M/S. Pam Cosmetics & Glasses (P) Ltd vs Cce-Chandigarh-I

[Arising out of order-in-appeal no. 130/CE/Chd-I/2012 dated 30.07.2012 passed by CCE-Chandigarh]

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

2. Whether it would 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 Department Authorities?

M/s. Pam Cosmetics & Glasses (P) Ltd. Appellant

Vs.

CCE-Chandigarh-I Respondent.

Appearance: Shri Shekhar Vyas, Advocate for the appellant.

Shri R.K. Grover, DR for the respondent.

Coram: Honble Shri Rakesh Kumar, Member (Technical)

Honble Shri S.K. Mohanty, Member (Judicial)

Final Order No. 51934/2015

Per: Rakesh Kumar

The facts leading to filing of this appeal are, in brief, as under:

1.1 The appellant company is a manufacturing unit (Unit-I) at Kala Amb, District Sirmor, Himachal Pradesh for manufacture of moulded plastic products covered by heading 3924.20 of the Central Excise Tariff. This unit is availing of the duty exemption under notification no. 49/03CE and had commenced commercial production sometimes in 2004. However, the dispute in the present case is not about this manufacturing unit but is about another manufacturing unit (unit II) claimed to have been set up by the appellant company in March, 2010 on the first floor of the same building and this unit is also for manufacture of the same products. According to the appellant company, the Unit II had commenced commercial production w.e.f. 29/03.2010 and the declaration for availing of exemption notification no. 49/03CE dated 10/06/2003 had been filed on 31/3/2010. According to the appellant, the single-window-clearance from the State Government for setting of this unit had been received on 17/2/2010 and the permission to operate DG set had also been given by the concerned authority on 26/2/2010. The Unit II was located on the first floor of the building on the ground floor of which, the Unit-I is located. The Unit-II was visited by the Jurisdictional Central Excise Officers on 25/8/2010 and thereafter, again on 23/11/2010. According to the report of the Visiting Officers  (a) while Unit-I has manufacturing process in a portion of first floor and the injection moulding thereon of Unit-I has also been installed on first floor, the Unit-II has also its manufacturing activity on the same floor, (b) there is no demarcation or boundary between Unit I and Unit  II;(c) there are two injections moulding machines put together on first floor- first machine is claimed to be of UnitI and the second machine is claimed to be of Unit-I; (d) the stock of raw material for both the units is stored at one place; (e) both the units have common sales tax registration; (f) entrance and exit of the Unit-II is common, and (g) while Unit-II has applied for registration with District Industries Centre for manufacture of plastic goods, at the time of office of officers visit to the factory, the production of plastic goods (parts of folding mirror) was going on both the machines and on enquiry with supervisor, it was reported that the goods under production both the machines are for Unit-I.

1.2 In view of the above, the officers were of the view that the Unit-II has no independent existence and hence, the same would not be eligible for exemption notification no. 49/03CE.

1.3 After issue of show cause notice for denial of the exemption, the Jurisdictional Assistant Commissioner vide order-in-original dated 15/4/2011 held that the Unit-II of the appellant company is not eligible for area based exemption under notification no. 49/03CE. The Assistant Commissioner in this order upheld the allegation that the Unit-II does not has any independent entry/demarcation of identity in the same Khasara No. for which the declaration has been filed under the notification; that it is just not possible to install all the plant and machinery and start commercial production within short period of two days and hence, it is clear that the unit claims had not started commercial production on or before 31/3/2010 and had cleverly created evidence to show that they had complied with the condition of notification no. 49/03CE dated 10/6/2003. On appeal being filed to Commissioner (appeals) against this order, the Commissioner (appeals) vide order-in-appeal dated 30/7/2012 dismissed the appeal. Commissioner (appeals) in the impugned order held that Unit II, which is claimed to be a new unit set up by the appellant company, did not exist and it was created only on paper. Against this order of the Commissioner (appeals), this appeal has been filed.

2. Heard both the sides.

3. Shri Shekhar Vyas, Advocate, ld. Counsel, for the appellant, pleaded that the copy of the verification reports dated 27/8/2010 and 23/11/2010 were not provided to the appellant; that on the day, the officers visited the unit, there was heavy rains because of which water had entered the ground floor (where old unit is located); that for this reason only, the machinery, raw material, finished the goods etc of the Unit-I had been shifted to the first floor; that just because of floods, the machinery and raw material of Unit-I had been shifted from ground floor to first floor, the appellant cannot be accused of creating the dummy Unit-II; that Unit-II has separate existence and is independently entitled for exemption notification no. 49/03CE; that machinery of Unit-I and Unit-II is separate; that just because on the date of officers visit, on account of floods, the raw material of Unit-I had been shifted to first floor, it cannot be presumed that there was common raw material storage of both the units and that in view of the above, the impugned order is not correct.

4. Shri R.K. Grover, ld. DR defended the impugned order by reiterating the findings of the Commissioner.

5. We have heard the submissions from both the sides and perused the records.

6. The appellant in the present case is Unit-II of M/s. Pam Cosmetics And Glasses Pvt. Ltd. and is located at first floor of the building at 196/2/1, Moginand Nahan Road, District Sirmour, Himachal Pradesh and the unit is engaged in manufacture of moulded plastic products. On the ground floor of the same building, there is Unit-I of the appellant company manufacturing the same products and the old unit located at ground floor is operating since 2004. The old unit is also availing of exemption under notification no. 49/03CE. The Unit-II is claimed to have been set up in February/March, 2010 and according to the appellant, the single-window-clearance of this unit had been granted by the District Industries Centre on 17/2/2010. The permission of operating DG sets had been granted on 26/2/2010 and thereafter it had commenced commercial production on 29/3/2010. There is no dispute that this Unit-II had filed the necessary declaration for availing of exemption under notification no. 49/03CE on 31/3/2010. The department seeks to deny the exemption of Unit-II on the ground that Unit-II is not independent. In this regard, para 3 of the show cause notice dated 31/8/2010 issued by the Deputy Commissioner of Central Excise to the appellant unit is reproduced below:

On scrutiny of the papers submitted by you and on the basis of the verification which was conducted on 25/08/2010 by the Superintendent of Central Excise Paonta Sahib, it has been found that(i) The unit is located on first floor of the Unit-I, (ii) Unit-II has manufacturing process in a portion on the first floor where the Unit-II has been installed, (iii) the Unit does not have an independent entry. There is no demarcation of the boundary of Unit-I and II, (iv) The stairs to the first floor are spiral stairs made up of iron and the raw material cannot be carried to first floor to these stairs, (v) both the units have common registration, (vi) there are two injection moulding machines put together on the first floor. One machine belongs to Unit-I and the other to Unit-II, (vii) stock of raw material was put together at one place, (viii) unit-II has applied for registration with DIC for manufacture of plastic goods and at the time of visit, the production of plastic goods (parts of the folding mirror) was going on both the machines. On enquiry from supervisors, it was reported that the goods under production at both machines are for Unit-I and (ix) the UnitiII is not independent and secure.

In view of the above shortcoming it is difficult to identify the demarcation of the Units and it is evident that the Unit-II is not an independent unit. As such the exemption under such notification cannot be granted t o the said unit.

7. Thus, the basis for denial of exemption notification no. 49/03-CE the Unit-II is that it has no independent existence of Unit-I or in other words, the Unit-II is alleged to be the part of the Unit-I and according to the department, Unit-II cannot be treated as a separate unit which had commenced commercial production on or before 31/3/2010 so as to be independently eligible for exemption under notification no. 49/03CE. The Assistant Commissioner has upheld the above allegation and it is this order of the Assistant Commissioner which has been upheld by the Commissioner (appeals) by the impugned order.

8. While according to the factual position mentioned in para 3 of the show cause notice dated 31/8/2010 and also discussed in the order passed in the Commissioner (appeals), we agree with the departments plea that two Units  Unit-I and Unit-II cannot be treated as independent unit, on this ground the benefit of exemption in respect of the clearances from the new unit at first floor cannot be denied, as once Unit-II is held to be not an independent unit, it will have to be treated as a part of the Unit-I and there is no dispute about the eligibility of the Unit-I for exemption under notification no.49/03CE.

9. In view of this, the goods manufactured from the new machinery, if any installed, in the name of Unit-II on the first floor would be eligible for duty exemption under notification no. 49/03CE. However, since both the Units, - Unit-I as well as Unit-II, are upheld to be one entity and not the independent Units, they would be eligible for exemption under notification no. 49/03CE only for ten years from the date on which the Unit-I had commenced commercial production. In fact, in terms of the Para 3 of the notification no. 49/03CE and similar provision in notification no. 50/03CE, the exemption under these notifications is applicable to a Unit for a period not exceeding 10 years from the date of publication these notifications in the official Gazette or from the date of commencement of the commercial production whichever is later. Thus, if the Unit-I had commenced commercial production sometime in 2004 it would be eligible for exemption under this notification till 2014 only. The attempt to set up the Unit-II as a separate Unit on first floor of the Unit-I appears to be an attempt by the appellant company to enjoy the exemption in the name of Unit-II for another period of ten years. Since, we have held that Unit-II has no existence and Unit-I and Unit II have to be treated as one unit, the same would be eligible for exemption only for a period of ten years from the date on which the unit-I had commenced commercial production.

10. The appeal stands disposed off, as above.

(Rakesh Kumar)

Member (Technical)

(S.K. Mohanty)

Member (Judicial)

Ritu