2003 (2) TMI 361 - AT - Central Excise

Tribunal upholds Central Excise duty demand, penalties, and confiscation order on interconnected entities

The Tribunal confirmed the demand of Central Excise duty from M/s. Kinotone, upheld penalties on M/s. Kinotone, M/s. International Talkie, and M/s. Cine ... SSI Exemption - Penalty Issues Involved:1. Demand of Central Excise duty from M/s. Kinotone.2. Imposition of penalties on M/s. Kinotone, M/s. International Talkie, and M/s. Cine Lamp.3. Confiscation of land, building, plant, machinery, etc.4. Determination of the real manufacturer.5. Clubbing of clearances and eligibility for SSI exemption.Detailed Analysis:1. Demand of Central Excise Duty from M/s. Kinotone:The show cause notice dated 5-5-1990 was issued to M/s. Kinotone, M/s. Cine Lamp, and M/s. International Talkie Equipment Co. Pvt. Ltd. for demanding Central Excise duty on 269 Cinema Projectors manufactured and removed by M/s. Kinotone under the brand name 'ITEC' from 1-4-85 to 31-3-90. The Collector confirmed the demand of Central Excise duty against M/s. Kinotone, stating that they fragmented their operations to avail exemptions under Notification No. 85/85-C.E., dated 17-3-85, and Notification No. 175/86-C.E., dated 1-3-86. The Tribunal upheld this demand in its previous order, and the Gujarat High Court remanded the matter for reconsideration. Upon review, the Tribunal found no reason to interfere with the impugned order and confirmed the duty demand from M/s. Kinotone.2. Imposition of Penalties:The Collector imposed a penalty of Rs. 5 lakh on M/s. Kinotone under Rule 173Q of the Central Excise Rules, 1944, and also imposed penalties on M/s. International Talkie (Rs. 1 lakh) and M/s. Cine Lamp (Rs. 50,000) under Rule 209A of the Central Excise Rules, 1944. The Tribunal had previously upheld these penalties. The Tribunal reiterated that the penalties were justified given the evidence of inter-linkages and control by the Adalja family over these entities. The penalty on M/s. Kinotone was deemed not excessive considering the duty confirmed was over Rs. 52.63 lakhs.3. Confiscation of Land, Building, Plant, Machinery, etc.:The Collector ordered the confiscation of land, building, plant, machinery, etc., with an option to redeem the same on payment of a fine of Rs. 50,000/-. This was based on the finding that M/s. Kinotone and the other entities were inter-linked and operated under a scheme to defraud the government of its legitimate revenue. The Tribunal did not find any reason to alter this part of the order.4. Determination of the Real Manufacturer:M/s. Kinotone argued that they only manufactured parts of the projector and that the complete cinema projector was assembled and installed by M/s. International Talkie, which should be considered the real manufacturer. The Tribunal, however, found that M/s. Kinotone was the manufacturer as they supplied the complete projectors. The Tribunal noted that the Adalja family controlled all three entities, but the duty was rightly confirmed against M/s. Kinotone since Bharatbhai B. Adalja, a partner in Kinotone, controlled the entire business.5. Clubbing of Clearances and Eligibility for SSI Exemption:The show cause notice and the Collector's findings established that M/s. Kinotone, M/s. Cine Lamp, and M/s. International Talkie were inter-linked and their clearances were to be clubbed. This was done to avail the benefit of small scale exemption under the relevant notifications. The Tribunal upheld the clubbing of clearances and confirmed that M/s. Kinotone was not eligible for the SSI exemption as the goods were affixed with the brand name 'ITEC' belonging to M/s. Itec Pvt. Ltd.Conclusion:The Tribunal confirmed the demand of Central Excise duty from M/s. Kinotone, upheld the penalties imposed on M/s. Kinotone, M/s. International Talkie, and M/s. Cine Lamp, and maintained the confiscation order. The Tribunal found no reason to interfere with the Collector's findings and rejected the appeal, emphasizing that M/s. Kinotone was the real manufacturer and liable for the duty and penalties.