2006 (3) TMI 578 - AT - Central Excise

Summary

Issues:
1. Pre-deposit of duty amount and penalty under Section 11AC
2. Dispute over proprietorship of the manufacturing unit
3. Bar of limitation for raising the demand
4. Financial hardship plea and waiver of pre-deposit

Analysis:

Issue 1: Pre-deposit of duty amount and penalty under Section 11AC
The appellant sought to dispense with the pre-deposit of duty amount and penalty imposed under Section 11AC, totaling Rs. 10,08,262. The demand was confirmed due to under-valuation of Dichlofenac Sodium. The appellant argued that the manufacturing unit was under the proprietorship of Mr. Vilas Tamhankar, not Mrs. Gokhale. However, the Commissioner rejected this claim, stating that the manufacturing unit remained a proprietary firm of Mrs. Gokhale. The Tribunal found no merit in the appellant's contention, emphasizing that the dispute over proprietorship did not affect the duty liability of the firm.

Issue 2: Dispute over proprietorship of the manufacturing unit
The appellant's argument regarding the proprietorship of the manufacturing unit was based on the transfer of the business to Mr. Vilas Tamhankar. However, the Commissioner maintained that Mrs. Gokhale was the proprietor, evidenced by her signing numerous cheques for the business. The Tribunal concurred with the Commissioner's decision, emphasizing that the ownership dispute did not absolve the firm of its duty liability.

Issue 3: Bar of limitation for raising the demand
The appellant contended that the demand was time-barred, being raised after the normal limitation period. However, the charge of under-valuation was discovered during a search of the factory premises by Central Excise officers. The Tribunal held that the detection of under-valuation through investigation invalidated the limitation defense, as the issue was not apparent until the search and subsequent inquiry.

Issue 4: Financial hardship plea and waiver of pre-deposit
The appellant did not present any substantial arguments regarding financial hardship or merit to support the waiver of pre-deposit. Despite this, the Tribunal considered all circumstances and directed the appellant to deposit Rs. 5.00 lakhs within eight weeks. Upon compliance, the pre-deposit of the remaining duty and penalty was waived, with recovery stayed during the appeal's pendency.

This judgment underscores the importance of establishing ownership in duty liability disputes, the impact of discovery on limitation defenses, and the Tribunal's discretion in considering financial hardship for pre-deposit waiver.