2011 (4) TMI 667 - AT - Central Excise

Appeals by Businesses Succeed, Penalties Set Aside; Revenue's Appeal Dismissed.

The appeals by M/s Akal Engineers, M/s Perfect Fasteners, and M/s Unique Industries were successful, resulting in the penalties being set aside. However, ... SSI exemption - Violation of principles of natural justice - second round of litigation - held that:- We do not find any violation of principles of natural justice because the impugned adjudication was in second round and all the submissions of the parties were already heard. Further when an opportunity was given the parties did not show keenness in availing the opportunity. - Decided against the assessee.SSI exemption - clubbing of turnover - partnership firm and firms of partners - held that:- There is no question of extending separate SSI exemption limit to each partner of a firm or to different firms being run by the same person especially in a situation where goods are manufactured by one firm and sold in the name of different firms. - financial flow back among the four units established - Since M/s Guru Dashmesh Engineering and Traders was found to be having the necessary manufacturing facilities and other firms were not having the necessary facilities the demand confirmed in the hands of M/s Guru Dashmesh Engineering and Traders is proper. - Demand beyond normal period of limitation and penalty upheld.To sum up the Appeals filed by M/s Akal Engineers, M/s Perfect Fasteners and M/s Unique Industries are allowed by setting aside the penalty. The Appeal filed by M/s Guru Dashmesh Engineers and Traders, the Appeal filed by M/s Esteem Electrodes (P) Ltd and the Appeal filed by Revenue against Shri. Rakesh Kumar are rejected. Issues Involved:1. Alleged duty evasion by multiple entities.2. Clubbing of clearances of different entities.3. Violation of principles of natural justice.4. Validity of penalties imposed under Section 11AC and Rule 173Q.5. Separate existence and SSI exemption eligibility of entities.6. Alleged clandestine removal by Esteem Electrodes (P) Ltd.7. Role of M/s India Corporation in aiding duty evasion.Issue-Wise Detailed Analysis:1. Alleged Duty Evasion by Multiple Entities:The case involves six appeals related to alleged duty evasion during 1990-91 to 1994-95. The Show Cause Notice (SCN) was issued in October 1996. The entities involved were M/s Guru Dashmesh Engineers and Traders, M/s Akal Engineers, M/s Perfect Fasteners, M/s Unique Industries, M/s Esteem Electrodes, and Mr. Rakesh Kumar, proprietor of India Corporation. The SCN alleged that these entities were contrived to enjoy small scale exemption, but in reality, they were controlled by Shri Zabarjang Singh Sidhu.2. Clubbing of Clearances:The Tribunal had previously remanded the matter for de-novo adjudication, instructing that clearances of the five units should be clubbed as per the Apex Court's decision in Ganjan Fabrics Distributors Vs. CCE Pune. The adjudicating authority found that M/s Guru Dashmesh Engineers and Traders, Akal Engineers, and Perfect Fasteners were controlled by Shri Z. S. Sidhu, with financial flow among these entities indicating they were essentially one entity. Consequently, the clearances of these entities were clubbed, and duty was demanded without SSI exemption.3. Violation of Principles of Natural Justice:The appellants argued that there was a violation of principles of natural justice as they were not given adequate opportunity for hearing. However, the Tribunal found no merit in this argument, noting that the second round of adjudication provided ample opportunity for submissions, and the Commissioner (Appeal) also gave adequate opportunity for hearing.4. Validity of Penalties Imposed Under Section 11AC and Rule 173Q:The appellants contended that penalties under Section 11AC were not applicable as the section was not in force during the impugned period. They also argued that penalties under Rule 173Q amounted to a new case made out by the Commissioner (Appeals). The Tribunal rejected these arguments, stating that wrong quoting of sections does not invalidate the notice if the offence is clearly stated. Penalties under Rule 173Q were found to be correctly imposed as the appellants' actions constituted offences under clauses (a), (b), and (d) of Rule 173Q.5. Separate Existence and SSI Exemption Eligibility of Entities:The appellants claimed separate existence and eligibility for SSI exemption. However, the Tribunal found that the entities did not prove their separate manufacturing activities. The evidence showed that M/s Akal Engineers and M/s Perfect Fasteners were not operational during the relevant period, and their clearances were rightly clubbed with M/s Guru Dashmesh Engineers and Traders.6. Alleged Clandestine Removal by Esteem Electrodes (P) Ltd.:Esteem Electrodes (P) Ltd. was found to have suppressed production and indulged in clandestine removal of goods. The adjudicating authority confirmed a demand of Rs. 21,57,377 and imposed an equal penalty. The Commissioner (Appeal) reduced the duty demand to Rs. 10,90,427 and the penalty to Rs. 10,00,000. The Tribunal upheld these findings, rejecting the appellant's arguments.7. Role of M/s India Corporation in Aiding Duty Evasion:M/s India Corporation was accused of aiding the other entities by issuing invoices and manipulating records. The Commissioner (Appeal) had set aside the penalty imposed on Mr. Rakesh Kumar, proprietor of India Corporation. The Tribunal upheld this decision, finding no clear evidence that Mr. Kumar had knowledge of the goods being liable to confiscation under Central Excise laws.Conclusion:The appeals filed by M/s Akal Engineers, M/s Perfect Fasteners, and M/s Unique Industries were allowed, setting aside the penalties. The appeals filed by M/s Guru Dashmesh Engineers and Traders, M/s Esteem Electrodes (P) Ltd., and the Revenue against Mr. Rakesh Kumar were rejected.