2015 (10) TMI 138 - AT - Central Excise

Valuation - clubbing of clearance - proceedings were initiated against HPCEL on the ground that a portion of the clearance shown in the name HEC were actually cleared by them and HEC did not have manufacturing facility and it was only a trading firm - Revenue contends that the Commissioner (Appeals) failed to take note of the fact that the HEC has not incurred any expenditure on electricity and manpower and further, the Commissioner (Appeals) has simply ignored the statement of Shri Jayarama Reddy wherein he had agreed that HEC is only a trading firm - Held that - Investigating officers did not visit the premises of HEC which would have finally settled the issues. When Shri Jayarama Reddy retracted his statement, the officers could have visited the premises which also was not done. The claim made by HPCEL that conveyance charges and labour charges mentioned in the Profit & Loss Accounts are actually related to electricity and manpower has not been verified and discussed. The original authority could have asked for details of persons employed and actual consumption of electricity and could have verified whether electricity consumption and manpower / employees were sufficient or not for the production shown by HEC. This also has not been done. The fact that there was another statement of one Shri Krishna Reddy who was Director of HPCEL who categorically stated that HEC was a separate unit, has not been discussed. - As regards the Sales Tax Assessment Order, it was simply observed that the sales tax officers did not visit HEC. Unfortunately, the same applies to the officers of Central Excise also who did not visit the unit and did not gather evidence to show that there is no machinery to manufacture the goods. There is a major defect which has been discussed by the Commissioner (Appeals) also. The defect is that no notice has been issued to HEC separately. - Decided against Revenue.

Summary

Issues:
Proceedings against HPCEL for clearance shown in the name of HEC, failure to consider certain facts by the Commissioner (Appeals), retraction of statement by Shri Jayarama Reddy, expenditure on electricity and manpower, machinery verification at HEC premises, clubbing of clearances, lack of separate notice to HEC.

Analysis:
The case involved proceedings against HPCEL for allegedly clearing goods in the name of HEC, a trading firm without a manufacturing facility. The issue arose when Shri Jayarama Reddy admitted that HEC was a trading firm, leading to the initiation of proceedings against HPCEL. The Revenue contended that the Commissioner (Appeals) failed to consider key facts, such as lack of expenditure by HEC on electricity and manpower, and the retracted statement of Shri Jayarama Reddy. The Revenue argued that clubbing the clearances of HPCEL and HEC was not necessary in this case, emphasizing the belated retraction of the statement by Shri Jayarama Reddy.

During the proceedings, the learned A.R. pointed out that the Profit & Loss Accounts of HEC showed no expenditure on electricity and manpower, while the appellant claimed that such expenses were misclassified as conveyance and labor charges. The appellant also presented evidence from Sales Tax Assessment Orders indicating HEC's manufacturing activities and machinery purchases. The lack of verification regarding the machinery's sufficiency for production at HEC was highlighted, along with the failure to visit HEC's premises to confirm the manufacturing setup.

The Tribunal noted that investigating officers did not visit HEC's premises or verify the nature of expenses reported in the accounts. The failure to investigate the actual electricity consumption and employment details at HEC was highlighted. Additionally, the statement of another director, Shri Krishna Reddy, confirming HEC as a separate unit was not adequately considered. The Tribunal agreed with the Commissioner (Appeals) that reliance on the retracted statement of Shri Jayarama Reddy without considering other evidence was unjustified.

Regarding the clubbing issue, the Tribunal found that adding HEC's turnover to HPCEL's amounted to clubbing, necessitating proper evidence and separate notice to HEC. The lack of a separate notice to HEC was identified as a significant defect in the proceedings. Ultimately, the Tribunal concluded that the Revenue's appeal lacked merit, upholding the impugned order and rejecting the Revenue's appeal.