2018 (6) TMI 314 - AT - Central Excise

Valuation - Job-work - clubbing of clearances - N/N. 214/86 CE dated 25/03/1986 - It appeared to Revenue that the appellant M/s Universal Engineers & Traders is liable to pay Central Excise duty on the turnover and/or clearances of M/s Kailash Industries and further in absence of declaration as required under Notification No. 214/86 CE dated 25/03/1986, the appellant is not entitled to benefit of goods removed under job work without payment of duty and further there is no undertaking given by M/s Kailash Industries to the Jurisdictional Central Excise Officer of M/s Universal Engineers & Traders - denial also on the ground that M/s Universal Engineers & Traders have not declared any receipt of job charges in their books of accounts - benefit of N/N. 83/94 CE. Held that - The appellant and M/s Kailash Industries had led sufficient evidence to the effect that the clubbing provisions are not applicable, as M/s Kailash Industries have got their own independent existence and have been engaged in manufacturing and clearing of goods even prior to establishment of M/s Universal Engineers & Traders - It is evident from the facts that M/s Kailash Industries was set up in 1993 94 whereas the appellant M/s Universal Engineers & Traders had been set up during the period 2001 04, when they started manufacturing and were registered with the Central Excise Department. Further, I find that the clubbing of turnover of M/s Kailash Industries was also bad as M/s Kailash Industries was not to put to notice as to why their turnover should not be added to the turnover of the appellant M/s Universal Engineers & Traders. Benefit under N/N. 83/94 CE - denial on the ground that the declaration was not filed - Held that - The appellant unit is also entitled to the benefit of exemption Notification No. 83/94 CE, as amended as they have fabricated the panel boxes on job work basis for M/s Kailash Industries and the said items is specified for SSI industry. Only for reason they have not filed declaration by Kailash Industries, their exemption cannot be denied. Penalty under Rule 26 on M/s Kailash Industries - Held that - The order of penalty is ab-initio void, as Shri K. C. Gupta-Proprietor had died before passing of the Adjudication Order. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Clubbing of turnover between M/s Universal Engineers & Traders and M/s Kailash Industries.
2. Liability of M/s Universal Engineers & Traders to pay Central Excise duty.
3. Applicability of Notification No. 83/94–CE for job work exemption.
4. Validity of the penalty imposed on M/s Kailash Industries post the death of its proprietor.

Issue-wise Detailed Analysis:

1. Clubbing of Turnover Between M/s Universal Engineers & Traders and M/s Kailash Industries:
The Revenue argued that M/s Universal Engineers & Traders and M/s Kailash Industries should be treated as related persons due to their familial relationship and shared premises, thereby justifying the clubbing of their turnovers. The Tribunal, however, found that both entities had distinct operations, separate workers, and machinery. M/s Kailash Industries had been operational since 1994, whereas M/s Universal Engineers & Traders started later. The Tribunal concluded that the clubbing provisions were inapplicable as both firms demonstrated independent existence and operations.

2. Liability of M/s Universal Engineers & Traders to Pay Central Excise Duty:
The Revenue contended that M/s Universal Engineers & Traders was liable for Central Excise duty on the clearances made by M/s Kailash Industries due to the lack of proper declarations under Notification No. 214/86-CE. The Tribunal found that M/s Kailash Industries had its own purchases, labor expenses, and job work charges, indicating independent business activities. The Tribunal also noted that the appellant was entitled to the benefit of exemption under Notification No. 83/94–CE, as M/s Kailash Industries was an SSI unit and had filed the necessary declarations. Therefore, the demand for Central Excise duty was unfounded.

3. Applicability of Notification No. 83/94–CE for Job Work Exemption:
The Tribunal held that the appellant was eligible for the exemption under Notification No. 83/94–CE, which provides relief for goods manufactured on a job work basis for SSI units. Although M/s Kailash Industries did not file the required undertaking with the Jurisdictional Excise Officer, the Tribunal ruled that this procedural lapse did not warrant the denial of exemption, referencing the precedent set in G.G. Automotive Gears Ltd. v. Commissioner of Central Excise & Service Tax, Indore.

4. Validity of the Penalty Imposed on M/s Kailash Industries Post the Death of Its Proprietor:
The penalty imposed on M/s Kailash Industries under Rule 26 of CER, 2002 was contested due to the death of its proprietor, Shri K. C. Gupta, before the adjudication order was passed. The Tribunal declared the penalty ab-initio void, as penalties cannot be enforced posthumously.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order, and granted consequential benefits to the appellant. The decision emphasized the independent status of both entities, the procedural nature of the exemption requirements, and the invalidity of penalties imposed after the death of the responsible individual.