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CX -8/2003-CX – Adding value of clearances made to 100% EOU in computing aggregate value of clearances for home consumption of DTA Unit is contrary to law: CESTAT

2019-TIOL-2518-CESTAT-MUM

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH, MUMBAI
COURT NO. I

Appeal No. E/924/2011

Arising out of Order-in-Appeal No. YDB/202/M-II/2011, Dated: 08.03.2011
Passed by the Commissioner of Central Excise (Appeals), Mumbai-II

Date of Hearing: 15.02.2019
Date of Decision: 15.02.2019

M/s HALLMARK ENGINEERS

Vs

COMMISSIONER OF CENTRAL EXCISE
MUMBAI-II

Appellant Rep by: Shri Rajeev Gupta, Consultant 
Respondent Rep by: Shri N N Prabhudesai, Supdt. (AR)

CORAM: D M Misra, Member (J)
P Anjani Kumar, Member (T)

CX – Issue is whether for the financial years from 2004-05 to 2007-08, the appellant had exceeded the SSI exemption limit of Rs.1.00 crore and Rs.1.50 crore, as the case may be, applicable for the respective financial years, prescribed under notification no.08/2003-CE dated 1.3.2003, as amended.

HELD: There is no dispute of the fact that the appellant had cleared the intermediate product, namely “casing”, to their sister concern, a 100% EOU, against delivery challans-cum-invoices, which are duly recorded in the Books of Accounts of both the Units – also, it is not in dispute that the said casings were used in the manufacture of final products by the 100% EOU, and the finished goods were ultimately exported by the said 100% EOU, and the said facts had not been challenged – As per clause (3A) of the Notification no. 08/2003-CE dt. 1.3.2003 as amended, in determining the aggregate value of clearances of all excisable goods for home consumption, the value of clearances of goods to 100% EOU cannot be taken into consideration – therefore, adding the value of clearance made to 100% EOU in computing the aggregate value of clearances for home consumption of the DTA Unit is contrary to the position of law and, accordingly, unsustainable – also, in their own case for subsequent period, the Commissioner (Appeals) as well as the adjudicating Addl. Commissioner have decided the issue in their favour – in these circumstances, no merit found in the impugned order, consequently the same is set aside and the appeal is allowed : CESTAT [para 7, 8]

Appeal allowed

Case laws cited:

Commissioner of Central Excise, New Delhi Vs. Hari Chand Shri Gopal – 2010-TIOL-95-SC-CX-CB… Para 4

Indian Oil Corporation Ltd. Vs. Commissioner of Central Excise, Vadodara – 2012-TIOL-04-SC-CX… Para 4

Commissioner of Customs (Import), Mumbai Vs. Dilip Kumar & Co. – 2018-TIOL-302-SC-CUS-CB… Para 4

FINAL ORDER NO. A/85731/2019

Per: D M Misra:

This is an appeal filed against Order-in-Appeal No. YDB/202/M-II/2011 dated 08.03.2011 passed by the Commissioner of Central Excise (Appeals), Mumbai-II.

2. Briefly stated the facts of the case are that the appellant had been engaged in the manufacture of excisable goods namely, Tungsten Carbide Tools, Casings falling under Chapter 72 of the Central Excise Tariff Act, 1985. They had been availing SSI exemption under Notification No. 8/2003-CE dated 1.3.2003. During the relevant period they had cleared the intermediate product namely, Casing to their sister concern, an 100% EOU situated at Saki Vihar Road, Mumbai against invoice cum delivery challans. The value of the clearances made to their sister concern since not included in computing the aggregate value of clearance of all excisable goods in computing the exemption limit of prescribed under SSI exemption Notification 08/2003 CE dt.1.3.2003, show-cause cum demand notice was issued for recovery of the duty short paid amounting to Rs.18,34,999/- for the period, 2004-05, 2005-06, 2006-07 and 2007-08 with interest and penalty. On adjudication, the demand was confirmed with interest and penalty. Aggrieved by the said order, they filed an appeal before the learned Commissioner (Appeals), who in turn rejected their appeal. Hence, the present appeal.

3. Learned Consultant Shri Rajiv Gupta for the appellant submits that during the relevant period, the appellant had cleared, the intermediate product casing to their sister concern, an 100% EOU against transfer challan cum invoices. In support, he has referred to transfer challan cum invoice issued in favour of the 100% EOU. He has further submitted that in the show-cause notice itself it has been alleged that all the clearances were made by the appellant’s DTA unit to their 100% EOU, but the duty was demanded on the ground that no proper CT-3 certificates were prepared and the clearances were not made against said CT-3 certificate; besides proper Central Excise invoices were not prepared in accordance with Rule 11 of the Central Excise Rules, 2002. It is his contention that the total quantity of casing manufactured and cleared from the appellant’s DTA unit are duly recorded in their Books of Account and the said intermediate products had been used in the 100% EOU in the manufacture of finished goods ultimately exported. During the course of investigation, the authorized signatory of the appellant Shri P.K. Agarwal categorically stated that the clearances to their 100% EOU were made against transfer Challan cum invoices, a fact not disputed in the showcause notice. It is his further contention that there was no investigation at the end of the 100% EOU nor there is any allegation that the goods cleared by the appellant’s DTA unit had been diverted and not utilized in the manufacture of the finished goods by their 100% EOU, which ultimately exported. It is his contention that since the appellant’s DTA unit is an SSI unit, therefore, the procedures for maintaining records has not been strictly followed. He has further submitted that the value of clearances from DTA Unit to the 100% Unit have been duly recorded in their Books of Accounts at their DTA unit as well as in their 100% unit, therefore, the allegation that clearances were made without reflecting the same in the records of the their DTA unit is incorrect. He has further submitted for the subsequent period Ld. Commissioner (Appeals) vide Order Nos. US/89 & 90/M-II/2013 dt. 26.3.2013 has decided the issue in their favour and also the Addl Commissioner vide order dt.28.2.2014 dropped the proceeding initiated against them.

4. Per contra, the learned AR for the Revenue reiterates the findings of the learned Commissioner (Appeals). He submits that since the benefit of exemption notification is issue for consideration, therefore, while extending its benefit to the appellant, the same should be strictly construed. In support, he has referred to the various decisions of the Hon’ble Supreme Court, namely: – (i) Commissioner of Central Excise, New Delhi Vs. Hari Chand Shri Gopal – 2010 (260) ELT 3 (SC) 2010-TIOL-95-SC-CX-CB; (ii) Indian Oil Corporation Ltd. Vs. Commissioner of Central Excise, Vadodara – 2012 (276) ELT 145 (SC) 2012-TIOL-04-SC-CX; (iii) Commissioner of Customs (Import), Mumbai Vs. Dilip Kumar & Co. – 2018 (361) ELT 577 (SC) = 2018-TIOL-302-SC-CUS-CB.

5. Heard both sides and perused the records.

6. We have carefully considered the submissions advanced by both sides. The short issue involved in the present appeal for determination is whether for the financial years from 2005- 06 to 2007-08, the appellant had exceeded the SSI exemption limit of Rs.1.00 crore and Rs.1.50 crore, as the case may be applicable for the respective financial year, prescribed under Notification No.08/2003 CE dt.01.3.2003, as amended. The show-cause notice proposed to add the value of clearance made by the appellant’s DTA unit to their 100% EOU, solely on the ground that the goods were cleared without proper documents, invoices but under delivery challans. There is no dispute of the fact that the intermediate goods viz. casing is which were duly received in their 100% EOU. As per clause (3A) of the Notification no. 08/2003CE dt. 1.3.2003 as amended, in determining the aggregate value of clearances of all excisable goods for home consumption, the value of clearances of goods to 100% EOU cannot be taken into consideration. The said clause (3A) of Notification No. 08/2003CE reads as follows: –

“3A. For the purposes of determining the aggregate value of clearances of all excisable goods for home consumption, mentioned in clause (vii) of paragraph 2 of this notification, the following clearances shall not be taken into account, namely: –

(a) Clearance of excisable goods without payment of duty –

(i) to a unit in a free trade zone; or

(ii) to a unit in special economic zone;

(iii) to a hundred percent, export oriented undertaking; or

(iv) to a unit in an Electronic Hardware Technology Park or Software Technology Park; or.”

7. In the present case, there is no dispute of the fact that the appellant had cleared the intermediate product, namely “casing”, to their sister concern an 100% EOU against delivery challans-cum-invoices, which are duly recorded in the Books of Accounts of both the Units. Also, it is not in dispute that the said casings were used in the manufacture of final products by their 100% EOU, and the finished goods were ultimately exported by the said 100% EOU, and the said facts had not been challenged. Therefore, adding the value of clearance made to 100% EOU in computing the aggregate value of clearances for home consumption of the DTA Unit is contrary to the position of law and accordingly unsustainable. Also, in their own case for subsequent period, the learned Commissioner (Appeals) as well as the adjudicating Addl. Commissioner have decided the issue in their favour.

8. In these circumstances, we do not find merit in the impugned order, consequently the same is set aside and the appeal is allowed with consequential relief, if any, as per law.

(Operative portion of the order pronounced in Court)

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