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THE COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX, BHARUCH Versus SHREE KRISHNA INDUSTRIES

Maintainability of appeal before the High Court - Question relating to availability of exemption notification versus question relating to Determination of rate of duty of excise or the value of goods for assessment - SSI Exemption - Held that:- Section 35G of the Act expressly excludes orders passed by the Appellate Tribunal relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment. Corre .....

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er things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment. - Whether the clearances made by the respondent for the period under consideration, in fact, exceeded the limit stipulated under the exemption notification or were within such limit - Held that:- the question of applicability of the exemption notification does not arise, inasmuch as, it is not the case of the revenue that the assessee is not en .....

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e purposes of assessment, and as such, the appeals have rightly been filed before this court under section 35G of the Act. - Decided against the revenue - TAX APPEAL NO.548 of 2015, TAX APPEAL NO.516 of 2015, TAX APPEAL NO.549 of 2015 - Dated:- 10-3-2016 - MS. HARSHA DEVANI AND MR. G.R.UDHWANI, JJ. FOR THE APPELLANT : MR RJ OZA, SR. STANDING COUNSEL FOR THE OPPONENT : MR DEVAN PARIKH, SR. ADVOCATE with MR HARSHAL M SHAH, ADVOCATE COMMON ORAL ORDER (PER : HONOURABLE MS. JUSTICE HARSHA DEVANI) 1 .....

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lower appellate authorities. 3. Mr. Devan Parikh, Senior Advocate, learned counsel appearing on behalf of the respondent, at this belated stage, raised a preliminary objection to the maintainability of the appeals on the ground that the controversy involved in the present cases involves the determination of a question having relation to the rate of duty of excise or to the value of goods for the purposes of assessment and hence, in view of the provisions of section 35G of the Central Excise Act .....

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/2002-CE dated 1st March, 2002. It was pointed out that it is the case of the appellant that there are clandestine clearances which exceed the limit provided for availing of the benefit under the exemption notification and hence, the respondent is not entitled to the benefit of the said notification to the extent the clearances exceed the exemption limit. It was submitted that another aspect of the matter is that it is the case of the appellant that the respondent has two units namely, the Vadu .....

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n of a notification or tariff. It was submitted that various High Courts have taken a view in the context of factual aspects and even if a view is taken that it is a case of clandestine removal, if the issue is one of availment of an exemption notification, it is a question relating to the rate of duty. 5.1 In support of his submissions, the learned counsel placed reliance upon the decision of the Andhra Pradesh High Court in the case of Sridhar Paints Co. Pvt. Ltd. v. Commr. of Cus. & C. Ex .....

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n having a relation to the rate of duty of excise or to the value of goods for the purpose of assessment lies only to the Apex Court. The court found that the decision of the adjudicating authority in that case related to the rate of duty of excise and also to the value of goods for the purpose of assessment and accordingly, held that the appeal would lie before the Supreme Court and not before the High Court. 5.2 The decision of the Punjab & Haryana High Court in Commissioner of Central Exc .....

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in the light of the judgment of the Supreme Court in the case of Navin Chemicals Manufacturing and Trading Company Limited v. Collector of Customs, 1993 (68) E.L.T. 3 (SC), and found that the question of law formulated by the revenue in the said case referred to exemption under the Notification No.175/86-C.E. as amended by other notifications relating to the rate of duty of excise. The court found that the substantial questions of law raised in the appeals which were stated to arise from the ord .....

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another unit for its operation having common power connection, common boiler, common storage for raw material, common water treatment plant, common entrance and sharing common financial status and when the capital goods were purchased in the name of the old unit who had also availed credit of duty paid thereon, can be treated as an independent factory for allowing the benefit of the exemption notifications referred to therein. An objection was raised to the maintainability of the appeal before .....

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the other part should be interpreted similarly. It was further observed that a dispute as to whether or not the assessee is covered by an exemption notification relates directly and proximately to the rate of duty applicable thereto for the purpose of assessment. The court observed that in view of the above legal position, the substantial question raised in the appeal related to the determination of a question having relation to the rate of duty of excise and, therefore, for determination of suc .....

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was owned by M/s. Singer India Ltd., was not a branded goods in terms of the Notification No.1/93-CE dated 28th February, 1993 and if it was so, whether exemption/concession to the said goods was available under the notification? The court, after referring to various decisions in this regard, was of the view that since the question raised in the appeal relates to eligibility of the goods manufactured by the assessee for exemption under Notification No.1/93-CE dated 28th February, 1993 and goods .....

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ould be filed before the apex court under section 35L of the Act. Reliance was also placed upon a decision of the Karnataka High Court reported in 319 E.L.T. A 186, wherein the revenue had preferred an appeal challenging the order of the Tribunal holding that denial of SSI exemption to the assessee was erroneous and granting the benefit of exemption. The Tribunal also proceeded to determine the rate of duty payable in respect of hammer assembly. The question involved in the appeal was whether th .....

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r Industries Pvt. Ltd., 2011 (269) E.L.T. 45, wherein the order passed by the Tribunal holding that the confirmation of demand on clandestine removal of goods from the factory premises of the assessee does not hold any merit as there was no evidence before it to show that the goods which were alleged to have been clandestinely removed were in fact manufactured by the assessee in the absence of any flow of raw materials from the so called units from whom the purchases were recorded by the assesse .....

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11 (267) E.L.T. 579, wherein the substantial question of law proposed was whether the revenue was justified in demanding the duty on the ground of clandestine removal of goods. The court held that the said determination to be done by the court fell squarely within the phrase among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for the purposes of assessment . The said question was outside the purview of an appeal to the .....

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d lis was regarding benefit of exemption under Notification No.8/2001 available to an assessee, a small scale industry. It was not an issue relating to rate of duty or the value of goods, but only to the effect as to whether the assessee was entitled to exemption granted to a small scale industrial unit on the basis of trademark of another concern. The court held that any decision thereon is relevant only inter-parties and has no wider ramification within the jurisdiction of the court much less, .....

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rary view were not referred to nor dealt with therein. 5.8 The learned counsel further submitted that the notification in question provides that if the turnover is more than rupees one crore, the assessee is not entitled to the benefit thereof. It was submitted that even if it is a pure issue of fact, that if inter-party there lies an answer with regard to rate of duty and excisability of the goods, in effect and substance, the entire case relates to rate of duty if one of the questions relates .....

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ls under section 35G of the Act. If the substantial question of law raised in the appeals does not relate to the rate of duty or value of goods, the High Court has the jurisdiction to entertain and decide the appeals. Reference was made to the common question proposed in all the appeals to point out that the said question does not in any manner relate to the determination of any question having relation to the rate of duty or value of goods. Referring to the show-cause notice issued to the respo .....

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stions was as to whether or not, the benefit of Notification No.21/2002-Cus. dated 1st March, 2002 as amended could have been granted to the respondents, ignoring the test report of the Chemical Examiner and the Chief Chemist of the Government and relying upon the opinion of the private laboratory. The court noted that as there was no dispute that if the total carotenoid oil (as beta carotene) is found to be in the range of 500-2500 mg/kg in the very Palm Oil it attracts concessional rate of bas .....

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e of duty of customs or to the value of goods for the purposes of assessment as well as to the decision of the Supreme Court in the case of Navin Chemical Manufacturing and Trading Company Ltd. (supra) as well as the decision of the Supreme Court in the case of New India Assurance Company Limited v. M/s. Zuari Industries Limited, (2009) 9 SCC 70, the court held that in the aforesaid facts and circumstances, it could not be said that the question involved in the appeals had a direct and proximate .....

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ppeals, it would be necessary to refer to the question as proposed by the appellant, which is common in each of the appeals and reads thus:- [a] Whether in the facts and circumstances of the case, the Tribunal has committed substantial error of law to set aside demand of duty, interest and imposition of penalty imposed on the respondent assessee on the ground that charges leveled against him are not proved, in ignorance of relevant material and evidence placed on record in the adjudication while .....

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ndestine removal of Ceramic Glaze Fritz on which central excise duties were not paid by it. The case against the respondent is that out of the maximum production that was obtained on any day, the respondent had accounted for only a small portion of the production in its books of account, while majority of the production so obtained was deliberately kept unrecorded with an intent to clear the same without including its value in the aggregate clearance value prescribed under the exemption notifica .....

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-maintenance of account of stock of finished excisable goods manufactured and clandestinely removed by the respondent. It is the case of the appellant that the entire amount of sales for which invoices had been issued/chits prepared and recovered from the factories of the respondent situated at Vadu and Jambusar and recovered from other premises and the sale proceeds collected by way of cash/cheques/demand drafts against clandestine sale of illicitly removed ceramic glaze fritz shall be consider .....

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fication and for the balance clearances out of the two units, Central Excise duties are recoverable. It was the case of the respondent before the Central Excise authorities that the goods manufactured by M/s. Associated Industries in the Vadu factory cannot be included in the clearance value of the respondent s factory at Jambusar. 8. As is evident from the record of the case, the adjudicating authority and the first appellate authority confirmed the demand raised in the show-cause notice and th .....

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35G of the Central Excise Act, 1944 makes provision for appeal to the High Court. Sub-section (1) of section 35G which is relevant for the present purpose reads thus: 35G. Appeal to High Court.- (1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal on or after the 1st day of July, 2003 (not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for t .....

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he value of goods for purposes of assessment. Sub-section (2) thereof provides that for the purposes of that Chapter, the determination of any question having a relation to the rate of duty shall include the determination of taxability or excisability of goods for the purpose of assessment. 10. Thus, section 35G of the Act expressly excludes orders passed by the Appellate Tribunal relating, among other things, to the determination of any question having a relation to the rate of duty of excise o .....

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rder passed by the Appellate Tribunal relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment. 11. The question that, therefore, arises is as to whether the controversy before the Tribunal relates to the determination of any question having a relation to the rate of duty or value of goods for the purposes of assessment. The lead decision in this regard is the decision of the Supreme Cou .....

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rs are to be heard by a Bench consisting of one judicial member and one technical member, subject to the provisions of sub-section (4). Sub-section (4) carves out an exception to the general provisions of sub-section (2) and provides that a member of CEGAT sitting singly can hear appeals in the matters enumerated therein provided that they are not cases where the determination of any question having a relation to the rate of duty of customs or to the value of goods for purposes of assessment is .....

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ilarly, where the appeal involves the determination of any question that has a relation to the value of goods for the purposes of assessment, that appeal must be heard by a Special Bench. Cases that relate to the rate of customs duty for the purposes of assessment and which relate to the value of goods for the purposes of assessment are advised treated separately and placed before Special Benches for decision because they, more often than not, are of importance not only to the importers who are .....

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poses of assessment. Thus, the court has held that the phrase relating to is ordinarily of wide import but in the context of its use in section 129C of the Customs Act, it must be read as meaning a direct and proximate relationship to the rate of duty and to the value of goods for the purpose of assessment. The court also observed that cases that relate to the rate of customs duty for the purpose of assessment and which relate to the value of goods for the purpose of assessment are advisably tre .....

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falling within the ambit of the phrase relation to the controversy involved must have a direct and proximate relationship to the rate of duty and to the value of goods for the purpose of assessment and that the controversy must be such that the decision rendered thereon would have a wide application. The facts of the present case are required to be examined in the light of the above principles. 13. In the opinion of this court, from the facts as appearing from the record, the controversy before .....

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he clearances made by the respondent for the period under consideration, in fact, exceeded the limit stipulated under the exemption notification or were within such limit. 14. The Central Excise Act is an Act relating to central duties of excise on goods manufactured or produced in certain parts of India. By its very nature, therefore, in any matter relating to central excise, it is but natural that the same would in some manner or other touch the question of central excise duty. However, what i .....

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d to the benefit of the exemption notification. Nonetheless, even a person like the respondent, who is covered by an exemption notification, is entitled to the benefit thereof only to the extent the clearances fall within the limits prescribed in the notification. The moment the clearances exceed the limit, to the extent the clearances exceed such limit, the respondent would not be entitled to the benefit of the exemption notification in respect thereof. The question as to whether or not in fact .....

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