2018 (7) TMI 423 - AT - Central Excise

Liability of duty on Glass tubes - captive consumption - case of appellant is that Glass Tubes were being manufactured by them by Mouth Blowing process, which was exempted under N/N. 6/2002-CE dated 01.03.2002 - Statement of employee of the appellant, is to the effect that the manufacturing unit has started using the compressor from 01.04.2007 and prior to the said date, Glass Tubes were being manufactured by Mouth Blowing process. Held that - Admittedly, the appellant has produced a bill dated 31.03.2007 issued by Rathi Industries, showing the sale purchase of the compressor. The adjudicating authority has simpliciter dismissed the same on the ground that the same was purchased on the last date of the financial year and as such, was manipulated - Revenue has not bothered to investigate at the end of the seller of the compressor so as to find out the fact as to whether the compressor was actually sold on the said date or not. There is also no restriction on sale purchase activities on the last date of financial year. No investigation was made by revenue, in which case the bill produced by the appellant has to be accepted as the correct reflection of facts. The manufacturing process in their unit have been done with the help of the compressor only with the effect from 01.04.2007, inasmuch as there is no other contrary evidence reflecting on the fact that compressor was being used in the factory prior to the said date - prior to 01.04.2007 the appellant was using Mouth Blowing process for the manufacture of the Glass Tubes, which process granted them exemption in terms of N/N. 06/2002. Manufacture of the Glass Tubes with effect from 01.04.2007 with the help of the compressor - the appellant claims that he would be entitled to SSI Exemption in which case no duty liability would arise on them - Held that - For verification of the appellants said claim, which is dependent upon the computation of the clearances in a financial year, the matter remanded to the adjudicating authority to examine these facts - matter on remand. The penalty imposed on both the appellants set aside. Appeal disposed off.

Summary

Issues:
Manufacture of Glass Beads exempted from duty, manufacture of Glass Tubes, duty liability on Glass Tubes, use of compressor, extended period of limitation, duty demand, exemption notification, purchase of compressor, evidence of manufacturing process, imposition of penalties, SSI Exemption claim.

Manufacture of Glass Beads Exempted from Duty:
The appellants were engaged in the manufacture of Glass Beads exempted from excise duty. Glass Tubes were a by-product in this process, and the appellants claimed exemption for Glass Tubes manufactured using Mouth Blowing process under Notification No.6/2002-CE. However, Central Excise officers found the use of a compressor for manufacturing Glass Tubes, leading to a duty demand for the period from April 2003 to July 2007.

Duty Liability on Glass Tubes:
The Revenue alleged that Glass Tubes, not manufactured by Mouth Blowing process, were dutiable as they were used for producing an exempted product. A show cause notice was issued in 2008, raising a duty demand for Glass Tubes. The appellant argued that Glass Tubes were manufactured by Mouth Blowing process before the purchase of the compressor.

Purchase of Compressor and Manufacturing Process Evidence:
During adjudication, the appellant claimed to have purchased the compressor on 31.03.2007, and Glass Tubes were manufactured using Mouth Blowing process before that date. Evidence presented included a compensation suit filed by an employee and statements of workers supporting the use of Mouth Blowing process. The Adjudicating Authority questioned the authenticity of the compressor purchase bill and rejected the appellant's claims.

Evidence of Manufacturing Process and Exemption Claim:
The Tribunal found evidence supporting the use of Mouth Blowing process before the purchase of the compressor. Statements from employees and documents related to labor suits indicated the historical use of Mouth Blowing process. The Tribunal criticized the Adjudicating Authority's dismissal of evidence and lack of investigation into the compressor purchase.

SSI Exemption Claim and Penalty Imposition:
The Tribunal agreed with the appellants that Glass Tubes were manufactured using a compressor only from 01.04.2007, entitling them to exemption before that date. The matter was remanded to verify the SSI Exemption claim. The penalties imposed on the appellants were set aside, and both appeals were disposed of accordingly.