TaxTMI 
TaxTMI 
2017 (7) TMI 838
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....unting to Rs. 60,88,148/- have been demanded under Section 11A of the Central Excise Act, 1944 read with first proviso thereto from the appellant - M/s Kisan Gramodyog Sansthan (M/s KGS for short) with equal amount of penalty under Section 11AC of the Central Excise Act, 1944. Further penalty of Rs. 5,00,000/- is imposed on appellant - M/s KG Sansthan under Rule 173Q of Central Excise Rules, 1944 read with Rule 25 of Central Excise Rules, 2002. Further penalty of Rs. 2,00,000/- is imposed on appellant Smt. Vijay Laxmi Shukla under Rule 26 of the Central Excise (No. 2) Rules, 2001 and also equal amount of penalty of Rs. 2,00,000/- on appellant K. K. Shukla under Rule 26 of the Central Excise (No. 2) Rules, 2001. Further, interest has been demanded on the amount of duty payable. 3. The case of Revenue, as per the Show Cause Notice dated 28th June, 2002 is that a search was conducted by DGCEI, Regional Unit, Kanpur on 23/04/2002, in the factory premises of M/s KGS and the residential premises of its Secretary Smt. Vijay Laxmi Shukla. The appellant was engaged in manufacture of excisable goods i.e. Steel Furniture & Agricultural Tools & Implements and they had neither submitted any ....
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....d by electric welding machine and finally spray-painting was done on items like almirah, trunk, table with the help of compressor run by generator set. During the course of search in the residential premises of Smt. Vijay Laxmi Shukla W/o Shri Kamla Kant Shukla the Secretary of M/s KGS situated at Sharda Nagar, Kanpur. Some records were found pertaining to M/s KGS and also records relating to another Unit namely M/s Adarsh Lauh Evam Kashtha Kala Audyogik Utpadan Sahkari Ltd., Kanpur. In response to summons to Smt. Vijay Laxmi Shukla, her husband Shri Kamla Kant Shukla appeared on 23/04/2002 and his statement was recorded wherein inter-alia stated that M/s KGS was a Khadi Sansthan affliated with U. P. Khadi Gramodyog Board; that Shri Ram Sevak was President and his wife Smt. Vijay Laxmi Shukla was secretary and there were 14 other members in the said Sansthan; his wife used to look after the work of M/s KGS relating to purchase of raw materials, production of goods by workers, and sale of finished products, and maintenance of records was done by Accounts Clerk, Mr. Sharad Kumar and the unit had come into existence in 1992-93. And that they were purchasing raw material such as a HR/G....
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....ges, etc. Similarly, they were manufacturing machine stand which could be used for keeping Thresher machine, Chop Cutter machine and even water cooler on it. These stands were similar in look and were sold on the basis of their weight and were of multiple uses. They also manufactured tractor trolley body in their factory from steel sheets, iron, angle and rods. The bodies manufactured with axle only and they did not attach hub and tyres normally, but if the buyer provided hubs and tyres, the same are attached, otherwise they sold body of the tractor trolley only. Mr. Shukla also tendered copies of balance sheets for the year 1997-98 to 2001-02 and a chart giving detail of sale of finished goods and purchase of raw materials for the said period. 4. Smt. Vijay Laxmi Shukla also appeared for recording of her statement before the SIO, DGCEI, Kanpur and she agreed to the statement given by her husband Shri Kamla Kant Shukla and also the statement of Accounts Clerk Shri Sharad Kumar Awasthi and agreed with the contents thereof. Further on scrutiny of records revealed that appellant M/s KGS have purchased most of their raw materials from UP State Small Industries Corporation Ltd., Agra....
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...., Notification No. 5/99 dated 28/02/1999, Notification No. 6/2003 dated 01/03/2003 & Notification No. 3/2001 dated 01/03/2001, as amended from time to time, metal containers of chapter heading 73.10, attracting nil rate of Central Excise duty if: (a) in relation to the manufacture of such container no process is ordinarily carried on with the aid of power; or. 6. As per statement of Shri Kamla Kant Shukla, Almirah, Steel Box etc. after finishing are painted with the help of compressor having electric motor of 1HP/KW, which was operated with the help of generator set of 5 KVA and painting was done by the compressor which could be operated only with the help of power. As such, benefit of Exemption Notification No. 4/97 dated 01/03/1997, as amended from time to time was not available to them, duty was chargeable as per the tariff. It appeared that although KGS is a KVIC unit but the items manufactured by them are not covered in the schedule to the Notification No. 88/88 dated 01/03/1988, as amended which provides exemption from Central Excise duty on the item specified in the schedule to the said notification, if manufactured in rural area by co-operative/KVIC, etc. Thus it appe....
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.... on contest and the duty was demanded along with penalty as more fully mentioned hereinabove. 9. Being aggrieved by the said order/judgment the appellants have filed the appeal before this Tribunal. It is urged that vide the impugned order excise duty have been wrongly demanded either by wrongly classifying the products or erroneously denying exemption to the appellant and not considering the Modvat/Cenvat credit available to the appellant. It is further stated that the extended period of limitation have been wrongly invoked in the facts and circumstances of the present case. It is further stated that the appellant is a society registered as SSI with the Director of industries, U. P. and affiliated with U. P. Gramodyog Board. The Unit of the society was engaged in manufacture of steel furniture and agricultural tools and implements. The society has obtained registration under the U. P. Trade Tax and Central Sales Tax and enjoys exemptions being a certified Khadi & Village Industry (KVIC). The society is further exempted from payment of income tax under the Income Tax Act. The society was also given loan, by KVI Commission. The appellants are a KVIC Unit, which is admitted fact b....
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....absolutely clear that the said entry relates to those containers which are filled with liquid commodity and not for grains. Two reasons for the said submission are words "Reservoirs, tanks, vats" are such containers which are used to fill the liquid commodities and the word "similar containers" has to be read in that context by applying the principle of Ejusdem Generis. The words "of a capacity not exceeding 300L" signifies that the measurement is also in Liters and not Kilogram signifying that material which is to be contained in such containers should be measurable in Liters. Admittedly grains are not measured in Liters but in Kilograms. It is submitted that Steel Bakhari is a commodity meant for storing grains and the same is not disputed by the department. These commodities are produced manually and are thus classifiable under Tariff Entry 84.36. tariff Entry 84.36 reads as under:- "Other agricultural, horticultural, forestry, poultry-keeping, or bee-keeping machinery, including germination plant fitted with mechanical or thermal equipment; poultry/incubators and brooders." 10.2 The term "machinery" is to be understood in Section Note 5 of Section XVI which st....
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....Chapter Sub Heading 8716.00 as opposed to 84.32/84.36 claimed by the Appellant. 10.4 Machine Base (Theeha) That the item in question is Machine Base (Theeha) is manufactured by the Appellant for the installation of a thresher. It therefore forms part of the thresher and has been wrongly classified under Chapter Sub Heading 7326.90, reads as "Others". It is submitted that the item in question is classifiable under Chapter Sub Heading 8433 which reads as 'Harvesting or Threshing Machinery, including straw or fodder bales; grass or hay movers; machines for cleaning, sorting or grading eggs, fruit or other agricultural produce, other than machinery of heading 8437". Further within Chapter Sub Heading 8433, Tariff Entry 8433.90 includes parts of the machinery referred to Chapter Sub Heading 8433. Therefore, as the item in question is a part of the thresher machine, it will be covered within the Chapter Sub heading 8433 and 'nil' rate of duty will apply to the same. The thresher machine cannot work without the stand (theeha) as it will be of use only when the machine is placed on the theeha/base. 10.5 Tractor Phar (Hal-Ki-Nok) That the item in question is Tract....
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....y Press, 2010. Therefore as is clear from the definition above, a spade, in commercial parlance cannot be without a stick or handle. It has been stated by the Appellant that the stick or handle is not provided by them and the same has not been refuted by the Department. The Adjudicating Authority has wrongly denied the benefit of nilrate of duty to the said items by incorrectly classifying them under Chapter Sub Heading 8201 as the items in question are both without handle but are used for soil preparation and cultivation and are therefore classifiable under Chapter Sub Heading 8432. 10.7 Tasla It is submitted that the item Tasla has been wrongly classified by the Adjudicating Authority under Chapter Sub Heading 7326.90 under Chapter 73 of the Central Excise Tariff, Chapter Sub Heading 7326 reads as Other Article of Iron & Steel and Tariff Entry 7326.90 reads as "Others". The item in question, Tasla, in common and ordinary parlance is used for agricultural purposes meant for soil preparation or cultivation. Further, the item in question had been specifically manufactured for the clearing, sorting or grading of agricultural produce. Therefore it is submitted that the ....
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....llage Industries Commission, recognizing Appellant as a KVIC Unit, satisfies the condition of the Notification including the purpose for which exemption was granted. It is submitted that the exemption has been wrongly declined on the sole ground that the certificate is not from KVIC while recognizing that the Unit is a KVIC Unit. 10.9 STEEL BOXES It is submitted that steel boxes have been manufactured without the aid of power and are entitled to the exemption under Sr. No. 73.10 of the Notification No. 3/2001 dated 01.03.2001, 4/97-CE dated 01.03.1997, 5/98 dated 02.06.1998, 5/99 dated 28.02.1999, 6/2000 dated 01.03.2000 & 3/2001 dated 01.03.2001. It is submitted that the Order-in-Original proceeds on an hypothesis that the steel boxes have been painted and therefore, power has been used. It is submitted that the finding that the steel boxes are painted is entirely incorrect and contrary to record and evidence. It is submitted that the Panchnama drawn by the Department clearly records that the steel boxes have been found which are not painted [page 169 of the paperbook]. It is further submitted that the Appellant had submitted before the Adjudicating Authority the entire prod....
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....o NIL rate of duty and therefore, there was no liability to pay any Excise duty. It is an admitted position that the Appellant has not charged excise duty from its customers. In similar facts, the Honble Tribunal in the case of Bentek Electrical corporation Versus Commissioner of Central Excise [2006 (205) E.L.T. 1129] affirmed by Honble Kerala High Court in 2010 (257) E.L.T. 367 (Kerala) where a unit was recognized as a village industries unit it was held that the extended period of limitation cannot be invoked by the department under Section 11AC of the Central Excise Act, 1944." 11. The leaned Counsel further stated in the facts and circumstances that there is neither any contumacious conduct and/or suppression of facts on their part nor any concealment of the affairs and further they had bona-fide belief that they being a KVIC unit and manufacturing mainly agricultural implements are not taxable under the provisions of the Central Excise Act. Even on the purchase invoices for inputs from UPSIDC Ltd., as a registered dealer under the provisions of the Central Excise Act have reflected the amount of Excise duty on their invoices raised on the appellant, but have marked such in....
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....hammy. On the plea of availability of Modvat on being caught, hereby reliance is placed on reported decision of Honble High Court (Allahabad) in case of VEE Excell Drugs & Phmls P. Ltd. Versus Union of India wherein "Export Rebate, claim of, without filing requisite documents, ignorance of law, held, is not excuse when something is required to be done by law in a particular manner. Rule 18 of Central Excise Rules, 2002" 12.2 Therefore, in view of the above, further consideration of the plea for Modvat availability does not arise; as, neither the mandatory Option nor the prerequisite Declaration of SSI was ever filed by them & similar petition, supra was rejected. Further, humbly it is submitted that in the wake of abovementioned, all of their arguments loose force on considering appended & emphasized observations of various facts on confirmed demand neither figured nor disputed in arguments/contentions of appellant(s), hence the appeal deserves rejection as devoid of merits." 13. Having considered the rival contentions and on perusal of the facts on record, we are satisfied that all the goods manufactured by the appellant are agricultural implements and/or hand tools and h....