2022 (2) TMI 58 - AT - Central Excise

Tribunal: SSI Exemption Upheld for M/s Pap-Flon Enterprise

Pap Flon Engineering Co Pvt. Ltd., Manish R Parmar and Mukesh M Mistry Versus C.C.E. -Ahmedabad-I

The Tribunal held that M/s Pap-Flon Enterprise is eligible for excise duty exemption under SSI Notification No. 8/2003-CE as an existing manufacturer. It ... SSI Exemption - clubbing of clearances - existing manufacturer eligible for excise duty or not - clubbing of their clearances with M/s Pap-Flon Engineering Co.Pvt. Ltd - Show Cause Notice dated 18-10-2010 was issued within permitted time limitation for period from 1-4-2005 to 30-09-2010 or otherwise - whether M/s Pap-Flon Enterprise is existing manufacturer eligible for duty exemption benefits claimed under SSI Notification No. 8/2003-CE or not? - penalty u/r 27 of CER, 2002 - HELD THAT:- In the facts of this case, it is found that M/s Pap Flon Enterprise is an existing manufacturer eligible to avail SSI Exemption of Notification No. 8/2003-CE, having separate factory, machinery, PAN, Sales Tax, IEC, Professional Tax, ESIC Numbers, separate Electricity Meters and separate Bank Accounts - Tribunal’s decision in the case of M/S ALPHA CONVERTING MACHINES PVT. LTD., RAJAN M DAVID VERSUS C.C.E. – AHMEDABAD-I [2018 (9) TMI 271 - CESTAT AHMEDABAD] is on different facts of only dummy units and hence it is not applicable in the facts of this case. The ratio of decisions is that dummy units created to avail ineligible SSI benefits may not get ineligible benefits of SSI Notification, but benefits to existing units can not be denied the SSI Exemption, if available otherwise. Therefore, clubbing of clearances of M/s Pap Flon Enterprise, who is existing manufacturer and eligible for SSI Exemption, with clearances of M/s Pap Flon Engineering is not justified. Whether Show Cause Notice to M/s Pap-Flon Enterprise proposing for denial of SSI exemption claimed and proposing clubbing of their clearances with M/s Pap-Flon Engineering Co.Pvt. Ltd was required to be issued or otherwise? - HELD THAT:- M/s Pap-Flon Enterprise is an existing manufacturer who is eligible for duty exemption claimed under SSI Notification No. 8/2003-CE and considering the relied upon decisions, the submissions of Appellants is agreed upon, that Show Cause Notice should have been issued to M/s Pap Flon Enterprise proposing for denial of SSI exemption claimed and proposing for clubbing of their clearances, was required to be issued. Consequently, this question is answered in favour of the Appellants. Whether demands in Show Cause Notice dt. 18-10-2010 was issued within permitted time limitation for period from 1-4-2005 to 30-09-2010 or otherwise? - HELD THAT:- M/s Pap Flon Enterprise have not suppressed facts of continuing manufacturing activity of manufacture of goods availing SSI exemption since 1993-94. Relevant Copies of declarations filed by M/s Pap Flon Enterprise are on record in these Appeals and synopsis filed. In this context, it is found that the question of invoking extended period of time limitation is a mixed question of facts and the law. In the facts and circumstances of this case and law settled, invocation of extended period of time limitation in this case, is not justified and impugned Order-in-Original dated 13-05-2011 cannot be sustained on time limitation also. Penalty u/s 27 of CER, 2002 - HELD THAT:- The appellants have made certain procedural lapses in maintaining records for the movement of goods from M/s Pap-Flon Enterprise to M/s Pap-Flon Engineering Co Pvt Ltd and vice-versa, as required for which they are liable for penalty of ₹ 5000/- each under Rule 27 of Central Excise Rules, 2002 on M/s Pap-Flon Engineering Co Pvt Ltd and M/s Pap-Flon Enterprise. All such clearances in open market were with proper Invoices issued under the Central Excise Rules, 2002. However, it is found that since demand of duty with interest & equal penalty is set aside, separate penalty imposed under Rule 26 of Central Excise Rules, 2002 on Shri Mukesh Mistry and Manish Parmar, is not warranted. Appeal allowed. Issues Involved:1. Eligibility of M/s Pap-Flon Enterprise for excise duty exemption under SSI Notification No. 8/2003-CE.2. Requirement of a Show Cause Notice to M/s Pap-Flon Enterprise for denial of SSI exemption and clubbing of clearances.3. Validity of the demand Show Cause Notice dated 18-10-2010 concerning the period from 1-4-2005 to 30-9-2010 regarding time limitation.Issue-wise Detailed Analysis:1. Eligibility of M/s Pap-Flon Enterprise for Excise Duty Exemption:The Tribunal examined whether M/s Pap-Flon Enterprise is an existing manufacturer eligible for duty exemption benefits claimed under SSI Notification No. 8/2003-CE. The case revolved around the actual manufacture of goods with 'Ram Extruder Machines.' The Tribunal found that the 'Ram Extruder Machines' are used to improve the quality and speed of manufacturing certain goods but are not mandatory for all goods cleared by M/s Pap-Flon Enterprise. The Tribunal noted that M/s Pap-Flon Enterprise had other necessary machinery and that less electricity consumption alone could not conclusively prove the absence of manufacturing activities. The Tribunal concluded that M/s Pap-Flon Enterprise is an existing manufacturer eligible for SSI exemption, as they maintained separate and independent existence, filed statutory declarations, and had no evidence of financial flow back to M/s Pap-Flon Engineering Co. Pvt. Ltd. Therefore, clubbing of clearances was not justified.2. Requirement of a Show Cause Notice:The Tribunal addressed the appellants' contention that a Show Cause Notice was required to be issued to M/s Pap-Flon Enterprise proposing the denial of SSI exemption and clubbing of clearances. The Tribunal agreed with the appellants, citing various case laws that without issuing a Show Cause Notice to alleged dummy units, clubbing of their clearances with another unit is impermissible. The Tribunal held that the non-issuance of a Show Cause Notice to M/s Pap-Flon Enterprise vitiated the entire proceedings, thus answering this question in favor of the appellants.3. Validity of the Demand Show Cause Notice:The Tribunal examined whether the demand Show Cause Notice dated 18-10-2010 was issued within the permitted time limitation. The appellants argued that the extended period for demand of duty was not available as the pre-requisite conditions like fraud, collusion, wilful mis-statement, or suppression of facts were not present. M/s Pap-Flon Enterprise had filed statutory declarations since 1993-94, which were acknowledged by the Revenue. The Tribunal found that the appellants were not responsible for the non-verification of declarations by Central Excise officers and that there was no suppression of facts. Consequently, the Tribunal held that the invocation of the extended period of time limitation was not justified, and the impugned Order-in-Original dated 13-05-2011 could not be sustained on time limitation grounds.Conclusion:The Tribunal concluded that:1. M/s Pap-Flon Enterprise is an existing manufacturer eligible for excise duty exemption under SSI Notification No. 8/2003-CE.2. A Show Cause Notice was required to be issued to M/s Pap-Flon Enterprise for denial of SSI exemption and clubbing of clearances, and the absence of such notice vitiated the proceedings.3. The demand Show Cause Notice dated 18-10-2010 was not issued within the permitted time limitation, making the demand unsustainable.The Tribunal set aside the excise duty demand with interest and equal penalty against M/s Pap-Flon Engineering Co Pvt Ltd, imposing only a penalty of Rs. 5000/- each under Rule 27 of Central Excise Rules, 2002, on both M/s Pap-Flon Enterprise and M/s Pap-Flon Engineering Co Pvt Ltd. The penalties imposed on Shri Mukesh Mistry and Manish Parmar were also set aside, and the appeals filed by them were allowed.