2003 (7) TMI 365 - AT - Central Excise

Summary

Issues:
1. Allegations of non-payment of duty on processed fabrics and texturised yarn.
2. Relationship between the two companies under Section 4(4)(c) of the Central Excise Act.
3. Imposition of penalties under various sections and rules.

Analysis:

Issue 1: Allegations of non-payment of duty on processed fabrics and texturised yarn:
The case involved M/s. Special Prints Ltd. and M/s. Garden Silk Mills Ltd., where processed fabrics and texturised yarn were cleared between them. The show cause notice alleged non-payment of duty based on wholesale prices. The Commissioner confirmed the duty demands and imposed penalties. However, the parties denied the allegations, leading to the appeals. The Tribunal examined the case in detail, considering the relationship between the companies and the valuation of goods for duty payment.

Issue 2: Relationship between the two companies under Section 4(4)(c) of the Central Excise Act:
The Commissioner found the companies to be "related persons" under Section 4(4)(c) of the Act, impacting the duty payment calculations. The Commissioner's decision was based on this relationship, deviating from the precedent set by the Supreme Court in the Ujagar Prints case. However, the Tribunal highlighted that the relationship aspect was not crucial for determining duty payment, citing relevant judgments and clarifications.

Issue 3: Imposition of penalties under various sections and rules:
Apart from confirming duty demands, the Commissioner imposed penalties on the companies and individuals involved. The penalties were based on different sections and rules, including Section 11AC, Rule 173Q, and Rule 209A of the Central Excise Rules. The appeals challenged these penalties along with the duty demands, leading to a comprehensive legal analysis by the Tribunal.

In the detailed analysis, the Tribunal referred to various legal precedents, including the Ujagar Prints case, to establish the correct method of assessing duty on processed goods and texturised yarn. The Tribunal emphasized that the relationship between the companies did not alter the duty calculation methodology. Based on the legal principles and precedents cited, the Tribunal set aside the duty demands and penalties imposed by the Commissioner, ultimately allowing the appeals.

This judgment provides a thorough examination of the duty payment issues, the legal interpretations of relevant sections, and the application of precedent cases to determine the correct duty assessment in the context of processed fabrics and texturised yarn transactions between related entities.