Revenue cannot deny SSI exemption by presuming trading sales as manufactured without investigating capacity, suppliers, transporters, or verifying audited balance sheets showing separate sales; demand set aside for lack of proof.

ORDER: [PER SHRI ASHOK JINDAL]

The appellants are in appeal against the impugned order wherein central excise duty amounting to Rs.3,19,84,038/- (inclusive of cess), along with interest, for the period from April, 2009 to March, 2013, has been demanded from the appellant- company, namely, M/s. Hightension Electrical Equipments Pvt. Ltd. and penalties of Rs.3,19,84,038/- under Section 11AC of the Central Excise Act and Rs.1,00,00,000/- have been imposed on the appellant-company and Shri Suresh Kumar Jaiswal, Director of the appellant-company respectively.

2. The facts of the case in brief are that the appellant-company was engaged in the manufacture and re-sale of Electrical Overhead Materials/Hardware Fittings of Electrical Transmission Line, namely, 11 KV, 33KV Strain Hardware, D.O. Fuse, H.T. Fuse, A.B. Switch, M.S. Stay Set, G.I. Pin of 200 Amps., 400 Amps., etc., falling under Chapter 85 of Central Excise Tariff Act, 1985. The basic raw materials were M.S. Channel, Insulator, Gun Metal, Copper, Bolts and Nuts, G.I. Pipe, etc. They manufacture, amongst other things, A.B. Switch, D. O. Fuse, H.G. Fuse, Insulator, etc. The appellant-company availed the benefit of SSI Exemption and thus they did not pay any central excise duty so long as their clearance value did not exceed the SSI Exemption Limit. They were also undertaking trading of goods. They were maintaining the records properly. They were procuring orders from different Electricity Boards of different States namely Madhya Pradesh State Electricity Board, Maharashtra State Electricity Distribution Co. Ltd., Madhya Pradesh Paschim Kshetra Vidyut Vitaran Co. Ltd., Chhattisgarh State Power Transmission Co. Ltd., Larsen and Toubro Ltd., Kirloskar Brothers Ltd. and Power Grid Corporation of India Ltd., etc., and supplying the goods partly manufacturing by themselves and partly by procuring from the market and re-selling the same to keep their commitments since the appellant had no capacity and infrastructure for manufacturing such a huge quantity of goods. Since they were availing SSI Exemption, the appellant-company did not avail any credit of duty paid on inputs. In case of trading (purchasing & re-selling) of finished goods no credit was also passed on to the buyers. The appellant- company was also not undertaking any further activity on those purchased finished goods. The appellant had intimated the Department vide their Letter Ref No. HIEI/CE/459/93-94 dated 21.02.1994 that they were undertaking trading activities also.

3. On 10.12.2012, officers of the Department visited their factory and obtained copy of Invoices, Purchase Orders, Inspection Certificates etc. They also recorded the statement of Shri Sanjib Halder, Authorised Signatory of the appellant-company, on different dates, when Shri Halder inter alia explained that their company was manufacturing the goods and also undertaking trading activities; that for this purpose, they were maintaining separate series of invoices for clearance of their manufactured goods and trading goods accompanied by Test/Inspection Report; that they issued two types of bills ‘M’ for manuf