2019 (9) TMI 1216 - AT - Central Excise

SSI exemption - clubbing of clearances - whether the value of the clearances of the Appellant M/s Durable Drums, be added to the value of clearance of M/s Machine Crafters in computing the aggregate value of the clearances for the period 2000-2001 in extending the benefit of SSI exemption? HELD THAT - There is no dispute of the fact that during the relevant period, M/s Machine Crafters were the manufacturer of excisable goods viz. slotted angles/brackets etc. The said finished goods emerge after carrying out the processes of shearing, punching, bending, welding and painting. It is the contention of M/s Machine Crafters that except painting and the process of bending, all other processes were carried out on job work basis from various job workers by sending the raw materials to them. Similar is the situation with M/s Durable Drums. In the premises of M/s Durable Drums, only facility for painting was available and all other processes in similar way were carried out on job work basis by them. The above processes were carried out on job work basis by sending the raw materials to various job workers has been fairly established by the Appellant M/s Machine Crafters, enclosing the relevant challans sending raw materials and receipt of the processed goods, in the appeal paper book. Benefit of N/N. 83/94-CCE and No.84/94-CE available to SSI unit - denial on the ground that the Appellant M/s Durable Drums did not have the manufacturing facility other than the process of painting - HELD THAT - It cannot be denied that the process of painting is the ultimate and final process which makes the product marketable and hence, it is the process ancillary and incidental to manufacture of the finished goods, hence M/s Durable Drums also is a manufacturer and eligible to the benefit of said Notification. Demand do not sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
Determining whether the value of clearances of M/s Durable Drums should be added to M/s Machine Crafters for computing the aggregate value of clearances under SSI exemption notifications for the relevant period.

Analysis:
The case involved four appeals against an order passed by the CCE (Appeals), Mumbai-I, related to the manufacturing activities of M/s Machine Crafters during 2000-2002. The issue arose when it was alleged that M/s Durable Drums, another company, got goods manufactured at the premises of M/s Machine Crafters, leading to a demand for unpaid duty, interest, and penalties. The Appellants contended that both entities were independent manufacturers, and the processes were carried out on job work basis. The Appellants provided evidence of sending raw materials to job workers for various processes, challenging the clubbing of clearances of both units for SSI exemption calculations.

The Appellants argued that M/s Durable Drums had a separate legal existence and engaged in different manufacturing activities compared to M/s Machine Crafters. They highlighted that most processes were outsourced to job workers, and the Department had acknowledged M/s Durable Drums as an independent unit. The Appellants emphasized that the process of painting was incidental to manufacturing and covered under relevant notifications, thus rejecting the notion of adding M/s Durable Drums' clearances to M/s Machine Crafters.

On the contrary, the Revenue argued that since most machinery was in M/s Machine Crafters' premises, all goods were manufactured there, justifying the inclusion of M/s Durable Drums' clearances for SSI exemption calculations. The Revenue emphasized that M/s Durable Drums lacked manufacturing facilities beyond painting, leading to the denial of the notification benefits.

The Tribunal analyzed the facts and evidence, concluding that the processes were outsourced to job workers by both entities, and the process of painting was crucial for product marketability. The Tribunal rejected the clubbing of clearances, stating that M/s Durable Drums was also a manufacturer eligible for the notification benefits. The Tribunal found no evidence to support the claim that M/s Durable Drums was a dummy unit or controlled by M/s Machine Crafters, ultimately setting aside the impugned order and allowing the appeals with consequential relief.

In summary, the judgment addressed the issue of whether the clearances of M/s Durable Drums should be added to M/s Machine Crafters for SSI exemption calculations. It emphasized the independent existence of both entities, the outsourcing of processes to job workers, and the significance of the painting process in manufacturing. The Tribunal ruled in favor of the Appellants, rejecting the clubbing of clearances and affirming M/s Durable Drums' eligibility for notification benefits.