2001 (3) TMI 713 - AT - Central Excise

Issues Involved:
1. Whether Archana Industrial Transformers P. Ltd. (Archana) suppressed the production of electric transformers and cleared them in the name of SSI units to avail the benefit of Notification 175/86.
2. Whether Vidarbha Transformers P. Ltd. (Vidarbha) and Nippon Transformers P. Ltd. (Nippon) were involved in any manufacturing activity.
3. Whether the Commissioner was correct in dropping the demand for duty from Nippon and imposing penalties on Archana and Vidarbha.

Issue-wise Detailed Analysis:

1. Suppression of Production and Availing Notification Benefits:

The Commissioner's order partly confirmed the proposal in the common notice issued to Archana, Vidarbha, and Nippon, demanding Rs. 17.30 lakhs from Archana and imposing penalties on Archana and Vidarbha. The notice alleged that no manufacturing took place at Vidarbha and Nippon, and the entire manufacture occurred at Archana. Consequently, Archana was not entitled to the benefit of Notification 175/86 for the years 1990 to 1993. It was alleged that Archana suppressed the production of electric transformers and cleared them in the name of SSI units to evade the payment of Central Excise duty.

2. Manufacturing Activity at Vidarbha and Nippon:

The evidence included a visit by officers to the factories of Archana and Nippon, showing no manufacturing activity, with only winding machines present and production records kept at Archana. Statements from workers and a security guard suggested that Vidarbha's factory had been closed for a year, and transformers were made at Archana and dispatched in Vidarbha's name. However, the Commissioner concluded that Vidarbha, Archana, and Nippon were separate independent units, with no manufacturing at Vidarbha, but did not establish a case against Nippon due to lack of evidence.

3. Appeals by Archana and Vidarbha:

Archana and Vidarbha contended that the manufacture of transformers was a three-stage process involving core winding at Vidarbha and Nippon, dehydration at Archana, and final operations back at Vidarbha and Nippon. They argued that Vidarbha had twelve workers, with three working at Archana to learn the manufacturing process. The presence of production records at Archana was explained as necessary for reporting to the common management in Calcutta. The departmental representative largely relied on the Commissioner's reasoning.

The Tribunal found it difficult to conclude that the activities claimed by Archana and Vidarbha amounted to manufacturing transformers. However, it noted that the department's case was that no manufacturing occurred at these premises. The Tribunal questioned the credibility of the security guard's statement and found that the Commissioner did not rebut the affidavits of Vidarbha's workers. The Tribunal concluded that the absence of manufacturing at Vidarbha was not established to the required degree of probability and allowed the appeals of Archana and Vidarbha, setting aside the impugned order.

4. Department's Appeal Relating to Nippon:

The department's appeal contended that components were sent by Vidarbha and Nippon, and transformers were cleared from Archana. The Tribunal noted that the department did not claim that complete transformers did not emerge from Vidarbha and Nippon. The charge of core windings sent for completion to Archana was permitted under Rule 57F(2). The Tribunal found that the Commissioner did not give any finding on the raw material purchased by Archana. The explanation of common purchase of raw material and its supply to Nippon was accepted. The Tribunal found no sufficient ground to interfere with the Commissioner's order and dismissed the department's appeal.

Conclusion:

The Tribunal allowed the appeals of Archana and Vidarbha, setting aside the impugned order, and dismissed the department's appeal relating to Nippon. Consequential relief was granted according to law.

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