2013 (4) TMI 255 - AT - Central Excise

Tribunal ruling: Duty upheld on extracts, penalties modified, chilli oleoresins duty for requantification.

The tribunal upheld the demand of duty on semi-finished herbal extracts and black phenyl, with duties deemed recoverable with interest from BEPL. The ... Demand on semi-finished herbal extracts - Demand on clearance to DTA - Demand on black phenyl - Penalty U/s 11AC of the Act read with Rule 25 of the Central Excise Rules, 2002 - confiscation and redemption fine - Held that:- Their challenge to the demand of duty on the semi-finished herbal extracts on the ground of non-excisability & job-worked herbal extracts were further processed by Bayir chemicals’ Peenyan Unit and exported or cleared on payment of dutymust fail. - no merit in their alternative claim that the job-worked herbal extracts were further processed by Bayir chemicals’ Peenyan Unit and exported or cleared on payment of duty. There is no evidence to substantiate this claim. - This apart, job work itself is outside the scope of a 100% EOU’s activities (as rightly held by the lower authorities) inasmuch as the EOU’s entire production is meant for export. - Demand of duty confirmed - Decided against the assessee. Retraction of statement - clarification on statement - held that:- Any clarificatory statement should have been given, without delay, to the authority which recorded the original statement. Moreover, there should not be any inconsistency between the original and ‘clarificatory’ statements. In the present case, we have found inconsistencies also. Therefore the view taken by us with regard to the evidentiary value of the Managing Director’s original statement remains intact. Regarding demand on clearance to DTA - brought to any other place in India versus allowed to be sold in India - Held that:- The impugned demand of duty was quantified under the proviso even for the period prior to 11-5-2001, which cannot be sustained. As per the provisions interpreted by the Hon’ble Supreme Court CCE v. M/s. NCC Blue Water Products Ltd.(2010 (9) TMI 13 - Supreme Court of India ), the demand of duty on oleoresins cleared from EOU premises from April 1999 to 10-5-2001 requires to be requantified in terms of the main part of Section 3(1) of the Central Excise Act and we shall direct the adjudicating authority to do so. Regarding Demand on black phenyl - Held that:- we have found this dispute to be similar to the one pertaining to semi-finished herbal extracts and, therefore, there is no reason for a different view. Consequently, the above demand has only to be sustained. As regards interest on duty - Held that:- there is no specific grievance against Section 11AB having been invoked for levy of interest on duty. In the result, the assessee is liable to pay interest on duty under the aforesaid provisions for the relevant periods. Regarding Redemption Fine - Held that:- These goods were admittedly not used for the declared purpose and hence liable to confiscation under Rule 25. These capital goods were used for job work on raw materials supplied by a third party, which was not permissible under the EOU scheme and amounted to contravention of Notification No. 1/95-C.E. Regarding Penalty U/s 11AC - Held that:- The proviso to Section 11A(1) of the Act was rightly invoked on the ground of wilful suppression of facts by GNCO/BEPL, for recovery of duty and, for that matter, the requirements of Section 11AC were satisfied. Issues Involved:1. Demand of duty on semi-finished herbal extracts.2. Demand of duty on chilli oleoresin.3. Demand of duty on black phenyl.4. Demand of interest on duty amounts.5. Imposition of penalties under Section 11AC and Rule 26 of the Central Excise Rules, 2002.6. Imposition of redemption fine in lieu of confiscation of seized goods.Detailed Analysis:Issue 1: Demand of duty on semi-finished herbal extracts- Facts: BEPL, a 100% EOU, was found to have cleared semi-finished herbal extracts to M/s. Bayir Chemicals without proper authorization and without payment of duty.- Contentions: BEPL argued that they were merely undertaking job work for M/s. Bayir Chemicals, and the semi-finished goods were not marketable or excisable. They also claimed that the demand was time-barred.- Findings: The tribunal found that the processes undertaken by BEPL resulted in excisable goods. The plea of job work was rejected as job work is outside the scope of a 100% EOU's activities. The plea of limitation was also rejected due to non-disclosure of relevant facts to the department.- Conclusion: The demand of duty on semi-finished herbal extracts was upheld.Issue 2: Demand of duty on chilli oleoresin- Facts: BEPL was found to have clandestinely cleared chilli oleoresin to the DTA without payment of duty.- Contentions: BEPL contended that there was no evidence of manufacture and clearance, and that the machinery and power connection were not available during the material period. They also argued that the duty should be assessed under the main part of Section 3(1) of the Central Excise Act for the period prior to 11-5-2001.- Findings: The tribunal found that the Managing Director's confessional statement provided sufficient evidence of clandestine manufacture and clearance. However, for the period prior to 11-5-2001, the duty was to be assessed under the main part of Section 3(1) as per the Supreme Court's decision in M/s. NCC Blue Water Products Ltd.- Conclusion: The demand of duty on oleoresins was set aside for requantification as per the main part of Section 3(1) for the period prior to 11-5-2001 and under the proviso for the subsequent period.Issue 3: Demand of duty on black phenyl- Facts: BEPL was found to have manufactured black phenyl on behalf of M/s. Sneha Chemicals without proper authorization and without payment of duty.- Contentions: BEPL did not present a specific argument against this demand.- Findings: The tribunal found the dispute similar to the one pertaining to semi-finished herbal extracts and upheld the demand.- Conclusion: The demand of duty on black phenyl was upheld.Issue 4: Demand of interest on duty amounts- Facts: Interest was demanded on the duty amounts under Section 11AA/11AB of the Central Excise Act.- Contentions: BEPL argued that the provisions of Section 11AA could not be invoked as the demand of duty itself was not sustainable.- Findings: The tribunal found that interest was leviable under Section 11AA/11AB as the demands of duty were upheld.- Conclusion: BEPL was held liable to pay interest on the duty amounts.Issue 5: Imposition of penalties under Section 11AC and Rule 26 of the Central Excise Rules, 2002- Facts: Penalties were imposed on BEPL, M/s. Bayir Chemicals, and M/s. Sneha Chemicals.- Contentions: BEPL argued against the imposition of penalties, while M/s. Bayir Chemicals and M/s. Sneha Chemicals contested the quantum of penalties.- Findings: The tribunal upheld the penalty on BEPL under Section 11AC but directed the adjudicating authority to redetermine the quantum. The penalty on M/s. Bayir Chemicals was reduced to Rs. 50,000/-, and the penalty on M/s. Sneha Chemicals was set aside due to lack of evidence of active involvement.- Conclusion: The penalties were modified as detailed above.Issue 6: Imposition of redemption fine in lieu of confiscation of seized goods- Facts: Redemption fine was imposed in lieu of confiscation of raw materials, semi-finished goods, and capital goods.- Contentions: BEPL did not present a specific argument against the redemption fine.- Findings: The tribunal found the redemption fine of Rs. 50,000/- to be reasonable considering the total value of the seized goods.- Conclusion: The redemption fine was sustained.Final Order:- The demands of duty on herbal extracts and black phenyl were upheld, and these duties were held to be recoverable with interest from BEPL.- The demand of duty on oleoresins was set aside for requantification as per the main part of Section 3(1) for the period prior to 11-5-2001 and under the proviso for the subsequent period, and the duty so requantified was recoverable with interest from BEPL.- BEPL was directed to pay the balance amount of duty after appropriation of Rs. 30 lakhs already paid, with interest thereon.- The redemption fine was sustained.- The quantum of penalty on BEPL under Section 11AC was directed to be redetermined by the original authority.- The penalty on M/s. Bayir Chemicals was reduced to Rs. 50,000/-, and the penalty on M/s. Sneha Chemicals was set aside.- The appeal of M/s. Sneha Chemicals was allowed, and the other appeals were disposed of in the above terms.