2014 (4) TMI 607 - AT - Central Excise

SSI Exemption - clubbing of clearance - Duty demand - Penalty u/s 11AC - Interest u/s 11AB - Whether both the units, Unit No.I and Unit No.II of the Respondent company would be eligible for exemption under notification no.4/97-CE dated 1.3.97 and successor notification no.5/98-CE dated 2.6.98, 618 dated 1.3.2000 and 3/2001-CE dated 1.3.2001 separately - Held that - two units are manufacturing the same excisable goods, there is not even a dividing walls between the two units. On the contrary the same are within the same compound and with one entry and exit gate and the two units share a common electricity connection and pump house, common boiler and a number of other processes. Therefore, in this case, issue of separate registration for the two units is wrong and notwithstanding the issue of separate excise registration, in view of the Apex Court s judgement in case of Dhampur Sugar Mills Ltd. (2001 (1) TMI 129 - CEGAT, COURT NO. IV, NEW DELHI), both the units are to be treated as one single factory - two units have to be treated one factory and a common registration certificate issued to them was absolutely incorrect. Since the two units have to be treated as one factory only, they cannot avail the exemption notification no.4/97-CE and its successor notification separately and for the purpose of availment of these exemptions, the clearances of the two units will have to be clubbed. Therefore, the impugned order dropping the duty demand by treating the two units as two separate factories is not correct. As the common registration certificates had been granted in the year 1994 after due verification and thereafter each unit was submitting separate RT-12 Return wherein the availment of exemption under notification no.4/97-CE and its successor notification was being shown. There is no allegation that there was collusion between the assessing officers and the assessee or that any disciplinary action on vigilance grounds has been taken against the assessing officers. In view of this, we hold that the only normal limitation period would be available to the department for recovery of short paid duty which must be quantified by the Commissioner. Since the allegation of wilful mis-statement, suppression of facts or fraud, contravention of provisions of Central Excise Act, 1944 or of the Rules made thereunder with intent to evade the payment of duty is not sustainable, neither penalty under Section 11 AC of the Central Excise Act 1944 or under Rule 173 Q (1) (d) would be sustainable nor the interest on duty under Section 11 AB would be attracted for the period prior to 11.5.2001 as during the period prior to 11.5.2001, demand of interest under Section 11AB on the duty short paid, not paid or erroneously refunded was linked with such non-payment, short payment or erroneous refund having taken place due to wilful mis-statement, suppression of facts or fraud etc. on the part of the assessee - Decided partly in favour of Revenue.

Summary

Issues Involved:
1. Eligibility for separate exemption under Notification No. 4/97-CE and its successor notifications.
2. Whether MPL Unit I and MPL Unit II can be treated as separate factories.
3. Validity of the demand for central excise duty and applicability of the extended limitation period.
4. Imposition of penalties under Section 11AC of the Central Excise Act, 1944, and Rule 173Q (1)(d) of the Central Excise Rules, 1944.

Issue-wise Detailed Analysis:

1. Eligibility for Separate Exemption:
The central issue was whether M/s. Mukerian Papers Ltd. (MPL) Unit I and Unit II could separately avail exemption under Notification No. 4/97-CE and its successor notifications. These notifications provided a concessional rate of duty subject to quantity limits for paper and paperboard manufactured from pulp containing not less than 75% by weight of pulp made from materials other than bamboo, hardwoods, softwood, reeds, or rags. The Tribunal held that the exemption is factory-wise, not assessee-wise, meaning each factory owned by the same manufacturer could separately avail the exemption if the conditions were met.

2. Separate Factories Determination:
The Tribunal examined whether MPL Unit I and Unit II could be treated as separate factories. Despite having separate registration certificates, both units shared several common facilities, including:
- Common compound wall, entry, and exit gates.
- Common electricity connection, water storage, pump house, boiler, and raw materials storage.
- Common laboratory, chemical preparation room, foam tank, hypo plant, lime mud washer, primary clarifier, and effluent treatment plant.
- Common mechanical and electrical workshops, administrative control, and sales organization.

The Tribunal concluded that the manufacturing processes of the two units were interlinked, and the units could not function independently. Thus, MPL Unit I and Unit II could not be treated as separate factories under Section 2(e) of the Central Excise Act, 1944, which defines a factory as any premises where excisable goods are manufactured.

3. Validity of Demand and Limitation Period:
The Tribunal found that the separate registration certificates were issued in 1994 after due verification, and the respondent had been filing separate returns for each unit. There was no evidence of collusion or fraud by the respondent. Therefore, the extended limitation period under the proviso to Section 11A(1) was not applicable. The Tribunal held that only the normal limitation period would be available for recovering short-paid duty, which must be quantified by the Commissioner.

4. Imposition of Penalties:
Given the absence of fraud, wilful misstatement, or suppression of facts, the Tribunal ruled that penalties under Section 11AC of the Central Excise Act, 1944, and Rule 173Q (1)(d) of the Central Excise Rules, 1944, were not sustainable. Interest on the short-paid duty under Section 11AB was chargeable only for clearances from 11.5.2001 onwards, as prior to this date, interest was linked to fraudulent activities.

Conclusion:
The Tribunal held that MPL Unit I and Unit II should be treated as one factory and could not separately avail exemptions under Notification No. 4/97-CE and its successor notifications. The duty demand for the normal limitation period was confirmed, with interest chargeable from 11.5.2001. No penalties were imposed. The appeal was partly allowed.