2013 (5) TMI 543 - AT - Central Excise

SSI Exemption Benefit denied Commmom brand name - clubbing of clearance - brand name of Maharaja - Notification No.175/86 - Held that - it was not the case of the Revenue in the SCN to club the clearance of the units. - In fact the demand stands confirmed against each unit separately by the adjudicating authority himself. Thus establishing their separate identity. - all the units being registered separately, manufacturing different goods though identical and located at different places, having complete machinery to manufacture goods cannot be held to be related parties, merely because the Directors or partners or proprietors are relative of each other. - club of clearance is not valid. M/s Hindustan Machines had declared the value of clearances in the year 1987-88 as Rs.9.50 lakhs approximately. There being no evidence to show that the said figure of clearance was not correct, therefore the same has to be hold as the correct clearance value. If that be so, he was entitled to SSI exemption Notification No.175/86-CE during the succeeding financial year, 1988-89 and thereafter. In as much as the brand name owner M/s Hindustan Machines has been held to be entitled to the benefit of Notification, the other units using the said brand name would become entitled to the benefit of SSI exemption Notification as they are not hit by para 7 of the Notification. Thus, conformation of demand against the M/s Hindustan Machines as also other manufacturing units by denying them the benefit of SSI Notification is unsustainable. The said part of the demand is accordingly set aside along with setting aside of the penalties on the said ground. Clandestine removal of the good Held that - charges of clandestine removal cannot be made on the basis of assumptions and presumptions and on the basis of documents recovered from third person s premises, without their being any evidence of actual manufacture of the excess quantity, which required corroboration of procurement of raw material, the labour as also electricity consumption etc. - In a case of clandestine removal the department should produce positive evidence to establish the same. In the absence of same, a finding cannot be based on the contents of loose chits of uncertain authorship. Department has not produced evidence of use of inputs to prove that there was manufacture of unaccounted finished product. Therefore, confirmation of demand against the appellants on the allegation of clandestine removal is unsustainable. Under valuation Whether the advertisement and publicity expenses incurred by M/s Technocrat Marketing are required to be added in the assessable value of the appellants final product or not? - Held that - The issue stands decided by the Hon ble Supreme Court s decision in the case of M/s Phillips India reported in 1997 (2) TMI 120 - SUPREME COURT OF INDIA on the basis of same the advertisement expenses or publicity charges incurred by the marketing company cannot be included in the assessable value of the goods manufactured by the respective manufacturing units. Confiscation of seized goods Appellants contended that the said goods were in semi-finished condition and were yet to be recorded in the RG-I register, that is why some of the goods were only detained and not seized. Adjudicating authority has not dealt with the above plea of the appellants. It seems that the order has been passed with pre-determined mind to confiscate the goods. There is no statement appearing that the same were meant for clandestine removal. Thus, the confiscation of the said goods is not warranted. Imposition of penalty Held that - In as much as the demands have been set aside, the penalties imposed upon them under various provisions of Central Excise Act, 1944 and the Central Excise Rules are also set aside. Further in as much as the appeals of manufacturing units stands allowed, the imposition of penalties upon individuals, who are either Directors/Partners of the said units are also set aside.

Summary

Issues Involved:
1. Availability of Small Scale exemption under Notification No.175/86.
2. Allegations of clandestine clearances.
3. Confiscation of seized goods.
4. Inclusion of expenses on publicity and advertisement in computing assessable value.
5. Reliance on statements without cross-examination.
6. Invocation of the extended period of limitation.

Detailed Analysis:

1. Availability of Small Scale exemption under Notification No.175/86:
The main contention revolves around whether M/s Hindustan Machines and other units manufacturing under the brand name "Maharaja" were eligible for the SSI exemption under Notification No.175/86-CE. The Commissioner denied the exemption based on a document titled "Sales Statement of 1987," which suggested that the total clearances exceeded the Rs.1.5 crore limit, thus disqualifying them from the exemption. However, the Tribunal found that the document was recovered from a marketing company that did not exist during the relevant period. There was no evidence linking the sales figures to M/s Hindustan Machines. The Tribunal concluded that M/s Hindustan Machines declared clearances of Rs.9.50 lakhs for 1987-88, making them eligible for the SSI exemption in subsequent years. Consequently, other units using the "Maharaja" brand name were also entitled to the exemption.

2. Allegations of clandestine clearances:
The Commissioner alleged clandestine clearances based on documents recovered from the premises of M/s Technocrat Marketing P. Ltd. and the residence of Shri Hari Om Bhatia. However, the Tribunal found that these documents did not conclusively link the alleged clandestine activities to the manufacturing units. The Tribunal emphasized that charges of clandestine removal must be supported by tangible evidence, such as procurement of raw materials, actual manufacture, and clearance of goods. The Tribunal noted that no such corroborative evidence was presented. The Tribunal cited several precedents, including the Kuber Tobacco case, to reinforce that documents recovered from third parties cannot be the sole basis for alleging clandestine removal. Therefore, the Tribunal set aside the demand of duty based on alleged clandestine removal.

3. Confiscation of seized goods:
The Tribunal addressed the confiscation of goods seized during searches at the manufacturing units. The appellants argued that the seized goods were in semi-finished condition and not yet recorded in the RG-I register. The Tribunal found that the Commissioner did not adequately address this plea and had a pre-determined mindset to confiscate the goods. The Tribunal held that the confiscation was unwarranted as there was no evidence suggesting that the goods were meant for clandestine removal.

4. Inclusion of expenses on publicity and advertisement in computing assessable value:
The Tribunal examined whether expenses incurred by M/s Technocrat Marketing on publicity and advertisement should be included in the assessable value of the manufactured goods. The Commissioner had distinguished the Supreme Court's decision in M/s Phillips India, which excluded such expenses. The Tribunal found the Commissioner's reasoning unjustified and held that the marketing company's expenses on advertisement and publicity were on their own behalf. Therefore, these expenses should not be included in the assessable value of the goods.

5. Reliance on statements without cross-examination:
The Tribunal noted that the Commissioner relied on various statements without providing an opportunity for cross-examination. The Tribunal emphasized that reliance on statements without cross-examination violates principles of natural justice. The Tribunal found that the statements alone could not substantiate the allegations of clandestine removal and denied the demand based on such statements.

6. Invocation of the extended period of limitation:
The Tribunal did not specifically address the invocation of the extended period of limitation in detail, as the primary issues concerning the SSI exemption, clandestine removal, and confiscation of goods were resolved in favor of the appellants. Consequently, the penalties imposed on the manufacturing units and individuals were also set aside.

Conclusion:
The Tribunal allowed all appeals, granting consequential relief to the appellants. The demands for duty, penalties, and confiscation of goods were set aside based on the findings that the SSI exemption was wrongly denied, the allegations of clandestine removal were unsubstantiated, and the inclusion of advertisement expenses in the assessable value was unjustified.