Commissioner Of Central Excise Kolkata 2 Commissionerate vs. M/S S A Enterprise

Facts

The revenue, Commissioner of Central Excise, Kolkata II (now CGST & CX, Howrah Commissionerate), filed these appeals challenging a common order dated June 27, 2023, passed by the Customs, Central Excise & Service Tax Appellate Tribunal (CESTAT), Kolkata. The CESTAT had allowed six appeals filed by the respondents, M/s S A Enterprise and Shri Aayush Rungta. The respondents had challenged orders of adjudication passed by the Commissioner of Central Excise, Kolkata, which confirmed demands for central excise duty and imposed penalties. The initial show cause notice was dated December 24, 2010. The revenue's case was primarily based on the respondent's representations to power supply corporations, declaring themselves as manufacturers of the goods supplied.

Held

The Court held that the matter was entirely factual and no substantial question of law arose for consideration. The Tribunal had extensively examined the factual position, including the respondent's stand that declarations were made for business procurement and that they were traders. The Tribunal noted the lack of manufacturing facilities at the respondent's premises and the absence of additional evidence from the revenue between 2007 and 2010 to counter the respondent's contentions. The revenue also failed to provide positive evidence of clandestine manufacturing or incriminating material. The Tribunal found that the respondent's submission that goods were manufactured by job workers on a principal-to-principal basis was not adequately addressed by the adjudicating authority. The Tribunal concluded that suspicion, however grave, cannot substitute proof and that the respondent had explained their case with voluminous records. Consequently, the Tribunal found that the activities undertaken did not amount to manufacture and rightly allowed the respondents' appeals. The appeals were dismissed as no substantial question of law was found.

Key Issues

1. Whether the learned Tribunal committed a gross error of law by not appreciating Section 2(f) of the Central Excise Act, 1944, which defines 'manufacture' to include activities incidental and ancillary to completion of manufacture, particularly when the respondent declared itself a manufacturer, participated in tenders as such, and complied with manufacturer conditions, yet could be considered a trader? (Question of law) 2. Whether the order passed by the learned Tribunal is liable to be set aside? (Question of law) Petitioner/Appellant (Revenue) argued that the Tribunal erred in not considering the respondent's declarations as a manufacturer and their participation in tenders as such, suggesting they should be treated as manufacturers under Section 2(f) of the Central Excise Act, 1944. The respondent contended that the declarations were made solely to procure business and that they were engaged in trading and supply, not manufacturing. They asserted that their factory lacked the necessary infrastructure and testing facilities, and the department failed to produce positive evidence of clandestine manufacturing or procurement of unaccounted raw materials. The respondent also argued that the goods were manufactured by job workers on a principal-to-principal basis.