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2009 (8) TMI 997

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..... hole of the Central Excise duty as per Tariff entry, the officers Central Excise, Division-Agra, visited the factory of the appellant no. 1 on 12-7-2007. As a result, the officers found that the appellant no. 1 was engaged in manufacturing of exempted product glass bead by captively consuming the goods glass tubes being manufactured by using power operated compressor. The officers also found that during financial years, 2003-04 to 2007-08 till 12-7-2007, the appellant no. 1 has cleared glass tubes over and above the SSI exemption limit as provided under Notification No. 08/2003-C.E., dated 1-3-2003, as amended during the respective financial years. The officers seized the 17440 bundles of glass tubes available in the factory of appellant no. 1 totally weighing 43600 Kgs and valued at Rs. 10,90,000/- on 3-10-2007 and gave the same in the custody of Shri Praveen Sharma under proper supurdnama dated 3-10-2007. The goods were seized because the same were manufactured without filing declaration as required under Notification No. 36/2001-C.E. (N.T.), dated 26-6-2001 as amended/without taking registration for the manufacture of such glass tubes and clearance thereof for captive consumptio .....

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..... of confiscation. Apart from above, a penalty equivalent to duty involved on the seized and confiscated goods was imposed under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944 upon the appellant no. 1 and a penalty of Rs. 25,000/- was imposed upon the appellant no. 2 under Rule 26 for the alleged misdeeds. The adjudicating authority held that the appellant no. 1 was not eligible for SSI exemption in terms of Notification No. 8/2003-C.E., dated 1-3-2003, as amended as both the glass tubes as well as glass beads were not falling under the schedule to the list of the items eligible for SSI benefit appended with the aforesaid notification, therefore, the seized glass tubes used captively in manufacture of glass beads were dutiable and contraband in nature. It was also held that the dutiable goods were manufactured and cleared without payment of duty, without maintaining statutory records, without obtaining registration or filing declaration and without filing any monthly or quarterly return, therefore, the same were liable for confiscation and the both the appellants liable for penal action. 6. Being aggrieved with the impugned order, th .....

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..... ing decisions : - (a) Icy Cold Commercial Enterprise v. CCE - 1994 (69) E.L.T. 337 (T) (b) Kartar Steel (P.) Ltd. v. CCE - 1997 (93) E.L.T. 443 (T) = 1997 (18) RLT 138 (CEGAT). (c) Telemechanique & Control India Ltd. v. CCE - 2000 (117) E.L.T. 614 (T) = 1995 (10) RLT 475 (CEGAT). (d) Vee Kay General Industries v. CCE reported in 2001 (129) E.L.T. 57 (T). (e) CCE. v. Rose Metal Pvt. Ltd. - 2001 (133) E.L.T. 217 (T) (f) Bhillai Conductor Pvt. Ltd. v. CCE - 2000 (125) E.L.T. 781 (T). (g) Garden Silk Mills v. CCE reported in 1991 (51) E.L.T. 373 (T) (d) Dhebar Steel Re-rollers v. CCE, Raipur - 2002 (142) E.L.T. 194, wherein it has been held that - Without actual weighment - Neither the duty Demanded could be confirmed nor penalty could be imposed on the assessee. That the appellants further submit that the impugned Order is even otherwise manifestly erroneous and without application of mind inasmuch as following wrong foot steps of learned Commissioner, Central Excise, Kanpur vide his Adjudication Order No. 13/Commissioner/MP/2008 dated 31-12-2008, wherein benefit of SSI Exemption has been denied to the appellants (refer internal pages 67 to 70 of the Adjudication Order). The ld. R .....

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..... on a redemption fine to the tune of Rs. 2,75,000/- on the Glass Tubes being well within the factory premises is liable to be struck down on this ground alone and the appellants say that it be held that no redemption fine on the intermediate goods well available in the factory and entitle for benefit of SSI exemption is liable to be charged from the appellants. The impugned Order not being legally sustainable is liable to be struck down on this ground alone. That the learned Authority below has passed the order due to oversight and non-application of mind inasmuch as the ld. Respondent invoking both Rule 25 and Section 11AC have proposed as follows :- I impose a penalty equal to the duty amount upon M/s. J.P. Glass Industries, Jiloli, Makhnpur, under Rule 25 of Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944. The learned Respondent should have appreciated the fact that neither in the Show Cause Notice nor in the Adjudication Order there was any Central Excise Duty which was either quantified or demanded on the goods in question and when there was no levy of any duty or any demand of duty confirmed in the Adjudication Order, no mandatory penalty equi .....

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..... er Bench Ruling in Dharamendra Textile Processors [2008 (231) E.L.T. 3 (S.C.)], while passing orders on appeals by the Government against CESTAT orders setting aside such penalty in respect of two parties. In the significant pronouncement, the Bench comprising Hon ble Justice Mr. S.H. Kapadia and Hon ble Justice Mr. Aftab Alam, held :- the decision in Dharamendra Textile must, therefore, be understood to mean that though the application of Section 11AC would depend upon the existence otherwise of the conditions expressly stated in the Section, once the Section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under Sub-section (2) of Section 11A that is what Dharamendra Textile decides. The Bench clarified that we fail to understand how the decision in Dharamendra Textile can be said to hold that Section 11AC would apply to every case of non-payment or short payment of duty regardless of the condition expressly mentioned in the Section for its application. Penalty under Section 11AC is punishment for an act of deliberate deception by the assessee with the intent to evade duty b .....

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..... the assumed figure of Rs. 10,90,000/- as taken up by the Revenue is patently wrong and the correct figure should be read as Rs. 4,26,408/-. B. Submissions made by the Appellant No. 2 :- That with regard to invocation of penal provisions under Rule 26 of Central Excise Rules, 2002 as well as imposition of penalty against appellant No. 2 i.e. Neeraj Maheshwari, partner of M/s. J.P. Glass Industries, appellant No. 1, it is submitted : - That the Assistant Commissioner without assigning any reason has grossly erred in imposing penalty under Rule 26 of Central Excise Rules, 2002 on the appellant. That the adjudicating authority has nowhere held that as to how the appellant was instrumental in contravention of the provisions of the Central Excise Rules; That in any view of the matter partner of the manufacturer cannot be penalized for any of the acts done in bona fide belief and on behalf of the manufacturer has held by the Hon ble Tribunal in the matter of Goetz (India) Ltd. v. CCE, New Delhi, reported in 2002 (48) RLT 518; That by holding the director/partner of appellant s company/firm as instrumental in the offence and imposing on him the penalty of Rs. 25,000/- is patently wrong and .....

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..... ods are liable to confiscation. That there is no admission by appellant No. 2 with regard to dealing in any excisable goods, which he knew were liable to confiscation. The appellant has nowhere admitted that he has himself removed the goods without invoices/bills/challans. In the absence of any evidence of knowledge or reason to believe on the part of Appellant No. 2 that the goods were liable to confiscation, penalty under Rule 26 cannot be imposed; That the appellant No. 2 states that to invoke Rule 26, there should be sufficient evidence with regard to guilty frame of mind of the appellant. In the absence of evidence of knowledge of the appellant, no penalty can be imposed under Rule 26. The essential criterion for invoking the provisions of Rule 26 is the presence of mens rea on the part of the person referred to in the provision. In the present case, no evidence has been adduced to show that the appellant was having the belief that the goods were liable to confiscation; That the requirement of Rule 26 is very specific and it shows that it refers to removal of excisable goods or concerning oneself with such excisable goods physically and the same should have been done with the .....

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..... rrisa reported in 1978 (2) E.L.T. J 159 (S.C.). 7. In order to grant natural justice, an opportunity of personal hearing was given to the appellants, which was attended by Shri Amit Awasthi, Advocate on 6-8-2009, who reiterated the grounds of appeal and pleaded for relief on merits. An opportunity for hearing and submitting comments on the grounds of appeal was also given to the department but neither anyone appeared nor submitted any request for adjournment on behalf of the department, which means that the department has nothing to say. I am taking up stay applications and the appeals simultaneously in the interest of early disposal of the appeals. 8. I observe that this is a case where the department has seized and confiscated the excisable goods viz. glass tubes on the ground that the same were being manufactured and consumed captively for manufacture of excisable goods viz. glass beads chargable to nil rate of duty as per the tariff entry. By doing so the appellants contravened the provisions of Notification No. 67/95-C.E., dated 16-3-1995, as amended because in terms of the said notification, the benefit of exemption from duty on the goods being consumed captively is .....

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..... judicating authority has imposed the penalty without quantifying the duty either in the show cause notice or in the adjudication order and that the issue in the present case related to interpretation of provisions and admissibility of notifications and not the case of clandestine removal, thus, the penalty imposed hypothetical was liable to be set-aside. The appellant no. 2 has also contested the penalty imposed on him under Rule 26 on the grounds that the ingredients of his involvement are not proved; that the penalty upon the partner/proprietor cannot be imposed for the offence in respect of which the penalty has already been imposed upon the firm; that the appellant no. 1 was not engaged in any activity of evasion of duty and that sufficient evidence with regard to guilty frame of mind of the appellant have not been brought on record by the adjudicating authority. Both the appellants have also relied upon various case laws in their favour. 11. After careful consideration of facts of the case and the submissions of both the sides, I observe that this is the case, where the admissibility of Notification No. 67/95-C.E., dated 16-3-1995, as amended and the SSI exemption Notific .....

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..... manufacture of glass beads chargeable to nil duty as per the tariff entry, therefore the said glass pipes automatically become chargeable to duty and no more remain in the negative list in terms of second proviso detailed above. Only the item glass beads, which do not attract duty as per tariff entry, remain in the negative list and the SSI exemption was not available to them. In my opinion, the adjudicating authority has not appreciated the provisions of SSI notification appropriately and had improperly held that the SSI exemption was not available to the appellant no.1. In light of the facts discussed above and the provisions of the notification, I find that the adjudicating authority has wrongly held that the SSI exemption was not available to the goods glass tubes . Thus, I hold that the order of the adjudicating authority, confiscating the glass tubes on wrong appreciation of provisions of SSI notification, is not legal and proper and deserves to be set aside. Since, the order for confiscation itself is not maintainable, I do find any justification in upholding the order imposing the redemption fine. As regards, the allegation of non-submission of declaration, I find that the .....

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