2018 (10) TMI 635 - AT - Central Excise

Tribunal overturns excise duty demand due to lack of evidence, emphasizes need for concrete proof

The tribunal held that the department failed to prove the appellant's manufacturing of scaffoldings/propping equipment, setting aside the order and ... SSI exemption - scaffoldings / propping equipments supplied to some of the construction companies on job work basis - case of appellant is that they have not undertaken any manufacture of goods and in fact the goods are manufactured by the job workers - Held that:- There is no mahazar drawn up to show that there were any machinery at the premises at the time of inspection. It is also not noted anywhere whether there were raw materials or finished products in the said premises of M/s. Lakshmi Scaff and Vel Scaff on the date of inspection i.e. 8.12.2006. If the department had conducted inspection in the premises, they should have drawn up a mahazar showing the stock of raw materials and finished products lying in the premises. So also the activities carried out in the premises should reflect in the documents prepared at the time of inspection. There is nothing to show that there were machines in the premises or raw materials and finished products. There is no evidence put forth by the department to show whether the appellant had engaged any labourers in the premises for carrying out the manufacturing activity. From the statement, not supported by any document, the adjudicating authority has vaguely presumed that Shri A. Ganesan has manufactured the impugned goods. The statement given by Shri A. Ganesan does not put forth any evidence that he has manufactured such goods. It is for the department to establish the clandestine manufacture of goods by the appellant. In the present case, the department has failed to draw up panchanama during the date of visit so as to establish that the appellant was manufacturing goods in the premises. Further, there is no evidence to show that he had engaged labourers for manufacture and supply of such huge quantity of goods - the strong probability is that the appellant had procured the goods from job workers for supply to the construction companies. Demand do not sustain - appeal allowed - decided in favor of appellant. Issues Involved:1. Alleged manufacture and supply of scaffoldings/propping equipment.2. Liability to pay central excise duty.3. Evidence of manufacturing activity.4. Role of job workers in manufacturing.5. Extended period of limitation.6. Validity of the show cause notice and investigation process.Issue-wise Detailed Analysis:1. Alleged Manufacture and Supply of Scaffoldings/Propping Equipment:The appellant, a proprietor of two firms, was accused of manufacturing and supplying scaffoldings/propping equipment without registering with the Central Excise Department. The Preventive Unit of Central Excise visited the factory premises and issued a show cause notice demanding central excise duty of Rs. 1,32,04,174/- along with interest and penalties.2. Liability to Pay Central Excise Duty:The department argued that the appellant was liable to pay central excise duty as the value exceeded the SSI exemption limit. The appellant contended that the manufacturing was done by independent job workers and not by them directly. The appellant did not possess the required machinery, nor was there any evidence of such machinery at their premises.3. Evidence of Manufacturing Activity:The adjudicating authority confirmed the demand based on the sale value mentioned in the appellant's records. However, the appellant argued that there was no panchanama drawn to evidence the presence of machinery or raw materials at their premises. The investigation lacked corroborative evidence to prove that the appellant engaged in manufacturing activities.4. Role of Job Workers in Manufacturing:The appellant provided affidavits from job workers who confirmed they performed the manufacturing. The department cross-examined these job workers but found no contrary evidence. The department dismissed these affidavits as doubtful, but the tribunal found that the job workers' statements, supported by cross-examination, indicated they were indeed responsible for the manufacturing.5. Extended Period of Limitation:The appellant argued that the extended period of limitation could not be invoked as they were not involved in manufacturing and thus not required to register with the Central Excise Department. The department alleged suppression of facts, but the tribunal found no substantial evidence to support this claim.6. Validity of the Show Cause Notice and Investigation Process:The tribunal noted several deficiencies in the investigation process, including the lack of evidence to show the presence of machinery or raw materials at the appellant's premises. The tribunal emphasized that the department failed to establish that the appellant engaged in manufacturing activities. The appellant's role was limited to supplying goods procured from job workers.Judgment:The tribunal concluded that the department failed to prove that the appellant manufactured the goods. The impugned order was set aside, and the appeal was allowed with consequential relief. The tribunal held that the evidence presented by the department was insufficient to sustain the demand for excise duty.Conclusion:The tribunal highlighted the importance of concrete evidence in establishing manufacturing activities and the liability to pay excise duty. The lack of a proper investigation and reliance on assumptions and presumptions led to the dismissal of the department's claims against the appellant.