2010 (11) TMI 821 - AT - Central Excise

Tribunal Orders Appellants to Pre-Deposit Funds Pending Compliance

ENKAY TEXOFOOD INDUSTRIES LTD. Versus COMMISSIONER OF C. EX., THANE-I

ENKAY TEXOFOOD INDUSTRIES LTD. Versus COMMISSIONER OF C. EX., THANE-I - 2011 (272) E.L.T. 292 (Tri. - Mumbai) Issues Involved:1. Waiver of pre-deposits and stay of recovery.2. Demand of Central Excise duty and imposition of penalties.3. Alleged diversion of raw materials.4. Non-receipt of relied-upon documents.5. Compliance with Notification No. 1/95-C.E.6. Financial hardship claims.Detailed Analysis:1. Waiver of Pre-Deposits and Stay of Recovery:The appellants sought waiver of pre-deposits and stay of recovery concerning the dues adjudged by the Commissioner of Central Excise, Thane-I. The Commissioner demanded over Rs. 37.42 crores from the appellant firm for raw materials procured without payment of duty, which were allegedly diverted instead of being used for manufacturing export goods. Penalties were also imposed on the firm's partners and another company involved.2. Demand of Central Excise Duty and Imposition of Penalties:The Commissioner demanded duty based on findings that the raw materials procured by the appellant firm were diverted and not used for the intended purpose. The firm deposited Rs. 13 lakhs towards this demand. Penalties were imposed under Rule 25 and Rule 26 of the Central Excise Rules, 2001/2002 on the firm, its partners, and another company.3. Alleged Diversion of Raw Materials:The demand was based on the allegation that the raw materials procured under CT-3 certificates were diverted instead of being used in manufacturing export goods. The firm did not submit the required periodical returns or obtain the export obligation discharge certificate, leading to the conclusion that they violated Notification No. 1/95-C.E. and were liable for the duty.4. Non-Receipt of Relied-Upon Documents:The appellants argued they had not received all relied-upon documents, hindering their defense. However, the Revenue produced acknowledgments showing receipt of the documents. The Tribunal found that the appellants had received the necessary documents, and the plea of negation of natural justice was not sustainable at this stage.5. Compliance with Notification No. 1/95-C.E.:The firm failed to obtain the export obligation discharge certificate and did not meet the conditions of the Notification, making them liable for the duty. The Tribunal noted that the firm did not establish a prima facie case on merits against the demand. The firm's failure to provide evidence of compliance with the Notification's conditions led to the conclusion that they were liable to pay the duty.6. Financial Hardship Claims:The firm claimed financial hardship, stating their factory was closed and they could not pre-deposit any amount. However, no balance sheet was provided to support this claim. The Tribunal directed the firm to pre-deposit Rs. 9.5 crores within four weeks, failing which there would be no waiver of pre-deposit and stay of recovery.Additional Judgment for M/s. Enkay Texofood Industries Limited:The job-worker company argued against the penalty, claiming no collusion with the appellant firm and citing financial hardship. The Tribunal found no evidence supporting their claims and noted that the DGCEI officials found no manufacturing activity at their premises. The company was directed to pre-deposit Rs. 2 lakhs within four weeks, with a waiver of the balance penalty upon compliance.Conclusion:The Tribunal directed the main appellant firm to pre-deposit Rs. 9.5 crores and the job-worker company to pre-deposit Rs. 2 lakhs within four weeks, with waivers of the remaining amounts contingent on compliance. The appellants' claims of non-receipt of documents and financial hardship were not substantiated to the Tribunal's satisfaction.