2014 (2) TMI 330 - AT - Central Excise

Tribunal Ruling on Penalties for Job Workers in Central Excise & Customs Act

The Tribunal delved into the issue of penalties imposed on job workers under Rule 26 of Central Excise Rules and Section 112 of the Customs Act, 1962. It ... Penalty u/s 112 - Appellant able to appear being busy - Held that:- request for adjournment made by main appellant M/s Micro Polyester Pvt. Ltd. seems to be on flimsy ground as the said company has been filing only the replies before the adjudicating authority and has not availed the benefit of appearing before the lower authorities by an advocate or otherwise - extensive findings recorded by the adjudicating authority requires us to hold that M/s Micro Polyester Pvt. Ltd.’s case needs thorough appreciation of the evidences which can be done only at the time of final disposal of appeals. In our view, M/s Micro Polyester Pvt. Ltd. filed detailed appeals before us taking various grounds of appeals which are in the form of legal submissions would not have been done so without any assistance - Conditional stay granted. Issues:1. Imposition of penalties under Rule 26 of Central Excise Rules and Section 112 of the Customs Act, 1962 on job workers.2. Applicability of penalties on activities conducted prior to 2002.3. Consideration of role played by job workers, EOUs in facilitating escapement of Customs/Excise duty.4. Requirement of pre-deposit for hearing and disposing appeals.Analysis:1. The Stay Petitions raised a common legal issue regarding the imposition of penalties under Rule 26 of Central Excise Rules and Section 112 of the Customs Act, 1962 on job workers. The appellants argued that as job workers, they were only involved in job work and should not be penalized. The Tribunal considered the submissions made by both sides and decided to delve deeper into the issue to determine the actual role played by the job workers and EOUs in facilitating the escapement of Customs/Excise duty.2. The appellants contended that the penalties were imposed on activities conducted prior to 2002, and the show cause notice was issued in 2008, which exceeded the statutory period of 5 years as per the Excise Act and Customs Act. They cited precedents to support their argument that penalties cannot be imposed on dealers who issued invoices. The Tribunal acknowledged the need to thoroughly analyze the evidence and findings to reach a conclusion on the penalties imposed.3. The Departmental Representative argued that job workers were liable for penalties as they facilitated the movement of goods that were imported duty-free but not used for the intended purposes. The main appellant was accused of diverting goods, resulting in the evasion of Customs duty and Central Excise duty. The Tribunal noted the extensive findings by the adjudicating authority and emphasized the importance of understanding the roles played by all parties involved in the escapement of duties.4. The Tribunal directed the main appellant and its directors to make pre-deposits to hear and dispose of their appeals. The main appellant was instructed to deposit Rs.1 Crore, while the directors were directed to deposit Rs.50,000 each. Other appellants were also required to make pre-deposits to proceed with their appeals. Compliance with the pre-deposit conditions was mandated within eight weeks, with a subsequent report due on a specified date for further orders. Waivers for pre-deposit of balance amounts were subject to compliance and stayed until the appeals' disposal.