TMI Blog2009 (3) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... ility to SSI exemption. - E/184 and 256-261/2008 - 232-238/2009 - Dated:- 5-3-2009 - Ms. Jyoti Balasundaram, Vice-President and Shri P. Karthikeyan, Member (T) REPRESENTED BY : S/Shri N. Venkataraman, Senior Counsel and J. Shankararaman, Advocate, for the Appellant. Shri N.J. Kumaresh, SDR, for the Respondent. [Order per : P. Karthikeyan, Member (T)]. - The captioned appeals are filed by M/s. Mayil Mark Nilayam (MMN for short), the main appellant, associate firms and Shri M.N. Venkatachalam, partner MMN. Investigations at the premises of MMN revealed that within the premises there existed M/s. Tiger Industries, M/s. Sornam Industries, M/s. Tiger Mills, M/s. Lakshmi Mills and seven packing contractors, all belonging to the same group. Further enquiry revealed existence of two other units, M/s. M.M. Co., and M/s. N.V.M. Co. All those Units were directly controlled by M.N. Venkatachalam, partner of M/s. Mayil Mark Nilayam. 15,701 kgs of shikakai powder and 1384 kgs of arapputhool valued at Rs. 2,12,241/- found at the said premises were seized on the reasonable belief that they were liable for confiscation. Following investigation by the officers of the Directora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Central Excise Act, 1944 (the Act). The Commissioner imposed a penalty of Rs. 2,51,48,888/- on MMN under Rule 173Q and another penalty of Rs. 51,03,374/- u/s 11AC of the Act (relating to period since 28-9-1996). He imposed a penalty of Rs. 1.00 lakh on Shri M.N. Venkatachalam, partner of MMN under Rule 209A of the Central Excise Rules, 1944 (CER) and imposed penalties of Rs. 50,000/- each on M/s. Tiger Industries, M/s. Swarnam Industries, M/s. NVM Co, Kumbakonam, M/s. MM Industries and M/s. MM Co. Mayiladuthurai under Rule 209 of CER. He imposed a fine of Rs. 2,12,449/- towards the value of excisable goods seized during investigation and were found liable for confiscation. These goods had been released provisionally. 3. Separate appeals have been filed by MMN and others seeking to vacate the demands of duty and interest from MMN and the respective penalties imposed on them. MMN has assailed the impugned order on the basis that the same was passed in gross violation of principles of natural justice. Many of the submissions made by it were not considered in passing the impugned order. A product became excisable only when it passed the test of 'manufacture' and 'marketab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .), the Division Bench of the Karnataka High Court in Sree Ramakrishna Soapnut Works v. Superintendent of Central Excise - 2004 (164) E.L.T. 238 (Kar.), the Madras High Court in the case of Madura Coats Workers Cooperative Stores v. Union of India - 2005 (182) E.L.T. 159 (Mad.) rendered conflicting decisions on the excisability of the products involved. The Supreme Court on 28-2-2007, in the case of Sree Ramakrishna Soapnut Works v. Superintendent of Central Excise - 2007 (210) E.L.T. 332 (S.C.) remanded the issue to the Tribunal to decide as to whether the process involved in production of shikakai powder from shikakai amounted to manufacture [post-January 1999]. The South Zonal Bench, Bangalore vide Final Order dated 3-5-2007 in the case of S.R.K. Products (Pvt.) Ltd. v. Commissioner of Central Excise, Bangalore - 2007 (213) E.L.T. 34 (Tri) held that crushing or powdering of shikakai into shikakai powder did not amount to manufacture. The same authority which had classified the impugned goods under 3307.39 [shikakai powder] and 3405.40 [arapputhool] in the impugned order since issued another Show Cause Notice to the appellants for classifying the items under CSH 3305.99 and CSH 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court of Madras in the case of Madura Coats Workers Cooperative Stores Ltd. v. Union of India - 2005 (182) E.L.T. 159 (Mad.) held that the products were not liable to central excise duty. (v) On 28-2-2007 the apex Court set aside the decision of the Karnataka High Court in the case of Sree Ramakrihsna Soap Nut Works v. Superintendent of Central Excise - 2007 (210) E.L.T. 332 (S.C.) and remanded the matter to the Tribunal to decide the issue on merits. The apex Court, however, made it clear that their direction applied to the period post-January 1999. The earlier period was covered by the judgment of the Karnataka High Court reported in 1999 (111) E.L.T. 27 (Kar.), SLPs against which were dismissed. (vi) The Tribunal in the case of S.R.K. Products (Pvt.) Ltd. v. Commissioner 2007 (213) E.L.T. 34 (Tri) held that crushing or powdering of shikakai into shikakai powder did not bring into existence any new product. In the impugned order penalty was imposed on MMN under Rule 173Q without specifying the sub-clause of Rule 173Q under which the penalty had been imposed. The Apex Court had in a case of similar facts in the case of Amrit Foods v. Commissioner of Central Excise, U.P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s could be clubbed and held to be those of MMN? We take up the question of manufacture first. 10.1 Manufacture and classification of the goods (a) Shikakai Powder Shikakai powder is made by mixing mohwa cake, shikakai, usilai leaves, soap nut and turmeric in the proportion 350:5:50:10:2 and pulverizing them into powder in pulverizing machines using power and packing in unit packings of I5gms, 25 gms, 100 gms, 200 gms and 500 gms for retail sale. The Commissioner observes in the order that 'natural plant products are made into marketable specific application merchandise'. The impugned order does not examine whether the activity involved is an exigible process whereby a product with a new name, properties and uses different from the inputs emerged. We find that the Apex Court in Sree Ramakrishna Soapnut Works v. Superintendent of Central Excise - 2007 (210) E.L.T. 332 (S.C.) considered this issue. The Court observed that mere conversion of powder may not constitute manufacture. The matter could not normally be decided on concepts. Observing thus the matter was remanded to the Tribunal for adjudication. The Apex Court further remarked that the said decision applied only for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held in Divisional Deputy Commissioner of Sales Tax v. Bherhaghat Mineral Industries - 2000 (119) E.L.T. 271 (S.C.) that crushing of dolomite lumps into chips and powder was not process of manufacture which brought about a new commercial commodity. In Andhra Cements v. CCE - 2005 (188) E.L.T. 179 (Tri.-Bang.) the Tribunal held that grinding of granulated blast furnace slag did not amount to manufacture. We find that by grinding mohwa cake into arapputhool no new goods with different name, properties and uses come into existence. Mohwa cake is powdered to make arapputhool. As observed by the Apex Court in 2007 (210) E.L.T. 332 (S.C.) mere conversion into powder is not an activity of manufacture. The inputs do not get converted into a new product with different properties. The same material is presented in a different form. We hold that arapputhool is not a manufactured item exigible to duty. Therefore the question of classification of arapputhool also does not arise. 10.2 Limitation The period of dispute is June 1994 to January 1998. There were divergent views on the exigibility of the product shikakai powder. Different High Courts had held different views on the issue as reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he proposal of clubbing : "12.3.4 As already stated, the allegations in the show-cause notice supported by documentary evidences have not been clearly and specifically rebutted by the noticees. They have only stated that the units are legally registered and are independent. As elder member of the family, Shri M.N. Venkatachalam is managing the affairs of some of these units and that alone should not be the cause for clubbing. The evidences brought out in the show-cause notice were elaborate and overwhelming. As conceded by the noticees, that being elder member of the family managing decades old family business, the management and transactions of all the group units are controlled by Shri M.N. Venkatachalam either directly or as per his directions. The nature and functioning of these partnerships/proprietary concerns clearly indicate that these units though may have separate name and style and registration, were all part of one group with interconnected business interest and common objective. The records adequately reveal that the working capital required for functioning of the group units as a whole was tightly and solely controlled by Shri MNV and there is constant interchanging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case. However, as the associate units are held to be dummies of the main manufacturer we hold that no penalties can be imposed on them under Rule 209 of CER. As we hold that MMN had bona fidely believed that the impugned goods were not exigible no penalty is liable to be imposed on MMN and Shri. M.N. Venkatachalam. 11. In the result we hold as follows :- (i) Shikakai powder is excisable. It is classifiable under CSH 3305.90. Exemption under Notification No. l40/83 as amended shall be extended to clearances of shikakai powder made by MMN and associate units during the material period treating MMN as the manufacturer. (ii) Demand shall be restricted to normal period. (iii) Arapputhool is not excisable. (iv) Penalties imposed on MMN, except that on account of confiscation associate units and Shri M.N. Venkatachalam are set aside. (v) Duty due shall be re-quantified considering the sale price as cum-duty. (vi) The applicable amounts of fine shall be decided afresh. The appellants shall be allowed adequate opportunity of hearing before a fresh decision is taken. The appeal filed by MMN is allowed by remand. Other appeals are allowed. (Pronounced in open court on 5-3-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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