Custom, Excise & Service Tax Tribunal
M/S. Gee Tee Silk Mills vs Commissioner Of Central Excise, Mumbai on 29 June, 2010
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No.E/1419 & 1420/02 (Arising out of Order-in-Original No. 26-VPS-21/M-III dated 28.11.2001 passed by Commissioner of Central Excise, Mumbai III) For approval and signature: Honble Mr. P.G. Chacko, Member (Judicial) Honble Mr. S.K. Gaule, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== M/s. Gee Tee Silk Mills Shri Prakash Kukreja Appellants Vs. Commissioner of Central Excise, Mumbai Respondent Appearance: Shri Atul Thakkar & Shri K. Shroff, Advocates for appellant Shri N.A. Sayeed, JDR, for respondent CORAM: Honble Mr. P.G. Chacko, Member (Judicial) Honble Mr. S.K. Gaule, Member (Technical) Date of Hearing: 29.6.2010 Date of Decision: 29.6.2010 ORDER NO Per: P.G. Chacko, M(J)
The appeal filed by the company (assessee) is against a demand of duty confirmed against them under the proviso to Section 11A(1) of the Central Excise Act and also against penalties imposed on them under Section 11AC of the Act and Rule 173Q of the Central Excise Rules, 1944. The appeal filed by the Managing Director of the company is against a penalty imposed on him under Rule 209A of the said Rules. These appeals are arising before us today pursuant to the Honble High Courts remand orders dated 18.6.2009 in Central Excise Appeals no. 218 and 219 of 2006. The Honble High Court has directed this Tribunal to take fresh decision on the penal liability, if any, of the parties. In respect of the company, the Hon'ble High Court requires us also to consider the Honble Supreme Courts judgment in UOI vs. Dharmendra Textiles Processors 2007 (215) ELT 321 (SC).
2. After examining the records and hearing both sides, we find that the entire amount of duty was paid up by the assessee, a part of it prior to issuance of show-cause notice and the balance subsequently. We further find that no part of the penalty imposed under Section 11AC was paid by the assessee at any stage upon receipt of the Commissioners order. With regard to this penalty, the submission of the ld. counsel is that the requirements of Section 11AC of the Act have not been met in this case. It is submitted that the offence alleged and found against the assessee is undervaluation of the processed fabrics manufactured by them as job workers out of the grey fabrics supplied by merchant-manufacturers under the provisions of Notification 27/92-CE (NT) dated 9.10.92. It is submitted that the value adopted by the assessee (job worker) was that declared by the merchant-manufacturers in the relevant invoices (grey bills) and hence the assessee cannot be held to have misdeclared the value with intent to evade payment of duty. It is submitted that, if any offence was committed by anyone in this case, it was by the merchant-manufacturers and not by the assessee. It is submitted that there is no evidence of the assessee having colluded or acted in tandem with the merchant-manufacturers. For these reasons, according to the ld. counsel, there can be no penalty on the assessee under Section 11AC of the Act. As regards the penalty imposed on them under Rule 173Q, it is submitted that this penalty is not supported by the requisite finding. As regards the penalty imposed on the Managing Director of the company, the ld. counsel submits that this penalty is also not sustainable in law in the absence of any finding to the effect that the subject goods were liable to confiscation. Apart from these submissions on merits, it has also been pointed out that the Commissioners order is violative of the principles of natural justice inasmuch as any copy of any relied-upon document was not supplied and the appellants were not personally heard. In this context, it is submitted that, upon receipt of the show-cause notice, the assessee specifically requested the Commissioner and the Range Superintendent for supply of copies of the relied-upon documents. But these documents were not supplied and consequently the appellants were not in a position to give reply to the show-cause notice. It is also submitted that any notice of personal hearing was not served on the appellants at any stage.
3. Ld. JDR reiterates the relevant findings of the Commissioner. Regarding Notification 27/92 ibid, he submits that it was the obligation of the job worker to ensure that the prices declared by the raw material supplier were correct. The assessee happened to undervalue the finished goods by failing to discharge this liability under the Notification. It is also submitted that the assessee availed undue deemed MODVAT credit on grey fabrics in terms of Notification 29/96-CE (NT) by working in collusion with the suppliers of the raw material. According to the ld. JDR, the assessee cannot be heard to say that Section 11AC of the Act is not invocable against them inasmuch as the duty liability under the proviso to Section 11A(1) and the admissibility of deemed credit on grey fabrics were squarely admitted by them. The JDR has also referred to Honble Supreme Court judgments in UOI vs. Dharmendra Textiles Processors 2008 (231) ELT 3 (SC) and UOI vs. Rajasthan Spinning and Weaving Mills 2009 (238) ELT 3 (SC). According to the ruling given by the apex court, penalty equal to duty is liable to be imposed on the assessee under Section 11AC of the Act in the facts of this case, JDR submits.
4. In his rejoinder, the counsel refers to the Gujarat High Courts judgment in Exotic Associates vs. UOI 2010 (252) ELT 49 (Guj.) wherein it was held that an adjudicating authority while confirming any demand of duty under the proviso to Section 11A(1) of the Act against an assessee and seeking to penalize them under Section 11AC should expressly state in its order that, if 25% of the confirmed duty was paid within 30 days from the date of communication of the order, that would satisfy the purpose of Section 11AC. According to the ld. counsel, this opportunity was not made available to the assessee by the ld. Commissioner.
5. We have given careful consideration to the submissions. At this stage, duty liability stands owned up by the assessee. The entire amount of duty confirmed by the Commissioner under the proviso to Section 11A(1) of the Act stands paid up also. Similarly, the assessee has conceded that they were not eligible for deemed credit in terms of Notification 29/96-CE(NT) ibid on the grey fabrics which was received from the merchant-manufacturers and processed during the material period. By way of these admissions, the assessee has tacitly conceded the existence of circumstances which would warrant invocation of the provisions of Section 11AC of the Act. The stage at which duty was paid is immaterial. We are told that a part of the duty was paid prior to the issuance of show-cause notice, another part was paid by way of pre-deposit with this Tribunal and the balance amount was paid subsequently as ordered by the Hon'ble High Court. Thus, the entire amount of duty was paid by the assessee. By these payments, the assessee was honouring a demand which was raised by the department and confirmed by the Commissioner under the proviso to sub-section (1) of Section 11A of the Act. The ingredients of the said proviso are pari materia with those of Section 11AC of the Act. It would, therefore, appear that the penal liability under Section 11AC of the Act was also tacitly conceded. The same is the effect of the assessee having conceded their ineligibility for deemed credit on grey fabrics under Notification 29/96 ibid. The ruling of the Honble Supreme Court in Dharmendra Textile Processors case (supra) as clarified in Rajasthan Spinning and Weaving Mills (supra) is to the effect that, where the ingredients of Section 11AC of the Act are established against a person, penalty equal to duty is liable to be imposed on him irrespective of whether the duty was paid before or after issuance of the show-cause notice. In this connection, however, one aspect needs to be examined. The Hon'ble Gujarat High Court held that the adjudicating authority, in the context of confirming any demand of duty under the proviso to sub-section (1) of Section 11A of the Act against an assessee, should specifically inform the party that, if they pay penalty to the extent of 25% of the amount of duty within a period of 30 days from the date of communication of the order of adjudication, that would satisfy the purpose of Section 11AC. Any notice of this kind was not given to the appellant by the Commissioner. The ld. counsel hopes that, if the case is remanded to the Commissioner on the ground of violation of principles of natural justice, the assessee can claim the benefit.
6. We have found valid reasons for a remand of this case. After receipt of the show-cause notice, the appellant wrote to the Commissioner and the Range Officer complaining of non-receipt of the relied-upon documents. Copies of these letters are available on record. In separate letters dated 10.2.2000, they requested the Commissioner and the Superintendent of Central Excise to supply copies of the relied-upon documents to enable file a reply to the show-cause notice. These letters appear to have been received by the Superintendent on 10.2.2000. One of these letters was addressed to the Commissioner and the same ought to have been forwarded by the Superintendent to the Commissioner. The Commissioners order indicates that several dates were fixed for personal hearing and the appellants did not attend any of them. The grievance of the appellant is that any notice of personal hearing was not received by them. As against this grievance specifically raised in these appeals, the JDR has not come forward with any documentary evidence of any notice of personal hearing having been duly served on the parties. In the circumstances, we have got to infer that these appellants did not have an opportunity of being personally heard by the adjudicating authority. Thus, natural justice appears to have been denied to them. On this sole ground, we have to set aside the impugned order and remand the case to the adjudicating authority. The appellants will be at liberty to claim the benefit of any case law before that authority in relation to penalties.
7. In the result, we set aside the impugned order insofar as it concerns penalties on these appellants. The ld. Commissioner shall pass fresh order on the question whether these appellants are liable to be penalized under Rule 173Q or Rule 209A, as the case may be. As regards penal liability under Section 11AC, he shall follow the relevant instructions contained in the Hon'ble High Courts judgement. The appellants should be supplied copies of the relied-upon documents and also should be personally heard.
8. The appeals are allowed by way of remand.
(Pronounced in Court) (S.K. Gaule) Member (Technical) (P.G. Chacko) Member (Judicial) //SR ??
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