AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2022 (9) TMI 265
X X X X Extracts X X X X
X X X X Extracts X X X X
....Ltd. [Assessee] situated in Khasra No. 112, Village Matlabpur, Roorkee, Uttarakhand, is a manufacturer of pharmaceutical products. It had availed area based notification No. 49/2003-CE dated June 10, 2003 which was available in the location of its premises. However, the exemption notification was available to an assessee for ten years only, which period came to an end. Thereafter, the assessee purchased unit namely M/s. Shri Balaji Packing Industries [Balaji] 695, Nanhera, Ananthpur, Bhagwanpur, Roorkee. Balaji was initially a partnership firm and was thereafter converted into a proprietary firm of Shri Yogesh Kumar Sharma. It was engaged in manufacture of cartons. The assessee purchased Balaji under the slump sale agreement i.e., an agreement in which the entire business is bought without valuing its individual components. The agreement was signed on February 12, 2016 and thereafter it was named by the assessee as Unit No.II of M/s. Pegasus Pharmaco India Pvt Ltd. while its original unit was named Unit No. I. Within 20 days of purchasing Balaji, the assessee shifted it to the assessee's own address viz., Khasra No. 112, Matlabpur village Roorkee. (now called Unit No. I). Instead o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....03-CE dated June 10, 2003, its premises were searched by the officers on March 15, 2016 and it was noticed that the benefit of exemption Notification to the assessee had ended on February 20, 2016. Days prior to this date, it had purchased Balaji under the slump sale agreement. Balaji was operating from rented premises. Balaji was a small scale industry and has not crossed threshold limit, to render it liable to pay Central Excise duty. It had also not availed the benefit of area based exemption Notification No. 49/2003. Just 20 days before the sale, M/s. Balaji opted for the benefit of exemption Notification No. 49/2003 and thereafter sold its business in a slump sale agreement to the assessee who called it Unit No. II and shifted its business to its own premises. After 8 days, on March 10, 2016, the assessee sold the entire plant and machinery of Balaji, entered into an MOU with its own Unit No. I and started manufacturing pharmaceuticals in its old premises using its own machinery in Unit I. The case of the Revenue is that after completing its entitlement of exemption for 10 years, the assessee purchased Balaji which manufactures cartons under a slump sale agre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s as follows:- 1) I deny the benefit of Central Excise duty exemption under Notification No. 49/2003-CE dated 10.06.2003 to M/s Pegasus Farmaco India (P) Ltd [Unit-II] Khasra No. 112, Village-Matlabpur, Roorkee; 2) I confirm the demand of Central Excise duty amounting to Rs.23,04,75,983/- (Rupees Twenty Three Crore Four Lac Seventy Five Thousand Nine Hundred Eighty Three only) from the party for the period 20.04.2016 to 30.06.2017 under Section 11A(4) of Central Excise Act, 1944; 3) I confirm Interest as per applicable rates on the above confirmed demand of duty under Section 11AA of Central Excise Act' 1944; 4) I impose a penalty of Rs. 23,04,75,983/- (Rupees Twenty Three Crore Four Lac Seventy Five Thousand Nine Hundred Eighty Three only) on the party under Section 11AC(1)(c) of Central Excise Act, 1944; 5) I impose the penalty of Rs. 2,00,00,000/- (Rupees Two Crore only) on Sh Raghuveer Beti, Director of the party under Rule 26 of the Central Excise Rules, 2002; 6) I impose the penalty of Rs. 50,00,000/-(Rupees Fifty Lakhs only) on Sh C S Rao, Plant Head of the party, under Rule 26 of the Central Excise Rules,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t has further been submitted that in paragraph 9.9 and 9.10 of the impugned order, the Adjudicating Authority has mentioned that the electricity connection of 63 KVA was obtained by Balaji only on April 24, 2010 and therefore, it was inferred by him that the production could have taken place only after that day. It is submitted that prior to this date, the appellant had obtained a generator on rent of Rs.5000/- for the period March 25, 2010 to April 24, 2010. So long as it is on record that Balaji had the generator and existence of the same has also been recorded in its books of accounts, manufacture was possible. 12. The Adjudicating Authority held that the machines and inputs required for manufacture were brought into the State of Uttaranchal only on March 30, 2010 and it was very unlikely that Balaji could have undertaken the manufacturing activity on the same date. It has been submitted on behalf of the appellant that in view of the deadline of March 31, 2010, Balaji had worked 24 X 7 and commenced the production. Further, the manufacture of cartons does not require too much of heavy machinery, all the machinery was installed on the same day, manufacturing had been commenced....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ountant Piyush Jindal had issued a certificate prior to and after shifting of the machinery. It is further submitted that Yogesh Kumar Sharma proprietor of Balaji had retracted his original statement dated 22.12.2016 on 6.07.2018 stating as follows: "that I was under duress and tremendous stress on 22.12.2016 when my statement was recorded by the investigating officers which lead to tendering of incorrect facts, whereas the actual fact of the matter are that I have sold the entire manufacturing unit as to M/s. Pegasus Pharmaco India Private Limited in terms of slump sale agreement and they have continued the business of the said manufacturing unit with effect from 12th February 2016 in the same premises under a separate agreement/ arrangement after which they have shifted their production facilities to some other place, wherein they duly shifted the entire infrastructure including machineries etc. sold by me from the said premises." 18. It was further submitted that M/s. A V Print Pack had issued VAT invoices No. 1533 dated 09.03.2016 for sale of old machines to M/s. Shri Ram Packing Industries. Thus, Yogesh Kumar Sharma has, after selling Balaji and its machinery, set ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iate production, conduct trials and then finally starting commercial production. The appellant submitted that all these were accomplished within 24 hours of purchase of machinery and raw material by Balaji and commercial production was commenced on 31.03.2010 itself. In fact, at that time Balaji had not even an electricity connection which was obtained much later on 24.4.2010. Prior to this date, it had rented a generator for the period from 25.3.2010 to 24.4.2010 and about Rs.5000/- was paid as rent for the purpose. Subsequent sale of the goods during April, 2010 to March, 2011 were as follows: S.No. Period Sale Value (in Rs) 1. April' 2010 to June' 2010 1,23,794/- 2. July' 2010 to September' 2010 12,16,641/- 3. October' 2010 to December' 2010 12,34,298/- 4. January' 2011 to March' 2011 14,38,621/- 24. From the above figures, it would not be unreasonable to conclude that commercial production commenced only in July, 2010 or a little before that. This is consistent with the declaration of Balaji before the DIC that it intended to commence the commercial production by December 2010. 25. As submitted o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncement of any production". 26. It has been submitted on behalf of the appellant that Yogesh Kumar Sharma, the proprietor of Balaji had tendered his statement under duress on December 24, 2016 and thereafter retracted the same on July 06, 2018 through an affidavit to clarify his stand. Any person who is under duress can make a wrong statement. However, once the duress /pressure of the officer is removed, it is reasonably expected that the person immediately retract his statement by writing to the same officer or to the Head of Department or otherwise. The statement was recorded in end of December, 2016 and retraction was issued in July, 2018 after almost 2 years, that too, after the show cause notice was issued to Yogesh Kumar Sharma also proposing to impose a penalty upon him. Such a retraction, even if it is made in the form of an affidavit, is nothing but an after- thought and no credence could be given to such retraction. We, therefore, find the original statement of Yogesh Kumar Sharma was not made under duress. Nevertheless, even ignoring the statements, we can decide this matter based on documents. 27. It has been submitted that the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oducts of Balaji, if necessary, with additions or modifications. But in the present case, after purchasing Balaji, the assessee shifted it to its own premises and named it Unit No. II. The business of Balaji namely, manufacturing and selling cartons was discontinued and the machinery which was bought as part of 'slump sale agreement' was also disposed of. The production of manufacturing of cartons was discontinued. No new machinery was also purchased by Unit No. II. Instead, the two arms of assessee have entered into MOU between Unit No. II and Unit No. The original Unit of assessee which had availed full benefit of exemption for 10 years was termed as Unit No. I. The assessee shifted Balaji to its own premises which it called as Unit No. II. Except the claim of eligibility for exemption notification, everything related to the business of Balaji was discontinued. The goodwill which usually goes with business sale has gone with the name. The machinery, etc. purchased as part of sale as 'slump sale' were disposed of. Even the location /place of entity was shifted to its own premises. Then Unit No. I a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... benefit of the exemption notification for the pharmaceuticals manufactured by the assessee in its own plant beyond the maximum permissible period of ten years. Thus, paying about Rs. 25 lakhs under the slump sale agreement, the assessee has claimed exemption from duty beyond ten years of about Rs. 23 crores. e) The Circulars of the CBEC, which allowed the benefit of exemption when the ownership of the Unit has changed or new machinery is added or new product lines are added or the factory is shifted to a new location, do not come to the aid of the assessee for the reason that in this case, the only thing which changed with the slump sale agreement which the assessee signed with Balaji and the MOU which it signed with itself is the claim of the benefit of the exemption by Balaji and its transfer to the assessee so as to extend the benefit of the exemption to the pharmaceuticals manufactured by it beyond 10 years. 32. In view of the above, we find that the order passed by the Commissioner is correct in denying the benefit of exemption under notification No. 49/2003 and confirming the demand of duty under section 11A along with interest from the assessee under section 11A....