TaxTMI 
TaxTMI 
2009 (3) TMI 170
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....241/- found at the said premises were seized on the reasonable belief that they were liable for confiscation. Following investigation by the officers of the Directorate General of Anti-Evasion, a Show Cause Notice was issued to MMN and the associate units alleging that MMN had manufactured and cleared shikakai powder and arapputhool without payment of excise duty during the material period. The notice had proposed to classify shikakai powder under Chapter sub-heading 3307.39 and arapputhool under Chapter sub-heading 3405.40. MMN approached the Hon'ble High Court of Madras which quashed the Show Cause Notice. A learned Single Judge of the Madras High Court held that the process of production of the impugned goods did not involve manufacture attracting levy of excise duty. The Revenue filed appeal against the judgment of the learned Single Judge. The Division Bench of the High Court set aside the judgment of the learned Single Judge and directed the authorities to pass appropriate orders following due process of law. The impugned order came to be passed pursuant to the proceedings initiated with the Show Cause Notice dated 26-6-1998. 2. Adjudicating allegations of manufacture and cl....
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....the submissions made by it were not considered in passing the impugned order. A product became excisable only when it passed the test of 'manufacture' and 'marketability' Pulversing/pounding did not amount to manufacture. The Show Cause Notice did not suggest that the materials mohwa cake, shikakai, usilai leaves, rita and turmeric after pulversing/pounding and mixing assumed distinct name, character or use. Both shikakai and arapputhool remained the same before and after powdering and mixing. They did not undergo any reaction due to physical pounding and mixing. The impugned goods had been classified wrongly; shikakai powder under CH 3307 as bath preparation and arapputhool under CH 3405 as scouring powder. As per Explanatory Notes to HSN, bath preparations of Chapter Heading 3307 were only goods such as bath salts and preparation for foamed baths. The impugned goods fell under Chapter 14 as held by the Tribunal in S.R.K. Products (Pvt.) Ltd. v. Commissioner of Central Excise, Bangalore - 2007 (213) E.L.T. 34 (T). The decision of the Hon'ble High Court of Madras in Madura Coats Workers Cooperative Stores v. Union of India - 2005 (182) E.L.T. 159 (Mad.) holding the products to be n....
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....der] and 3405.40 [arapputhool] in the impugned order since issued another Show Cause Notice to the appellants for classifying the items under CSH 3305.99 and CSH 3405.40 respectively for the subsequent period. These highlighted the confusion prevailing in classification of impugned items and therefore allegation of suppression of facts did not hold good. The classification of the products ordered is also challenged on various grounds. 5. As regards the order of clubbing of clearances it is submitted that clubbing was not sustainable in the absence of common conglomeration of manpower, machine and money. There was nothing on record to suggest even remotely that there had been inter se (use) of money, manpower and machine. The individual units other than MMN were penalized under Rule 209 of CER. This implied that each of them was a manufacturer/producer/registered person/registered dealer. Therefore they could not be considered to be dummy units for the purpose of clubbing of clearances. The impugned order was not sustainable in the light of the decision of the Supreme Court in the case of Gajanan Fabrics Distributors v. Collector of Central Excise, Pune - 1997 (92) E.L.T. 451 (S.C.....
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.... under which the penalty had been imposed. The Apex Court had in a case of similar facts in the case of Amrit Foods v. Commissioner of Central Excise, U.P. - 2005 (190) E.L.T. 433 (S.C.) held that a penalty imposed under Rule 173Q without specifying the sub-clause of Rule 173Q was bad in law. The duty liability if at all upheld had to be re-quantified in terms of the ratio of the judgment of the Apex Court in the case of Commissioner v. Maruti Udyog - 2005 (179) E.L.T. A102 (S.C.). The appellants have relied on various case law in support of the argument that the impugned goods were not produced in a process of manufacture, that the classification has been decided incorrectly and that the demand was barred by limitation. 7. Shri M.N. Venkatachalam, partner of MMN has assailed the penalty of Rs. 1.00 lakh imposed on him under Rule 209A of CER on the ground that being one of the partners of SMMN, he had no occasion to play any role in dealing with the alleged excisable commodities. There was no allegation that the appellant had been involved in transporting or removing any excisable goods knowing that they were liable to confiscation under the Act or Rules. In the absence of any all....
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....rving thus the matter was remanded to the Tribunal for adjudication. The Apex Court further remarked that the said decision applied only for the period January 1999 to March 1999. For the period prior to January 1999 the judgment of the Karnataka High Court dated 3-2-1999 applied. This judgment had held that the activity of pulverisation of shikakai constituted manufacture. Subsequent to the judgment of the Karnataka High Court, Section 2(f) of the Act was amended to the effect that manufacture would also cover the activities specified in relation to any goods in Section Notes or Chapter Notes of the First Schedule to the Central Excise Tariff Act as amounting to manufacture. In view of the above judgment of the apex Court the issue whether the activity of production of shikakai powder from shikakai involved manufacture during the material period remains settled. It is seen that the judgment of the Karnataka High Court referred to by the apex Court also held that shikakai powder was classifiable under CSH 3305.90 during the material period. The classification issue also thus stands settled by the judgment of the Karnataka High Court. (b) Arapputhool Arapputhool is produced by gri....
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....were divergent views on the exigibility of the product shikakai powder. Different High Courts had held different views on the issue as regards the liability to excise duty of shikakai powder produced during the material period. The issue was finally settled by the judgment of the Apex Court in Sree Ramakrishna Soapnut Works (supra) decided on 28-2-2007. We find that in Jaiprakash Industries Ltd. v. CCE - 2002 (146) E.L.T. 481 (S.C.) the Apex Court held that extended period of five years was not invocable as Revenue had no evidence of any fraud, collusion, willful mis-statement or suppression of facts by the assessee. In view of the divergent views of the High Court on the issue, the apex Court found that the appellants had entertained a bona fide doubt as to whether or not the activity involved amounted to manufacture. That being the position, it could not be said that merely because the appellants had not taken out a licence and had not paid duty, provisions of Section 11A got attracted. Similar ratio was laid down in Mentha & Allied Products v. CCE (supra). As the Tribunal, High Courts and the Supreme Court expressed different views at different stages on the scope of 'bulk drugs....
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....equired for functioning of the group units as a whole was tightly and solely controlled by Shri MNV and there is constant interchanging of funds among the units (Page Nos. 35 to 41 of SCN refers). It is further seen that Shri MNV had exercised absolute control over his employees in such a way that they were assigned specific job taking into consideration the whole group's interest and not the single unit. This leads to unambiguous conclusion that Shri MNV, the partner of M/s. MMN has fragmented the unit manufacturing shikakai powder and arapputhool into two sets of units, one engaged in the procurement of raw materials and the other concerned with production and marketing. Hence, the allegation made in the show-cause notice is found sustainable for the purpose of arriving at the excisable exemption limit as per prevailing notification for SSI industries during the relevant time." The show-cause notice had made allegations to the effect that there was use of common funds among the units; that the transfers of materials among the units were not as between unrelated units and that vehicles of a couple of units were used for transportation by all units as if they were common property.....