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2009 (8) TMI 997

..... t of pre-deposit of penalty, has been filed by M/s. J.P. Glass Industries, Jijauli, Makhanpur, Firozabad (hereinafter referred to as the appellant no. 1 ) and Shri Neeraj Maheshwari, the partner of the appellant no. 1 (hereinafter referred to as the appellant no. 2 ) against Order-in-Original No. 71/AC/ADJ/2009 dated 31-4-09 passed by the Assistant Commissioner, Central Excise Division-Agra. 2. Brief facts of the case are that on the basis of intelligence that the appellant no. 1 was engaged in evasion of central excise duty by wrongly availing the exemption under Notf. No. 67/95-C.E., dated 16-3-1995 by way of not paying the Central Excise duty on the product Glass Tubes (Chapter Sub-Heading No. 70023900) being captively consumed while manufacturing the final products i.e. Glass Beads (Chapter Sub-Heading no. 70181020), which are exempted from whole 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 usin .....

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..... ecause the compressor was installed in the factory on 31-3-2007; that the glass tubes manufactured by mouth blown process were exempted from duty; that due to this reason they were not liable to pay duty on their products; that due to this reason, the penalty under Rule 25 read with Section 11AC was not imposable upon the appellant no. 1; and that due the aforesaid reason penalty was not imposable upon the appellant no. 2 under Rule 26 of the Rules ibid. The appellants at the time of personal hearing also pleaded before the adjudicating authority that the clearances during the relevant financial year was within SSI exemption limit as such the proposed confiscation was illegal. 5. The adjudicating authority however, ordered for confiscation of seized goods under Rule 25 vide impugned order and also imposed redemption fine of Rs. 2,75,000/- in lieu 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 all .....

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..... allegation of the department alleging the goods to be the contraband in nature was but without authority of law and not legally sustainable as being devoid of any positive and tangible evidence. That the learned Respondent ought to have appreciated the fact that it was not the case of the Revenue that the subjected intermediate produce i.e. glass tube was being attempted to be cleared for home consumption in garb of captive consumption and it was undisputed fact that all the glass tube manufactured through mouth blown process were used in the manufacture of glass bead after having consumed it captively and when the goods were well within the factory and there neither any intention nor any preparation for alleged clandestine removal and as such the seizure along with confiscation was infructuous and void ab initio. Reliance is placed on the following 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 (1 .....

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..... ods within the factory of production i.e. Glass Beads. As the Glass Tubes are used as input for further manufacture of Glass Beads the benefit of this Notification is not available to the party . That the learned adjudicating authority has misdirected himself in law and even flouted the provisions of law prescribed by SSI Notification No. 8/2003, supra which grants exemption to Glass Tubes as specified goods along with Glass Beads and as such the impugned order not being maintainable in the eyes of law is liable to be struck down on this ground alone and the appellant further say that when the intermediate product i.e. Glass Tubes itself being exempt from levy of CENVAT duty as being entitled for SSI Exemption, the provisions for proposed seizure as well as confiscation of the goods was without the authority of law and the impugned order imposition 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 .....

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..... 2004 (163) E.L.T. 47 (T) wherein it has been further been held that if the issue is relating to interpretation of provisions the penalty u/s 11AC and Rule 173Q (now Rule 25) is not imposable. That the appellants say that in the present case provisions of Section 11AC of the Central Excise Act, 1944, are not attracted. That the appellants say that Hon ble Supreme Court in a land mark judgment delivered on 12-5-2009, has ruled that mandatory penalty under Section 11AC of the Central Excise Act, 1944 will not apply to every case of non-payment or short payment of duty. It held that for imposing such penalty, condition mentioned in the Section should exist. The Court, however, held that once Section 11AC is applicable, the authorities would have no discretion on quantum and penalty equal to duty must be imposed. The Apex Court was clarifying its Larger 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 .....

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..... Orders passed by the Tribunal are set aside and the matters are remitted to the respective Tribunals for fresh consideration, in accordance with law, and in light of this Judgment - Appeal allowed. That the appellants say that in his impugned Order as well as Show Cause Notice the learned adjudicating authority has taken up hypothetical value of Glass Tubes i.e. the intermediate product. The appellants point out that as per the market price the value of Glass Tubes is Rs. 9.78 per kg which has also been accepted by the Commissioner in Adjudication Order dated 13-1-2009 and in internal page No. 70 para No. 4, the learned Commissioner, accepting the cost accountant certificate has accepted the cost of intermediate product as Rs. 9.78 per kg and emphasis is made internal pages 70 to 76 of the learned Commissioner s Order. It therefore behoves that 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. .....

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..... , inasmuch as there is no evidence nor any allegation raised by the Department that appellant No. 2 acted deliberately in defiance of law or was guilty of conduct, contumacious or dishonest or acted in conscience disregard of his obligation or as to how the appellant was instrumental in contravention of the provisions of Rule 26 of the Central Excise Rules, 2002. Hence, not even a minimum penalty is imposable upon the appellant. The appellant No. 2 relied upon the case law of M/s. Farwood Industries v. CCE reported in 2005 (185) E.L.T. 401 (Tri.), wherein the Hon ble Tribunal has held as follows :- Personal penalty upon Managing Director/Partner under Rule 209A or Rule 26 can be imposed only if there is finding that the person concerned acquired possession of or otherwise physically dealt with excisable goods with knowledge or belief that such goods 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 .....

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..... st under the provisions of Rule 26 of the Central Excise Rules, 2002. Therefore, Show Cause Notice proposing penalty on the appellant is liable to be set aside; and That with regard to imposition of penalty, appellant No. 2, says that his case being covered by decision of the Apex Court on imposition of penalty. Appellant No. 2 says that even otherwise he is not exposed to any penalty under the provisions of Rule 26 of Central Excise Rules, 2002, inasmuch as there is no evidence nor any allegation raised by the department that the appellant No. 2 acted deliberately in defiance of law or was guilty of conduct, contumacious or dishonest or acted in conscience disregard of his obligation. Not even a minimum penalty is imposable upon the appellant No. 2. Reliance is placed on the decision of Hon ble Supreme Court in Hindustan Steel Ltd. v. State of Orrisa 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 .....

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..... fication; that the SSI exemption was available on the said glass tubes because they were the specified items of Chapter 70 as mentioned in the eligibility list of the annexure appended to the said notification and that the said fact was also admitted by the Commissioner, Central Excise, Kanpur at page No. 70 of the Order-in-Original No. 13/Commissioner/MP/ 2008 dated 31-12-2008 that the glass tubes were specified items being used for manufacture of unspecified goods i.e. glass beads and that when the intermediate product i.e. glass tubes are exempted from levy of CENVAT duty being entitled for SSI Exemption, thus the provisions for proposed seizure as well as confiscation of the goods was without the authority of law. 10. The appellant no. 1 has also contested the penalty imposed under Rule 25 read with Section 11AC on the ground that the adjudicating 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 .....

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..... ) ...........; (xxviii) all goods falling under Chapter 70 or 71; (xxix) all goods.......; 13. From the above entry, I observe that the entire Chapter 70 of the First Schedule to the Central Excise Tariff Act, 1985 was eligible for SSI exemption but on going through the preamble of the notification, I find that exemption was available with some restriction given in the second proviso appearing in the preamble of the notification which reads as under :- Provided further that exemption contained in this notification shall not apply to goods which are chargeable to nil rate of duty or am exempt from the whole of the duty of excise leviable thereon. 14. As is evident, the department has intended to deny the benefit of Notification No. 67/95-C.E., dated 16-3-1995 to the glass pipes on the ground that the same are being consumed captively in 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 .....

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