2011 (3) TMI 769 - AT - Central Excise

Tribunal Overturns Commissioner's Order in Duty Evasion Case

The Tribunal set aside the Commissioner's order confirming duty, interest, and penalty amounting to Rs. 65,56,317 against the appellants for alleged ... Clandestine removal - allegation that manufactured product were disposed of as traded goods and thereby the appellants evaded the payment of duty - Necessary to ascertain whether the appellants were having necessary material in support of their contention that the goods in question were really traded goods unconnected with the manufacturing activity - Simultaneously, it was necessary for the department to place on record the material in support of their contention that those goods were actually manufactured goods - In the absence of such exercise being done, it was not open for the Commissioner to proceed to impose duty demand against the appellants - Accordingly, the appeal succeeds; the impugned order is set aside - Matter is remanded for de novo enquiry. Issues:1. Confirmation of duty, interest, and penalty by the Commissioner2. Allegation of evasion of payment of duty by the appellants3. Affixing of brand name on traded goods4. Lack of proper evidence regarding the manufacture of goods5. Stand taken by the appellants in response to the show cause notice6. Necessity of ascertaining the nature of goods before imposing duty demandConfirmation of Duty, Interest, and Penalty:The appeal stemmed from an order by the Commissioner confirming duty amounting to Rs. 65,56,317 along with interest and an equal penalty. The appellants, involved in manufacturing vibrators and converters, were also engaged in trading similar items. The Commissioner upheld the duty demand based on the allegation that the appellants evaded payment by disposing of manufactured products as traded goods.Allegation of Evasion of Payment of Duty:The main accusation against the appellants was that they disposed of manufactured products as traded goods to avoid duty payment. Despite the appellants denying affixing their brand name on traded goods, records indicated otherwise, leading to the inference of duty evasion. The Commissioner confirmed the demand without proper evidence regarding the nature of goods and without verifying if the traded goods were actually manufactured.Affixing of Brand Name on Traded Goods:The investigation revealed that some traded items bore the brand name of the appellants, contradicting the initial denial by the appellants. The reply to the show cause notice disclosed that the traded goods were affixed with the brand name 'Accentrix,' necessitating a thorough examination to determine the connection between the traded and manufactured goods.Lack of Proper Evidence Regarding Manufacture of Goods:The Commissioner's decision to confirm the duty demand lacked substantial evidence establishing that the traded goods were indeed manufactured by the appellants. The absence of a comprehensive assessment regarding the nature of the goods raised doubts about the validity of the duty imposition.Stand Taken by Appellants in Response to Show Cause Notice:The appellants' response to the show cause notice acknowledged the import and trading activities involving affixing the brand name on goods before selling them. This revelation highlighted the necessity of verifying the actual nature of the goods and ensuring that the duty imposition was based on accurate information.Necessity of Ascertaining Goods Before Imposing Duty Demand:The Tribunal deemed the Commissioner's order unsustainable due to the lack of a thorough investigation into whether the traded goods were genuinely unconnected with the manufacturing activity. The decision was set aside, and the matter was remanded for a fresh inquiry to determine the true nature of the goods and the applicability of duty accordingly.