2019 (6) TMI 263 - AT - Central Excise

Tribunal decision on Cable Filling Compound classification & turnover adjustments

M/s Venkateswara Industrial Products P Ltd, C. Ramdas, Director, M/s Venkateswara Industrial Paint Industry, C. Meera Ramdas, Director, G. Muthyalu, Production-in-Charge, Ramchem Versus Commissioner of Central Excise, Customs & Service Tax, Hyderabad – III

M/s Venkateswara Industrial Products P Ltd, C. Ramdas, Director, M/s Venkateswara Industrial Paint Industry, C. Meera Ramdas, Director, G. Muthyalu, ... Issues Involved:1. Classification of Cable Filling Compound (CFC) and Cable Cleaning Compound (CCC).2. Clubbing of turnover of VIPPL with VIPI, Newton, and AEI.3. Demand of duty and imposition of penalties and fines under various show cause notices.4. Allegations of clearances without payment of duty, undervaluation, and maintenance of separate records.Issue-wise Detailed Analysis:1. Classification of Cable Filling Compound (CFC) and Cable Cleaning Compound (CCC):The primary issue was the classification of CFC and CCC. The appellants claimed that CFC should be classified under Chapter heading 3403, which would make it exempt from duty under Notification 287/1986. The Commissioner classified CFC under Chapter heading 3823, making it ineligible for the exemption. The Tribunal upheld the Commissioner’s classification, noting that the essential characteristic of CFC was that of a sealant, not a lubricant, and thus it did not fall under Chapter heading 3403. Consequently, the exemption under Notification 287/1986 was not applicable.2. Clubbing of Turnover of VIPPL with VIPI, Newton, and AEI:The department alleged that VIPPL, VIPI, Newton, and AEI were not separate entities but were operating from the same premises, making VIPPL the actual manufacturer. The Tribunal found that VIPI was a separate entity, as admitted by the department in a subsequent show cause notice. Thus, the turnover of VIPI should be deducted from the total turnover for the demand calculation. However, Newton and AEI were considered dummy units, and their turnover was rightly clubbed with that of VIPPL.3. Demand of Duty and Imposition of Penalties and Fines:- Show Cause Notice No. 150/92: The demand of Rs. 7,51,833/- was confirmed, with penalties and fines imposed on VIPPL and its Director. The Tribunal upheld the demand after deducting the turnover of VIPI and treating non-duty paid clearances as cum-duty clearances. The penalties and fines were set aside.- Show Cause Notice No. 184/94: The demand of Rs. 13,62,382/- from VIPI and Rs. 3,17,958/- from VIPPL was confirmed. The Tribunal upheld the demand against VIPI for clubbing the clearances of AEI but dropped the demand based on the difference between private registers and RT-12 returns, undervaluation, and other grounds due to lack of evidence. The demand against VIPPL was set aside due to insufficient evidence.4. Allegations of Clearances Without Payment of Duty, Undervaluation, and Maintenance of Separate Records:- Clearances Without Payment of Duty: The Tribunal upheld the demand for clearances made by VIPI and AEI, considering AEI a dummy unit.- Undervaluation: The demand based on undervaluation was not substantiated due to lack of corroborative evidence.- Maintenance of Separate Records: The difference between private registers and RT-12 returns was not sufficient to prove clandestine removal, leading to the dropping of the demand on this ground.Conclusion:- The classification of CFC under Chapter heading 3823 was upheld, and the exemption under Notification 287/1986 was denied.- The turnover of VIPI was deducted from the total turnover, but the turnover of Newton and AEI was clubbed with VIPPL.- The demand against VIPPL under Show Cause Notice No. 150/92 was upheld with adjustments, and penalties and fines were set aside.- The demand against VIPI under Show Cause Notice No. 184/94 was partly upheld, and penalties and fines were set aside.- The demand against VIPPL under Show Cause Notice No. 184/94 was set aside due to lack of evidence.- The matter was remitted to the original authority for recalculating the differential duty.(Order pronounced in the open court on 04.06.2019)