Custom, Excise & Service Tax Tribunal
Cce, Delhi-I vs M/S. Hi-Tech Electronics Industries on 12 May, 2010
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No. 2, R.K. Puram, NEW DELHI COURT No. I CENTRAL EXCISE APPEAL NO. 2265 to 2267 OF 2002 [Arising out of Order-in-Appeal No. 890-893-CE/DLH/2001 dated 24.9.2001 passed by the Commissioner (Appeals), Central Excise, New Delhi] CENRAL EXCISE APPEAL NO. 5546-5547 OF 2004 [Arising out of Order-in-Appeal No. 277-78-CE/DLH/2003 dated 27.6.2003 passed by the Commissioner (Appeals), Central Excise, New Delhi] Dated of hearing/decision: 12th May, 2010 For approval and signature: Honble Shri Justice R.M.S. Khandeparkar, President; Honble Shri Rakesh Kumar, Member (Technical) 1. Whether Press Reporters may be allowed to see the order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair copy of the order? 4. Whether order is to be circulated to the Departmental authorities? E/2265 to 2267/02 CCE, Delhi-I Appellant Vs. M/s. Hi-Tech Electronics Industries, M/s. Jeet Enterprises, M/s. Khandhari Separators Industries Respondents E/5546-5547/04 M/s. Hi-Tech Electronics Industries, Shri Avtar Singh Appellants Versus CCE, Delhi-I Respondent Appearance: Shri Amrish Jain, Authorised Representative (SDR) for the Revenue; None for the assessees Coram: Honble Shri Justice R.M.S. Khandeparkar, President; Honble Shri Rakesh Kumar, Member (Technical) ORAL ORDER NO._________________ dated __________
Per JUSTICE R.M.S. KHANDEPARKAR:
Since the common question of law and the facts involved in all these appeals they were taken up together for hearing and are being disposed of by this common order.
2. We have heard learned D.R. and perused the records. None has appeared for the assessees.
3. In all these appeals the point which arises for consideration is whether three different enterprises by name Kandhar Separators Industries, Jeet Enterprises and Hi-Tech Electronics Industries could be treated as the independent units for the purpose of levy of excise duty under the Central Excise Act, 1944 in relation to the goods namely KRC brand Accumulators manufactured at plant and machinery situated at the premises, B-103, Naraina Industrial Area, Phase-I, New Delhi owned by M/s. Kandhari Radio Corporation.
4. Few facts relevant for the decision are that pursuant to the information received by the department that Kandhari Radio Corporation is involved in manufacturing and clearance of Accumulators without taking central excise registration and by evading the duty, the investigation was carried out, including search of premises. It was revealed that at the premises at 114, Bhagat Singh Market, New Delhi, there were offices of four different units including that of Kandhari Radio Corporation, other units being Kandhari Separators Industries, Jeet Enterprises and Hi-Tech Electronics Industries. All these units were engaged in the manufacture and sale of Accumulators. The entire manufacturing activity was done at B-103, Naraina Industrial Area, Phase-I, New Delhi. The accumulators so manufactured were bearing brand name KRC which belonged to Kandhari Radio Corporation. The investigation also revealed that in the course of clearance of the goods, the units were seeking benefit of exemption notification No. 1/93-CE dated 28.2.1993 (as amended). Show cause notices came to be issued to the said units as well as the authorized signatory Shri Avtar Singh. The adjudicating authority, after hearing the parties, confirmed the demand as per the show cause notice. Being aggrieved M/s. Kandhar Separators Industries, M/s. Jeet Enterprises and Shri Avtar Singh filed appeals before the Commissioner (Appeals) which came to be disposed of by the common order dated 24.9.2001 and the appeals filed by M/s. Hi-Tech Electronics Industries and Shri Avtar Singh, authorized signatory of the said firm came to be disposed of by order dated 27th June, 2003. Since the appeals filed by M/s. Jeet Enterprises, M/s. Kandhari Separators Industries and Shri Avtar Singh were partly allowed, the Department is in appeal against the same where as M/s. Hi-Tech Electronics Industries and Shri Avtar Singh are in appeal as far as Commissioner (Appeals) dismissed their appeals.
5. The Commissioner (Appeals) while allowing the appeals filed by M/s. Jeet Enterprises, M/s. Kandhari Separators Industries and Shri Avtar Singh has held that the evidence on record discloses that M/s. Kandhari Radio Corporation had the entire infrastructure, plant and machinery to manufacture accumulators but the other units did not have such infrastructure. Therefore, the goods are to be held as having been manufactured in a common factory premises and merely because the documentary materials disclose manufacture of the product by different units separately at the same place, they cannot be held to be liable independently for the excise duty under the said Act and the entire production is to be held to have been done by M/s. Kandhari Radio Corporation who is to be considered as the manufacturer and considering the same it cannot be held that the other units were manufacturing the goods with brand name of other person and, therefore, M/s. Kandhari Radio Corporation was entitled for the benefit of the exemption notification No. 1/93 dated 28.2.1993, and consequently, the duty liability of M/s. Kandhari Radio Corporation is Rs. 3,72,769/- for the period from March, 1995 to March, 1998. It has also been held that the proceedings ought to have been initiated against M/s. Kandhari Radio Corporation rather than against M/s. Jeet Enterprises and Kandhari Separators Industries and the entire duty liability is only on M/s. Kandhari Radio Corporation to whom no show cause notice was issued.
6. While dismissing the appeals filed by M/s. Hi-Tech Electronics Industries the Commissioner (Appeals) has held that the four units were separate and independent units and each one of them had separate independent records and were dealing with the goods in their own name as the manufacturer and not as a trader of those goods by using brand name/trade name of another person namely Kandhari Radio corporation on such goods and there is nothing on record to indicate that the goods cleared by those units were either purchased or otherwise obtained by them from Kandhari Radio Corporation and all the documentary material on record clearly reveal the separate identity and manufacture of goods independently by them.
7. Perusal of the records discloses that the Commissioner (Appeals) while upholding the contention of the assessees while dealing with the matters of M/s. Jeet Enterprises and Kandhari Separators Industries has clearly referred to the statement of Shri Avtar Singh. Shri Avtar Singh is undisputedly authorized signatory of all these firms. The statement discloses a clear admission on the part Shri Avtar Singh that though the entire infrastructure, plant and machinery belongd to Kandhari Radio Corporation, the same was used independently by each of those units for manufacture of their product in the brand name KRC in order to obtain certain benefits. It has been admitted by Shri Avtar Singh as well as the Accountant of Kandhari Radio Corporation, by name Shri Roshan Verma that separate plots were allotted to each of those units and they had separate sales tax registration and had been filing separate income tax returns. Undoubtedly, all the four units were family concerns of Shri Avtar Singh who was managing the entire show. In other words, the records clearly disclose that the manufacturing activity in relation to the product in question was carried out independently by each unit by using plant and machinery of M/s. Kandhari Radio Corporation.
8. Section 2(f) of Central Excise Act defines the term Manufacture and the Manufacturer. It provides that the term Manufacture includes any process, incidental or ancillary to the completion of a manufactured products which is specified in relation to any goods in the Section or Chapter notes of the First Schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture or any process which in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer, and the word manufacturer shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account.
9. The statutory provision comprise in Section 2(f) of the said Act makes abundantly clear that to be a manufacturer one need not necessarily own the machinery. Even use of machinery of others for the purpose of production can qualify the person or firm to be a manufacturer within the meaning of the said expression under the said Act. It is pertinent to note that the adjudicating authority after taking note of the statement of Shri Avtar Singh in respect of formation of four different units to avail various benefits and thereafter trying to evade the duty by illegally seeking to avail exemption benefit under the said notification, which he was not entitled to avail, had clearly observed that the doctrine of approbate and reprobate is clearly attracted in the facts of the case and the party having formed four different independent units, now cannot turn around and say that they would be entitled for the benefit of exemption as if the production is by one unit only. We fail to understand as to how the Commissioner (Appeals) could arrive at a conclusion that it was the production by only one unit merely because the machinery belongs to one unit. Once the statutory records maintained by the parties clearly disclosed independent manufacture of the goods by using the machinery belonging to only one unit, in the absence of any other cogent and admissible material to show that the entire production was by only one unit i.e. Kandhari Radio Corporation, the Commissioner (Appeals) has erred in granting the benefit of exemption notification to such production.
10. The department is justified in contending that the Commissioner (Appeals) clearly erred in granting the benefit and has travelled beyond the scope of show cause notice. The subject matter of the show cause notice was restricted to find out whether the three units were manufacturing the goods in the brand name of fourth unit namely Kandhari Radio Corporation and if so they were illegally availing the benefit of the said notification. Rather than analyzing the entire materials on record the Commissioner (Appeals) clearly travelled beyond the scope of show cause notice and erred in holding that liability in matter lies upon Kandhari Radio Corporation and not on the respondent assessees. The Order in that regard cannot be sustained.
11. For the reasons stated above, we find no infirmity in the order passed by the Additional Commissioner on the point of independent production by each of the units. The Commissioner (Appeals) was not justified in reducing the penalty. In the result, the appeals filed by the department succeed and the impugned order is hereby set aside and the order passed by the adjudicating authority is restored. The appeals filed by M/s. Hi-Tech Electronics Industries and Shri Avtar Singh are dismissed.
(JUSTICE R.M.S. KAHDEPARKAR) PRESIDENT (RAKESH KUMAR) MEMBER (TECHNICAL) RK ??
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