2007 (9) TMI 192 - AT - Central Excise

Tribunal upholds penalty for manufacturing Gutka Pan Masala without duty payment

The Tribunal upheld the order imposing a demand and penalty on appellants for manufacturing Gutka Pan Masala without paying duty. The notice served on a ... Service of notice on partner under Section 24 of the Partnership Act - notice to partner operates as notice to the firm - excisable goods manufactured and cleared without payment of duty - assessable value-sale price to be treated as cum-duty price - reduction of penalty under Rule 173QService of notice on partner under Section 24 of the Partnership Act - notice to partner operates as notice to the firm - Validity of service of show cause notice on Smt. Meena Agarwal as notice to the firm - HELD THAT: - The Tribunal examined whether service of the show cause notice on Smt. Meena Agarwal, a partner, amounted to valid service on the partnership firm. Reliance was placed on Section 24 of the Partnership Act which treats notice to a partner who habitually acts in the business in matters relating to the firm as notice to the firm. The record showed that on receipt of notice Smt. Meena Agarwal wrote on 18-4-1999 requesting copies of relied-upon documents so that an effective reply could be filed. The Tribunal held that this response evidenced her active participation in the firm's affairs for the purpose of notice and therefore service on her operated as service on the firm. The contention that service on her was invalid was rejected. [Paras 7]Service of the show cause notice on Smt. Meena Agarwal was valid and operated as notice to the firm.Excisable goods manufactured and cleared without payment of duty - Sustainability of demand in respect of goods found manufactured at unregistered premises and supplies to a trading firm run from same premises - HELD THAT: - The Tribunal considered the evidence that branded gutka pan masala was being manufactured at an unregistered premises and that a separate trading firm, M/s. Shyamji Traders, running from the same place had received supplies from the appellant during March 1993 to July 1993. The appellant did not reflect the quantity supplied in statutory records. On verification it was found that duty had not been paid on goods cleared to the trading firm. The Tribunal concluded that the absence of the supplied quantity in statutory records and the documentary verification supported the demand for goods cleared without payment of duty, and therefore the demand was rightly confirmed. [Paras 8]The demand in respect of goods manufactured and cleared without payment of duty to the trading firm is upheld.Assessable value-sale price to be treated as cum-duty price - reduction of penalty under Rule 173Q - Treatment of sale price for assessable value and quantum of penalty - HELD THAT: - The Tribunal applied the principle, as laid down by the Supreme Court in the cited decision, that for arriving at the assessable value sale price is to be taken as cum-duty price and the demand should be recalculated after deducting excise duty from the sale price. On penalty, having regard to the facts and circumstances, the Tribunal exercised its powers to reduce the penalty imposed under Rule 173Q. The Tribunal reduced the penalty to Rs. 50,000 and otherwise upheld the impugned order subject to recalculation of demand on the cum-duty basis. [Paras 8]Assessable value to be computed treating sale price as cum-duty price and demand to be recalculated accordingly; penalty under Rule 173Q reduced to Rs. 50,000.Final Conclusion: The appeal is disposed of by upholding the demand for goods cleared without payment of duty, ruling that service of the show cause notice on the partner Smt. Meena Agarwal was valid as notice to the firm, directing recalculation of demand treating sale price as cum-duty price, and reducing the penalty under Rule 173Q to Rs. 50,000. Issues:1. Validity of service of show cause notice on a partner of the firm.2. Demand raised for goods supplied without payment of duty.3. Interpretation of Partnership Act regarding notice to a partner.4. Assessment of excise duty based on sale price.Analysis:1. The appeal was filed against an order imposing a demand and penalty on the appellants for manufacturing Gutka Pan Masala without paying duty. The appellant contended that the show cause notice was not served on them but on a partner who was not actively involved in the firm. The Commissioner (Appeals) remanded the matter to provide the notice to the firm, which was done after five years. The appellant relied on the Partnership Act, specifically Section 24, and argued that the notice served on the partner was not valid. However, the Tribunal held that the notice to the partner was valid as she actively participated in the firm's affairs by responding to the revenue authorities' letter, requesting relied-upon documents for an effective defense.2. The revenue authorities argued that excisable goods were manufactured at an unregistered location, and duty was not paid for goods supplied to a trading firm. The demand was made based on this non-payment of duty. The Tribunal found the demand to be valid as the goods were manufactured at an unregistered place, and duty was not paid for goods supplied to the trading firm.3. The appellant also contested the demand based on the interpretation of the Partnership Act regarding notice to a partner. The Tribunal reiterated that notice to a partner who habitually acts in the firm's business is considered notice to the firm. In this case, the partner actively participated in the firm's affairs, making the notice valid on the firm.4. Regarding the assessment of excise duty based on the sale price, the appellant argued for the benefit of cum duty price deduction, citing a Supreme Court decision. The Tribunal agreed with this argument and recalculated the demand after deducting excise duty from the sale price. The penalty imposed was reduced, but the impugned order was otherwise upheld, disposing of the appeal accordingly.