IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. CEA No. 48 of 2005 (O&M) Date of Decision: August 3, 2009 Commissioner, Central Excise Commissionerate, Panchkula …Appellant Versus M/s Special Machine, Karnal …Respondent CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON’BLE MR. JUSTICE JASWANT SINGH Present: Mr. Sanjeev Kaushik, Senior Standing Counsel, Government of India (Indirect Taxes), for the appellant. Mr. A.K. Jain, Advocate, for the respondent. 1. Whether Reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporters or not? 3. Whether the judgment should be reported in the Digest? M.M. KUMAR, J. This order shall dispose of C.E.A. Nos. 48 and 120 of 2005 as common questions of law and facts are involved. These appeals have been filed by the revenue under Section 35-G of the Central Excise Act, 1944 (for brevity, ‘the Act’) challenging order dated 28.4.2004 and order dated 2.12.2004, passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (for brevity, CEA No. 48 of 2005 (O&M) ‘the Tribunal) in respective cases. The facts are being referred from C.E.A. No. 48 of 2005. 2. Brief facts of the case are that M/s Special Machiners- respondent was having three separate Units in Karnal and engaged in the manufacture of welding electrodes, plants & machinery and flux, falling under Chapters 83, 84, 85, 38 and 29 of the Schedule attached to the Central Excise Tariff Act, 1985 (for brevity, ‘the Tariff Act’). It was also holding L4 Licences for manufacturing of said products. M/s Industrial Products, M/s Modern Equipments and M/s S.M. Welding Electrodes (P) Ltd., all situated at Karnal, are also licensed/registered with the department and engaged in the manufacture of welding electrodes. M/s Perfect Industries, Karnal, was a declarant. 3. On 6.3.1992, the Central Excise Preventive Officers of Delhi visited two premises of the respondent as well as units belonging to M/s Industrial Products, M/s Modern Equipments and M/s S.M. Welding Electrodes (P) Ltd. and M/s Perfect Industries and some quantity of welding electrodes and pacing material etc. were seized. Later on it was detected that some of the material was unaccounted and did not tally with the records. On 6.3.1992 itself, the statement of Shri Vitap Jain, Chief Executive of the respondent was recorded who admitted that he was also the authorised signatory of M/s Industrial Products, M/s S.M. Welding Electrodes (P) Ltd. and M/s Modern Equipments. The statements of various employees working in the aforementioned industrial units were also recorded 2 CEA No. 48 of 2005 (O&M) under Section 14 of the Act. On 23.3.1992, the statement of Shri R.M. Jain, Proprietor of the respondent as well as Shri Vipin Jain, Accounts Assistant of the respondent was recorded. Summons were issued to Shri R.M. Jain to appear on 22.5.1992, 22.6.1992 and 10.7.1992 but he failed to appear on one pretext or the other. After recording the statements and analyzing the same it was found that Shri R.M. Jain, Proprietor of the respondent was providing readymade coating material to different units, which is an essential ingredient required for the manufacture of welding electrodes, through his other concern, namely, M/s Perfect Industries. However, no stock register was being maintained but only invoices were raised. It was also found that Modern Equipments and S.M. Welding Electrodes were manufacturing some of the brands owned by the respondent under royalty agreement. 4. It was further found by the department that the aforementioned different units were also lacking basic infrastructural facilities which were required for carrying on independent functioning. The production staff of all the units was common and the office work was being performed by the staff of the respondent. On the pretext of research and development (R&D), in the R&D Laboratory of the respondent the work of quality control of finished welding electrodes was being performed. It was also noticed that during 1987-88 and 1988-89 the respondent was not entitled for the benefit of notification No. 175/86, dated 1.3.1986, on the goods valuing more than Rs. 1.5 crores, which were cleared during 1986-87 3 CEA No. 48 of 2005 (O&M) and 1987-88. It was, thus, found that the respondent has contravened the provisions of Rule 9(1), 173B, 173C, 173F, 173G of the Central Excise Rules, 1944 (for brevity, ‘the Rules’) as well as notification No. 175/86, dated 1.3.1986, and willfully suppressed the material information with an intention to evade payment of duty. Accordingly, a show cause notice was issued to the respondent as to why the production and clearance effected by M/s Industrial Products, M/s Modern Equipments, M/s S.M. Welding Electrodes (P) Ltd. and M/s Perfect Industries be not treated as manufacture and clearance for and on behalf of the respondents in respect of the years 1987, 1988 and 1989 and an amount of Rs. 78,55,951/- be levied towards Central Excise Duty for the period from 1.10.1987 to 31.7.1992 on the value exceeding general exemption limit which was prevalent from time to time in terms of notification No. 175/86, dated 1.3.1986. Demand of duty from other units were also raised. They were also called upon as to why penalty under Rule 9(2) and 173Q of the Rules be not imposed. 5. On 14.2.2002, the Commissioner of Central Excise, Delhi-Adjudicating Authority after adjudication confirmed the demand of Rs. 77,08,165/- against the respondent under Section 11A (1) of the Act and also raised demand of interest on the said amount under Section 11B of the Act. A penalty of Rs. 5,00,000/- under Rule 173Q of the Rules was also imposed (P-1) 6. The respondent preferred an appeal against the Order-in- Original, dated 14.2.2002, before the Tribunal. The Tribunal has held 4 CEA No. 48 of 2005 (O&M) that there cannot be any objection for use of brand name, if the brand name users pay the royalty to the brand name owner. The Tribunal allowed the appeal of the respondent vide Final order dated 28.4.2004 (P-2), which is subject matter of challenge in the instant appeal. 7. The revenue-appellant by filing C.M. No. 5983-CII of 2006, has sought to raise the following amended substantial questions of law, which were taken on record on 19.5.2006:- “(a) Whether the clearance made by various units, is clubbable for the purpose of deciding eligibility for exemption under Notification No. 175/86-CE as amended vide notification 1/93-CE dated 28.02.1993? (b) Whether benefit of the exemption notification No. 175/86-CE as amended vide notification 1/93-CE dated 28.02.1993 is admissible to different partnership firms/companies being controlled by the same person with common brand name by holding all these separate entities for availing the benefit under SSI exemption? (c) Whether the order passed by the Tribunal is perverse and against the statutory provisions of the law and documentary evidence available on the record? (d) Whether Tribunal has committed grave error in allowing the benefit of the exemption notification 5 CEA No. 48 of 2005 (O&M) without taking into consideration the composition of partnership, existence of the factory, licence, nature of the goods manufactured basic infrastructure required for independent functioning of manufacturing enterprises? 8. It would also been necessary to read out the following questions of law raised by the revenue-appellant in the other appeal, namely, CEA No. 120 of 2005:- “(i) Whether the exemption under notification No. 8/2001-CE dated 1.3.2001 and notification No. 8/2002-CE dated 1.3.2002 would be admissible to a manufacturer using the brand names, registered or unregistered, of another person, in terms of the two decisions (supra) of the Hon’ble Supreme Court and in terms of para 4 and para 5(A) of the above notification? (ii) Whether the extended time limit as prescribed under section 11A of the Act has been rightly invoked in the show cause notice in view of the respondent No. 1 not disclosing to the Department the use of brand/trade name of another person?” 9. The assessee-respondent in both the aforementioned appeals, filed two separate applications, namely, C.M. No. 16933-CII of 2009 in CEA No. 48 of 2005 and C.M. No. 17074-CII of 2009 in CEA No. 120 of 2005, raising various preliminary objections 6 CEA No. 48 of 2005 (O&M) regarding maintainability of appeals. It has been claimed that determination of rate of Central Excise duty is involved then appeal would be maintainable before Hon’ble the Supreme Court under Section 35L of the Act. In that regard reliance has been placed on a Constitution Bench judgment of Hon’ble the Supreme Court in the case of Orient Weaving Mills (P) Ltd. v. Union of India, 1978 (2) E.L.T. 311. It has been asserted that the order passed by the Tribunal involves interpretation of exemption notification No. 175/86-CE, dated 1.3.1986, which determines the rate of Central Excise duty payable/leviable on excisable goods manufactured by the assessee- respondent. It has further been submitted that Section 3 of the Act is the charging section and refers to the rate of duty, which is determined by the Schedule under the Central Excise Tariff Act, 1985. These rates are further subject to exemption notifications issued under Section 5A of the Act. In other words, the exemption notifications are part of the Act. It has been contended that the substantial questions of law framed by the revenue-appellant also refer to the interpretation of the exemption notification No. 175/86- CE, dated 1.3.1986 and, therefore, this Court has no jurisdiction to entertain the instant appeals because under Section 35G of the Act, no appeal against the order passed by the Tribunal lies where the question relating to determination of rate of duty of excise or value of goods for the purposes of assessment is involved. 10. Having heard learned counsel for the parties and perusing the paper book with their able assistance we are of the 7 CEA No. 48 of 2005 (O&M) considered view that there is merit in the preliminary objections raised by the assessee-respondent regarding maintainability of the appeal. A similar controversy whether an assessee is covered by an exemption notification relating to rate of duty or not came up for consideration before a Division Bench of this Court in the matter of Commissioner of Central Excise, Ludhiana v. A.S.T. Paper Mills Ltd., 2008 (227) E.L.T. 189 (P&H). The Division Bench after discussing the matter in detail, especially in the light of judgment of Hon’ble the Supreme Court rendered in the case of Navin Chemicals Manufacturing and Trading Company Limited v. Collector of Customs, 1993 (68) E.L.T. 3, has held that since the question of law raised in that appeal was relating to determination of a question having relation to the rate of duty of excise, therefore, for determination of such question the appeal does not lie to this Court and the same has to be filed before Hon’ble the Supreme Court under Section 35L of the Act. Hon’ble the Supreme Court in the case of Navin Chemicals (supra) has categorically held that the expression ‘determination of any question having a relation to the rate of duty or to the value of goods for the purposes of assessment’ used in the other part should be interpreted similarly. 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 Division Bench also placed reliance upon another judgment of this Court rendered in the case of Commissioner of Central Excise, Chandigarh-I v. Suraj Udyog Ltd., 2003 (158) 8 CEA No. 48 of 2005 (O&M) E.L.T. 684 (P&H). 11. The question of law formulated by the revenue-appellant in the instant appeals also refers to exemption under notification No. 175/86-CE as amended vide notification No. 1/93-CE, dated 28.2.1993 in CEA No. 48 of 2005 & notification Nos. 8/2001-CE, dated 1.3.2001 and notification No. 8/2002-CE, dated 1.3.2001 in CEA No. 120 of 2005, relating to the rate of duty of excise. The notification No. 1/93-CE, dated 28.2.1993 was subject of consideration of a Division Bench of Bombay High Court (At Goa) in the case of Commissioner of Customs and Central Excise, Goa v. Primella Sanitary Products (P) Ltd., 2002 (145) E.L.T. 515 (Bom.). The Division Bench has relied upon the judgment of Hon’ble the Supreme Court in Navin Chemicals case (supra). 12. In view of the afore-discussed legal position, the substantial questions of law raised in these appeals, which are stated to have been arising from the Tribunal, relates to determination of a question having relation to the rate of duty of excise, therefore, we are of the considered view that for determination of such question, remedy of appeal lies to Hon’ble the Supreme Court and the same has to be filed before Hon’ble the Supreme Court under Section 35L of the Act. 14. As a sequel to the above discussion, we are of the view that the present appeals are not maintainable and the only remedy which is available to the revenue is to file an appeal before Hon’ble the Supreme Court under Clause (b) of Section 35L of the Act, if so 9 CEA No. 48 of 2005 (O&M) advised. Hence, the Registry is directed to return these appeals to be presented before the appropriate Court of competent jurisdiction. (M.M. KUMAR) JUDGE (JASWANT SINGH) August 3, 2009 JUDGE Pkapoor 10