Commissioner Of Central Excise vs M/S. Sunnoxx International

[Arising out of Order-in-Original No CHD-CEX-001-COM-018-019-2013 dated 30.4.2013 passed by the Commissioner of Central Excise, Chandigarh]

For approval and signature:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Hon'ble Shri B. Ravichandran, Member (Technical)

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3 Whether Their Lordships wish to see the fair copy of the Order?

4 Whether Order is to be circulated to the Departmental authorities?

Commissioner of Central Excise Appellants

& ST, Chandigarh

Vs.

M/s. Sunnoxx International Respondent

Appearance:

Shri S Nunthuk, Jt.CDR for the Appellants

Shri Naveen Mullick, Advocate for the Respondent

CORAM:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Hon'ble Mr. B Ravichandran, Member (Technical)

Date of Hearing /decision: 01.10.2015

FINAL ORDER NO. 53159/2015-EX(DB)

Per B Ravichandran:

The Revenue is in appeal against the order dated 30.4.2013 of the Commissioner. The respondents are engaged in the manufacture of lead acid batteries liable to Central Excise duty. The dispute arose regarding their liability to the exemption under Notification No. 50/2003-CE dated 10.6.03 on the ground that they did not commence commercial production on or before 31.3.2010. Proceedings were initiated against the respondent by issue of show cause notices dated 4.6.2012 and 14.3.2013. Learned Commissioner issued the impugned order and dropped all the proceedings against the respondent by allowing benefit under the said notification. Aggrieved by the said order, the Revenue is in appeal before us.

2. In the grounds of appeal it is stated that the adjudicating authority has erred in interpreting the notification No.50/03-CE. It was contended that the respondents have not commenced commercial production on or before 31.3.2010. In view of the following points:-

A) the respondents did not have connection for required power supply.

B) Purchase of raw material and first sale of final product appears to be manipulated.

C) Full plant and machinery required have not been installed. The respondents did not have proper clearance from HP State Environment Protection and Pollution Control Board.

D) The certificate of commencement of commercial production issued by Deputy Director of Industries, Department of Industries cannot be considered for extending the excise concession as the same is based on submissions made by respondent.

E) The respondents claim that they could make saleable batteries before 31.3.2010 and cleared the same is not supported by facts as technical expert has stated that plate casting will take atleast 72 hours for ageing. It is not possible for the respondent to manufacture and clear batteries before 31.3.2010.

3. During arguments, learned AR reiterated the points in appeal and stated that concession claimed by the respondent under the aforementioned notification is not available to them as they have not commenced commercial production of batteries on or before 31.3.2010.

4. The counsel for the respondent submitted that the order-in-original has examined each one of the points relevant to the case and the original authority concluded that the concession under the said notification is rightly available to them. He explained the respondents defense for each of the 7 points summarized under the show cause notice. The notice alleged:

23. In view of these facts and evidences, it emerges that:

(i) The Noticee did not have the required power supply and electrical infrastructure like electricity connection from HPSEB, DG Gensets, electric control panels, etc. including civil construction related to electricity for running machines and for production / manufacture in order to star commercial production of finished goods on or before 31.3.2010.

(ii) The Noticee had not installed the complete plant and machinery as on 31.3.2010 and none of the 25 plant and machinery declared in their project report was functional on the said date.

(iii) In their visit to the Noticee unit on 31.3.2010, the Assistant Environmental Engineer, HPSCPB, Parwanoo and Junior Environment Engineer, HPSPCE Baddi found that they had not installed Plant and Machinery including required pollution control devices.

(iv) The Noticee did not also have crucial raw material like Absorbent Glass Mat (AGM) required for the manufacture of batteries.

(v) Their manufacture and sales were concocted and false.

(vi) Shri Rajesh Gupta, Partner of the Noticee has agreed that 24 out of 25 plant and machinery were uninstalled, raw material like AGM, terminal pole safety valve/ rent was not available and sales shown was found to be false.

(vii) The Noticee tried to manipulate / temper with the records at every stage with a malafide intention to fraudulently avail of the area based exemption and to evade Central Excise Duty.

5. Regarding non-availability of power supply before 31.3.2010, he contended that they already had the power connection of 48Kw from HPSEB and 62KVA DG set. Power supplies of these sources is sufficient to run the machines installed in the month of March, 2010. It is admitted fact that they did not have all the machines installed and were not fully operational during March, 2010. The power availability during the month of March, 2010 is sufficient for commencement of commercial production. Regarding purchase of raw material and their utilization, he stated that apart from the documents in stock register, the same is supported by their annual balance sheet which will clearly show the quantum of purchase, use and closing balance. Regarding certain discrepancies in purchase vouchers, he had stated that store keeper has elaborated certain entries for accounts purpose and as such, the documents are genuine. They have employed about 15 workers including Supervisor in March, 2010, though the Managers were appointed in September, 2009. To support this, they have attendance register, salary ledger, wages register till 31.3.2010. Range Superintendent vide his letter dated 5.3.2011 addressed to the Asstt. Commissioner, Shimla specifically stated that respondent commenced the commercial production by 31.3.2010 and recommended for concession under the above notification. Learned Counsel submitted that plant and machinery available for working utilizing the available power plant commenced commercial production by taking the first step to convert parts of the materials/ raw material to commence production of batteries. They had manufactured grids with the help of grid casting machines and all the further processes were carried out manually. Such processes were well recognized in the industries.

6. Regarding proceedings by the Pollution Control Board, the learned Counsel for the respondent stated that Member- Secretary of the Board over-ruled the objection dated 31.3.2010 raised by the officers and extended the approval and the issue of certificate by the Pollution Control Board. He also relied on the fact that respondents were availing concession for sales tax and income tax based on same condition of commencement of commercial production prior to 31.3.2010. Himachal Pradesh State Industrial Policy Rules essentially requires certificate of commencement of commercial production to be granted by the Directorate of Industries. Such certificate stating the date of commercial production and date of commencement of commercial production as 31.3.2010 has been issued to them on 21.9.11. Regarding statement given by Shri Rajesh Gupta, partner, the learned counsel stated that same should be read along with letter dated 2.5.11 explaining the process carried out and also procurement of raw material in March, 2010.

7. We have heard both the sides and examined the appeal records. The only point for decision is whether or not the respondent had commenced commercial production on or before 31.3.2010, in order to be eligible for exemption under notification No. 50/03-CE. A perusal of the impugned order shows that the learned Commissioner has elaborately discussed all the points agitated before us. Concession under notification No. 50/03-CE is in pursuance of industrial policy notified through office memo No. 1(10) /2001 -NER dated 7.1.2003. In pursuance of the said Central Government Policy, the State Government also commenced Industrial Policy 2004 to extend concession and facility for the industries in Himachal Pradesh. In terms of the said Policy commencement of commercial production means the date on which industrial enterprise actually commenced the commercial production as certified by Director etc. In the present case, the State authorities have certified commencement of commercial production as 31.3.2010. The respondents were also given the benefit under Income Tax Act and Sales Tax Act on the ground that they commenced production before 31.3.2010. All these issues are apparently operational under the same Industrial Policy.

8. We find that the Revenue emphasized in appeal that it is not possible to manufacture Lead Acid battery in short span of few days and to clear that before 31.3.2010 as claimed by the respondents. We find notification talks about commencement of commercial production. It is clear that commercial sale of manufactured items on or before 31.3.2010 is not a pre-requisite as per notification.

9. Learned original authority examined this issue in detail. We agree with his finding that it is only the commencement of commercial production which is essentially and not emergence of fully saleable finished product. As such, the sale of such item at best can only establish the existence of commercial production prior to that date but that is not only evidence to say that the commercial production commenced or not. It is pertinent to note that show cause notice demanded duty for clearances made from 1.4.2010. It is apparent if the clearances made from 1.4.2010 are to be charged to duty as they are manufactured by the respondent, the commercial production would have certainly commenced prior to that date. Regarding non-availability of certain raw material with the respondent they have clarified that while most of the raw materials were procured by them some essential raw materials in small quantities were either taken from the samples given by the vendors and also supplied by vendors of capital machines as sales promotion. This is done in the initial starting stage of their operations. Considering the direct and corroborative evidence as analyzed by the original authority and the conclusion arrived thereafter by the authority, we find the Revenue has not made out a case to interfere with the said findings. Accordingly, we dismiss the appeal filed by the Revenue.

( operative part of the order pronounced in the open court )

( Ashok Jindal ) Member(Judicial)

( B Ravichandran )

Member(Technical)

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