2012 (10) TMI 384 - AT - Central Excise

Tribunal Partially Allows Appeals, Clarifies Rule 209 for 100% EOUs

HI-TECH NEEDLES (P) LTD. Versus COMMISSIONER OF CUSTOMS, ALLAHABAD

The appeals were partially allowed. The Tribunal set aside the confiscation of cannulae and related customs duty demands but upheld the excise duty ... Clandestine manufacturing activity - 100% EOU for manufacture of Needles - One cannulae was needed for manufacturing one needle – alleged that stock as per RG-1 was nil on 26-7-2000 and there was no production recorded – Held that:- Unaccounted final products are seized from the possession of the Appellants. Their private records showed receipt and issue of cannulae - appellants had manufactured the needles as alleged. As a Hundred Percent EOU they were supposed to maintain account of raw materials and finished goods. They preferred to show these items to be nil and to continue manufacturing activity - confiscation of needles under the provisions of Central Excise Rules is upheld - redemption fine on needles is upheld. Issues Involved:1. Clandestine manufacturing and clearance of needles.2. Confiscation and redemption of cannulae and needles.3. Demand for customs duty on cannulae and excise duty on needles.4. Imposition of penalties under the Customs Act and Central Excise Act.5. Validity of multiple Show Cause Notices (SCNs).6. Applicability of Rule 173Q and Rule 209 to 100% EOUs.7. Authority of Commissioner (Appeals) to remand cases.Detailed Analysis:Issue 1: Clandestine Manufacturing and Clearance of NeedlesThe appellants were accused of clandestine manufacturing and clearance of needles without payment of duty. During a visit by Central Excise officers on 5-1-2001, unaccounted cannulae and needles were found. The Managing Director admitted to the clandestine procurement of raw materials and manufacture of unaccounted needles. The Revenue argued that the appellants imported cannulae without paying customs duty for clandestine manufacturing.Issue 2: Confiscation and Redemption of Cannulae and NeedlesThe Revenue confiscated 19,48,184 cannulae and 19,87,600 needles and proposed redemption fines. The Commissioner (Appeals) upheld the confiscation but remanded the issue of excise duty determination for needles to the adjudicating authority for exact assessment.Issue 3: Demand for Customs Duty on Cannulae and Excise Duty on NeedlesThe adjudicating authority confirmed customs duty of Rs. 6,41,401 on cannulae and excise duty of Rs. 9,92,597 on needles. The Commissioner (Appeals) upheld the customs duty but remanded the excise duty issue for re-assessment. The Tribunal found that the benefit of doubt should go to the appellants regarding customs duty due to lack of evidence on clandestine import but upheld the excise duty liability due to better proof of unaccounted final products.Issue 4: Imposition of Penalties under the Customs Act and Central Excise ActPenalties were imposed under Section 112 of the Customs Act and Rule 209 of the Central Excise Rules. The Tribunal noted that combined penalties on the Managing Director were not maintainable and remanded the matter for separate determination of penalties under the applicable rules.Issue 5: Validity of Multiple Show Cause Notices (SCNs)The appellants argued that the second SCN was time-barred based on the Nizam Sugar Factory case. The Tribunal rejected this plea, stating that the second SCN was for a period prior to the first SCN and issued within the five-year limit for suppression and clandestine manufacture cases.Issue 6: Applicability of Rule 173Q and Rule 209 to 100% EOUsThe appellants contended that Rule 173Q was not applicable to 100% EOUs. The Tribunal agreed that Rule 173Q was not applicable but noted that Rule 209 was applicable to any manufacturer, thus upholding the penalties under Rule 209.Issue 7: Authority of Commissioner (Appeals) to Remand CasesThe Tribunal acknowledged that the Commissioner (Appeals) did not have the power to remand but exercised its own power to remand the matter to the adjudicating authority for correct determination of excise duty liability and penalties.Conclusion:The appeals were partially allowed. The Tribunal set aside the confiscation of cannulae and related customs duty demands but upheld the excise duty liability on needles. The matter was remanded to the adjudicating authority for re-assessment of excise duty and separate determination of penalties. The Tribunal clarified the applicability of Rule 209 to 100% EOUs and rejected the plea on time-bar for the second SCN.