1997 (7) TMI 473 - AT - Central Excise

Summary

Issues Involved:
1. Exemption under Notification No. 179/77-C.E. for assembling gen sets without the aid of power.
2. Exemption under Notification No. 118/75-C.E. for alternators captively consumed in the manufacture of gen sets.
3. Allegation of clandestine removal of alternators based on missing serial numbers.
4. Computation of value of clearances under Notification No. 119/75-C.E. for job work.
5. Determination of related persons for the purpose of valuation.

Summary:

Issue 1: Exemption under Notification No. 179/77-C.E.
The Tribunal held that the exemption under Notification No. 179/77-C.E., dated 18-6-1977, was available to the appellants for assembling gen sets manually without the aid of power, even though power was used in the manufacture of alternators. This conclusion was supported by previous Tribunal decisions and Supreme Court rulings, which clarified that the use of power in the manufacture of inputs does not affect the exemption for the final product if the final product itself is made without the aid of power.

Issue 2: Exemption under Notification No. 118/75-C.E.
The Tribunal accepted the appellants' claim that alternators captively consumed in the manufacture of gen sets were entitled to exemption under Notification No. 118/75-C.E. The alternators, classifiable under Tariff Heading 68, were used in further manufacturing processes within the appellants' factory, thus qualifying for the exemption.

Issue 3: Allegation of Clandestine Removal
The Tribunal found that the appellants failed to provide a reasonable explanation for the missing serial numbers of alternators. The appellants' claim that some alternators were rejected during the assembly process was unsupported by evidence. Therefore, the Tribunal upheld the adjudicating authority's finding that the alternators with missing serial numbers were clandestinely removed without proper payment of duty.

Issue 4: Computation of Value of Clearances
The Tribunal rejected the appellants' plea that only the value of notified items should be considered for computing clearances under Notification No. 119/75-C.E. It held that the entire value of the final product, including components supplied by customers, must be taken into account for the purpose of computing total clearances, as the appellants were the manufacturers of the gen sets even on a job work basis.

Issue 5: Related Persons
The Tribunal found no evidence to support the adjudicating authority's conclusion that the appellants' customers, M/s. General Commercial Corporation and M/s. Electrical Elements, were related persons. The onus to prove this relationship lay with the department, which failed to provide adequate evidence. Consequently, the enhancement of value on this ground was set aside.

Penalty and Redemption Fine:
The Tribunal noted that the penalty and redemption fine imposed by the adjudicating authority would vary based on the revised demand. Therefore, it remanded the matter to the lower authority for re-quantification of the demand and re-determination of the penalty and redemption fine.

Conclusion:
The appeal was disposed of with the Tribunal setting aside the impugned order and remanding the matter to the Collector for re-quantification of the demand and re-determination of the penalty and redemption fine in light of the Tribunal's findings.