2018 (9) TMI 557 - AT - Central Excise

SSI Exemption - crossing of threshold limit - Job-work - Held that - Since the job work goods is used in the manufacture of edible oil by the principal which is exempted from payment of Excise Duty, the appellant, being job worker, is not entitled for job work exemption notification as per 214/86-CE dated 25/03/86. Therefore, value of clearance job work goods should be included in the overall clearance value. It is observed that the appellant have exceeded the SSI Exemption Limit of ₹ 1 crore. Therefore, appellant is liable to pay duty on the value exceeded to the exempted limit - penalty on Director id also maintained. Appeal allowed in part.

Summary

Issues:
1. Whether the value of job work goods exceeding the threshold limit of 1 crore is liable for payment of excise duty by the appellant.
2. Whether the appellant is entitled to job work exemption notification.
3. Whether the penalty imposed under section 11AC should be reduced.
4. Whether the penalty imposed on the director is justified.

Analysis:

1. The appellants were involved in the manufacture of Plastic jars on a job work basis for certain principals. The issue arose when the value of clearance of job work goods exceeded the threshold limit of 1 crore as per SSI exemption. The department contended that the value exceeding 1 crore made the appellant liable for payment of excise duty. A Show Cause Notice was issued, and the demand was confirmed, including the imposition of a penalty under section 11AC. The appellant's appeal was rejected by the Commissioner (Appeals), leading to the present appeal.

2. The Tribunal considered the submission made by the Revenue and examined the records. It was observed that since the job work goods were utilized in the manufacture of edible oil by the principal, which was exempted from excise duty, the appellant, as the job worker, was not entitled to job work exemption notification as per 214/86-CE dated 25/03/86. Consequently, the value of clearance of job work goods was required to be included in the overall clearance value. As the appellant had exceeded the SSI Exemption Limit of 1 crore, they were held liable to pay duty on the value that exceeded the exempted limit. The Tribunal upheld the demand of duty along with interest.

3. Regarding the penalty imposed under section 11AC, the Tribunal noted that the adjudicating authority had not granted the option of 25% penalty available in the proviso of section 11AC. Citing the ratio of a Supreme Court judgment, the Tribunal decided to reduce the penalty to 25%, provided that the duty, interest, and 25% penalty were paid within one month from the date of the order.

4. As for the penalty imposed on the director, it was upheld by the Tribunal. Since there was no dispute regarding the demand of duty, the director, who was directly involved in the company's affairs, was deemed responsible for the non-payment of duty. The penalty on the director was maintained, while the appeal of the company was partly allowed under certain conditions. However, the appeal of the director was dismissed.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision on each aspect of the case.