbing clearances.
- No evidence of suppression in the show cause notice.
- Upheld the Collector (Appeals)'s decision and rejected the appeal.

Vice President - S.K. Bhatnagar:
- Argued that the real manufacturer needed to be determined.
- Believed the show cause notice did allege suppression.
- Proposed remanding the case to the Assistant Collector for reconsideration.

President - Justice U.L. Bhat:
- Agreed with the Member Judicial that the appeal should be dismissed.
- Concluded that the value of clearances did not exceed Rs. 15 lakhs, thus the appellants were entitled to the exemption.

Final Order:
In view of the majority opinion, the Department's appeal was rejected.