Case: CCE, ALLAHABAD Vs. SURCOAT PAINTS (P) LTD

Ashok Bhan and V.S. Sirpurkar, JJ. 1. This appeal has been filed by the Revenue against the Judgment and Order, dated, 10th October, 2001 passed by the Customs, Excise & Gold (Control) Appellate Tribunal, (in short Tribunal) New Delhi in Final Order No. 142/01-C, in Appeal No. E/369/96-C whereby the Respondent was held eligible to avail of the benefit of the small scale exemption notification. Brief facts of the case are as under: The Respondent M/s Surcoat Paints Pvt. Ltd. is engaged in the manufacture of paints and varnishes falling under Chapter 32 of the schedule to the Central Excise Tariff Act, 1985. The Respondent was incorporated as a private limited company on 13th October, 1986 under the Companies Act. Respondent is a registered small scale industry holding permanent registration certificate issued by the General Manager, District Industries, Centre of Director of Industries, U.P. Respondent has been availing exemption of S.S.I. as envisaged under Notification No. 175/86 dated, 1st March, 1986 as amended and Notification No. 1/93-CE dated, 28th February, 1993 as amended. 2. There is another Company by the name of M/s Singhal Paints Pvt. Ltd. which is engaged in manufacturing paints and varnishes. M/s Singhal Paints Pvt. Ltd. was also a registered small scale industry. 3. The Commissioner, Central Excise, Allahabad, issued a Show Cause Notice dated, 28th February, 1995 to the Respondent denying it the benefit of Notification No. 175/86 on the ground that in terms of Notification No. SO-232(E) dated, 2nd April, 1991 issued u/s 11B of the Industries (Development and Regulation) Act, 1951, (for short IDR Act), the Respondent company would come under the category of being subsidiary to any other undertaking and shall cease to be a small scale industry. M/s Surcoat Paints (Pvt.) Ltd. and M/s Singhal Paints (Pvt.) Ltd. are being controlled by the same management and are to be considered as owned by the same owner. M/s Surcoat Paints (Pvt.) Ltd. thus ceases to become a small scale undertaking and thus ineligible to avail benefit under Notification No. 175/86-CE dated, 1st March, 1986. Since, M/s Surcoat Paints come under the category of being owned or controlled by M/s Singhal Paints (Pvt.) Ltd., it was not eligible for availing of the benefit of Notification No. 175-86 CE and 1/93/CE. 4. It was alleged in the Show Cause Notice that there was short payment of duty to the tune of Rs. 40,33,903.73 on the goods cleared by the manufacturer during the period 1st February, 1990 to 25th January, 1995 as it had wrongly availed the benefit under Notification No. 175/86 CE and 1/93 CE by willfully, suppressing the facts to avail small scale industry exemption violating the provisions of Rule 173-B, 173-F and 173-G read with Rule 173-Q of the Central Excise Rules, 1944. As per Show Cause Notice the SSI benefit is not available to the Respondents on the ground that SSI registration certificate was not correctly given to the Respondent. According to the Revenue, the Respondents were not entitled to the exemption granted to the small scale industry unit under Notification No. 175/86 CE and 1/93 CE as the aggregate value of excisable goods effected by Surcoat and Singhal taken together exceeded Rs. 150 lacs/200 lacs and hence the Show Cause Notice was issued to the Respondent. 5. Respondents filed their detailed reply to the Show Cause Notice controverting all the allegations contained therein. The Commissioner, Central Excise, Allahabad, adjudicated the case and confirmed the demand of Rs. 40,33,903,73 and imposed a penalty of Rs. 2,00,000 vide Order in Original No. MP(5/95)0 of 1995 dated, 3rd January, 1996. 6. Neither notice was issued to M/s Singhal Paints nor any demand was raised from M/s Singhal Paints. 7. The Assessee being aggrieved by the said Order, filed an appeal before the Tribunal. 8. The Tribunal has reversed the Order passed by the Commissioner of Central Excise, Allahabad, primarily relying upon the earlier decision of the Tribunal in CCE v. Agra Leather Goods Pvt. Ltd. 2000 (39) RLT 674 (T). Admittedly, against the aforesaid Order no appeal was filed by the Revenue. In Agra Leather Goods case (supra), the Tribunal held as under: The main condition required for availing the benefit of exemption Notification No. 175/86-CE dated, 1st March, 1986 is that the unit must hold SSI registration certificate either from the State Directorate of Industries or the Development Commissioner of the Industries. The Respondents admittedly possessed SSI registration certificate No. 20/01/08849/PMT/SSI/01 dated, 21st July, 1964 issued by the Directorate of Industries, Government of Uttar Pradesh during the period in question. True that the norm for determination of SSI status of the unit is normally the extent of investment on plant and machinery, the limit of which was earlier Rs. 35 lacs prior to 1st April, 1991 and thereafter, it was raised to Rs. 60 lacs. But this is required to be gone into by the Competent Authority before issuing the SSI certificate to a particular unit. In this case, there is nothing on record to suggest that the Directorate of Industries, Government of Uttar Pradesh even raised any objection about the non-compliance of this norm by the Respondents before issuing the SSI certificate. Rather it can be safely inferred that this norm was complied with, by the Respondents and they are accordingly issued the SSI certificate, especially when there is no material on record to raise any inference that they suppressed their correct investment on the plant and machinery while applying for the certificate. Having been issued SSI certificate by the Competent Authority the Respondents were legally entitled to claim the benefit of Notification No. 175/86-CE and 1/93-CE. If the Revenue department suspected the genuineness of their SSI certificate they could ask for the cancellation of the same from the authority who issued the same or take any proper action against the Respondents are permissible under the law. Till the SSI Registration was not cancelled by the Competent Authority, the Respondents could not be legally denied the benefit of the exemption notification referred to above. 9. Since, the Revenue has accepted the decision given by the Tribunal in Agra Leather Goods case (supra), the Revenue is precluded from challenging the similar Order passed in respect of another Unit. Since, the Order passed in Agra Leather Goods Case (supra) has attained finality,

Decision reasoning: 0[ds]Admittedly, against the aforesaid Order no appeal was filed by the Revenue. In Agra Leather Goods case (supra), the Tribunal held as under:The main condition required for availing the benefit of exemption Notification No. 175/86-CE dated, 1st March, 1986 is that the unit must hold SSI registration certificate either from the State Directorate of Industries or the Development Commissioner of the Industries. The Respondents admittedly possessed SSI registration certificate No. 20/01/08849/PMT/SSI/01 dated, 21st July, 1964 issued by the Directorate of Industries, Government of Uttar Pradesh during the period in question. True that the norm for determination of SSI status of the unit is normally the extent of investment on plant and machinery, the limit of which was earlier Rs. 35 lacs prior to 1st April, 1991 and thereafter, it was raised to Rs. 60 lacs. But this is required to be gone into by the Competent Authority before issuing the SSI certificate to a particular unit. In this case, there is nothing on record to suggest that the Directorate of Industries, Government of Uttar Pradesh even raised any objection about the non-compliance of this norm by the Respondents before issuing the SSI certificate. Rather it can be safely inferred that this norm was complied with, by the Respondents and they are accordingly issued the SSI certificate, especially when there is no material on record to raise any inference that they suppressed their correct investment on the plant and machinery while applying for the certificate. Having been issued SSI certificate by the Competent Authority the Respondents were legally entitled to claim the benefit of Notification No. 175/86-CE and 1/93-CE. If the Revenue department suspected the genuineness of their SSI certificate they could ask for the cancellation of the same from the authority who issued the same or take any proper action against the Respondents are permissible under the law. Till the SSI Registration was not cancelled by the Competent Authority, the Respondents could not be legally denied the benefit of the exemption notification referred to above.9. Since, the Revenue has accepted the decision given by the Tribunal in Agra Leather Goods case (supra), the Revenue is precluded from challenging the similar Order passed in respect of another Unit. Since, the Order passed in Agra Leather Goods Case (supra) has attained finality,