CX - Uttarakhand Exemption - commencement of commercial production means starting of manufacture of finished products on commercial scale, which is preceded by trial production - Pre-deposit ordered: CESTAT by majority
By TIOL News Service
NEW DELHI, OCT 10, 2013: THE Stay application is for waiver of pre-deposit of about Rs. 2 Crores as duty and equal amount as penalty.
The appellant is a unit located in the area of Hardwar and engaged in the manufacture of DVD EMPEG Cards and DVD Players etc. Vide Notification No. 50/2003-CE dated 10.06.2003 the units located in the Hardwar area stand extended subject to the condition that they commenced commercial product prior to 31.03.2010.
The dispute in the appeal relates to as to whether the appellant had commenced commercial production prior to 31.03.2010, so as to earn the exemption in terms of the notification. The appellant filed a declaration on 31.03.2010 with their jurisdictional Central Excise authorities claiming the benefit of the said notification on the ground that they have started their commercial production. The appellant's factory was subsequently visited by the officer on 17.04.2010 and enquiries were conducted. Statement of their Accountant was recorded who stated that they have commenced trial production till that date w.e.f . 30.03.2010 and have not started maintaining the statutory record. Accordingly, Revenue believed that the commercial production had not commenced by 31.03.2010 and the appellant was not entitled to the benefit of the notification. Accordingly, proceedings were initiated resulting in passing of the present impugned order.
The adjudicating authority has relied upon the statement of their Accountant who was not offered for cross-examination. He has also referred to the fact that the soldering paste had not been purchased by the appellant till 31.03.2010 indicating that the goods were not manufactured by that day. He has also referred to the fact that pneumatic screw driver was also not available to the appellant by the said date. As such they concluded that the appellant have not commenced commercial production by 31.03.2010.
On the other hand, the appellant's contention is that pneumatic screw driver was not one of the essential equipment for manufacture of their goods and the function was performed manually. Similarly soldering paste was one of the items required for the ultimate finish of the goods and does not indicate that the commercial production was not commenced by 31.03.2010. The expression used for the purpose of earning the notification benefit is "commencement" of the commercial product and not finishing of the final product. They had admittedly commenced the production on 30.03.2010, they are entitled to the benefit of the notification. He also submits that during the month of April 2010 itself they have cleared 76,000 PCBs.
The appellants have placed on record a letter dated 31.03.2010 issued by Regional Manager, State Infrastructure and Industrial Development Corporation of Uttarakhand Limited, mentioning that their officer on 30.3.2010 found that commercial production of electronic goods is going on in the premises.
The Member (J) was of the view that as there is no dispute about the availability of the notification to the appellant, on account of their unit being located in the area of Hardwar, the condition of the notification have to be considered in not very strict manner. As such taking into account above referred letter, the appellant are entitled to unconditional stay.
The Member (T) did not agree. He observed, "Under Notification No. 50/2003, the exemption is available to the manufacturer on finished excisable goods and under para 2(a) of the said Notification, exemption is applicable only to the units which had commenced commercial production not later than 31st March, 2010. I find the commercial production in clause 2(a) refers to the commercial production of the finished goods as the exemption in the notification is in respect of finished goods. It is on record that no finished goods were manufactured by 31st March, 2010 by the appellants. ". So, he wanted pre-deposit of 50% of the duty.
The matter was referred to the Third Member - another Technical Member who was of the prima facie view that the commencement of commercial production means starting of the manufacture of the finished products on commercial scale, which is preceded by trial production and installation of complete plant & machinery and on that day the plant must be ready in all respects for manufacture of finished product in commercial quantity and all raw materials, consumables, etc. required for manufacture are available . He observed, "Though Hon'ble Member (Judicial) has heavily relied upon the letter dated 31.3.2010 of the Regional Manager, State Infrastructure & Industrial Development Corporation addressed to the appellant, the statement in this letter dated 31.3.2010 that the appellant were found to have commenced commercial production of the electronic goods on 31.3.2010 is not supported by the fact that as on that date, the raw materials and capital goods required for manufacture of finished goods in commercial quantity were not there as without soldering paste and wire and without pneumatic screw drivers, manufacture of Populated PCBs is not possible."
He was of the view that the appellant have not been able to establish prima facie case in their favour . It is settled law that while considering waiver from the requirement of pre-deposit under Section 35F of the Central Excise Act, 1944, the main factor which is to be considered is as to whether the appellant have prima facie case in their favour or not and if there is slightest risk to the Revenue, the conditions must be imposed for safeguarding the interests of the Revenue.
So he agreed with the Member (T)
As per the majority order, appellant is directed to deposit 50% of the duty within a period of 8 weeks.
(See 2013-TIOL-1491-CESTAT-DEL)
