Judgment:
Per Jyoti Balasundaram
The brief facts of the case are that M/s.S.P.Engineers (hereinafter referred to as SPE) is a proprietary concern of Shri M.Satish Kumar who does not own any factory. He also does not have any office of his own except for a small place where he sits to transact business. He was entrusted with job work of manufacture of trolleys and storage racks etc. by M/s.Lumax Samlip Industries Ltd. (hereinafter referred to as LSI) and PHC Manufacturing Ltd. (hereinafter referred to as PHC). Raw materials and components required for job work, land, building, plant and machinery, electricity etc. were supplied by LSI and PHC who also provided design and drawings for manufacture of the finished products. Since SPE was carrying on manufacture in the factory premises of LSI and PHC, SPE came within the ambit of Notification No.8/99-CE dt. 28.2.99 and 8/2000 dt. 28.2.2000 which envisages that the aggregate value of clearances of excisable goods from a factory by one or more manufacture has to be considered in order to arrive at the eligibility of the manufacturer of the SSI exemption and since both LSI and PHC had on their own exceeded turn over of Rs.1 crore each before SPE commenced manufacture in their factory premises, the department was of the view that the turnover of SPE was liable to duty at the normal rate of 16% advalorem for the years 1999-00 and 2000-01. Show-cause notice raising duty demand of Rs.8,09,425/- on SPE and proposing recovery of interest and imposition of penalty and confiscation of goods was issued to SPE. The adjudicating authority (the Joint Commissioner of Central Excise) confirmed the demand together with interest, and imposed equal penalty on SPE and penalties of Rs.1 lakh each on PHC and LSI. SPE succeeded in appeal before the Commissioner (Appeals) who accepted their plea that they (SPE) were not the manufacturers of the goods in question and that LSI and PHC were the manufacturers thereof; hence these appeals by the Revenue.
2) We have heard both sides. The finding of the Commissioner (Appeals) on who is the manufacturer is reproduced hereunder :-
“8. As noted the Joint Commissioner has not made an attempt to render any findings in this regard therefore I have carefully considered the submissions made and also the documents filed. While I am conscious that raw material supplier cannot be held as manufacturer the totality of the situation as canvassed by the advocate needs consideration in the peculiar circumstances of this case. I find that PHC and LSIL have not only supplied raw materials but also provided design, drawings, land, building, plant and machinery, samples etc. to SP Engg for carrying out the conversion. Over and above, the engineers of PHC and LSIL have constantly supervised the production and they were also ensuring the quality of the products. There is also no penalty on SP Engg for defective fabrication and lots of material during conversion. In my opinion for whatever reasons PHC and LSIL were not prepared to call themselves as manufacturer, nonetheless they are the manufactures as they were totally involved in the said activity. Therefore, I have no hesitation in concluding that PHC and LSIL are manufacturer of the impugned goods in their respective premises. I have already noted this issue has not been addressed to its logical end by the lower authority and he has merely proceeded based on the allegations in the SCN without referring to the submissions made by the appellants.”
The Commissioner (Appeals) has further extended the benefit of Notification No.67/95-CE (captive consumption) to PHC and LSI. However, we agree with the JCDR that the lower appellate authority has not clearly discussed as to how he has arrived at the conclusion that SPE is not the manufacturer. There was no charge in the notice that engineers of LSI and PHC were constantly supervising production by SPE and also ensuring quality of products. This finding is also contrary to the finding in the adjudication order. Further, the goods in question fall for classification under Chapter Heading 8716.00, 9403.00, 7309.00 and 7326.90 of the First Schedule to the CETA 1985. Therefore, they do not qualify for exemption under Notification No.67/95 as they are not capital goods listed in the Table annexed to Rule 57Q of Central Excise Rules, 1944. The Commissioner (Appeals) has not adverted to this very important aspect while holding that the benefit under Notification No.67/95 is available to LSI and PHC. In the cross objections, the assesses” grievance is that the Commissioner (Appeals) has not considered the case on merits and on limitation. They also raise the plea of eligibility to exemption in terms of Notification No.83/94.
3) Since the impugned order is non-speaking, we set is aside and remit the case to the Commissioner (Appeals) for fresh decision on all issues. All issues are left open for fresh decision. Fresh orders shall be passed after extending reasonable opportunity to the assessees of being heard in their defence.
4) The appeals and cross-objections are thus allowed by way of remand.