2018 (7) TMI 1522 - AT - Central Excise

Review of Confiscation & Penalties under Central Excise Rules: Penalties Reconsidered, Exemption Eligibility Analyzed

The Tribunal reviewed a case involving confiscation of goods and penalties under the Central Excise Rules, 2002, and demand of central excise duty under ... Dutiability - process of printing amounting to manufacture - benefit of N/N. 7/2003 dated 01.03.2003 denied - Whether in the facts of the case the appellants were entitled for the exemption under the N/N.7/22003-CE dated 01.03.2003? - Whether the Penalties were imposed correctly against them? Held that:- Sr.No.3 of the said notification exempts goods specified therein processed without the aid of power or steam, with or without using of machines. There is no explanation has been inserted below Sr.No.3 so as to deem that lifting of water etc and mixing of dyes etc by stirrer the said fabrics have been processed without the aid of power or steam. Thus the units who are engaged in processing or printing of MMF using power operated pumps for lifting water or using power operated stirrer for mixing the dyes are not eligible to claim the exemption under said Notification. Penalties - Held that:- Considering the facts that the proprietor and the firm are one and the same, the imposition of penalty on M/s Neelam Prints as well as proprietor Shri Iftikhar Ahmed was not called for. Therefore, the penalty of ₹ 1,70,108/- imposed on Shri Iftikhar Ahmed is set aside. As regards enhancement of penalty to ₹ 10,000/-, Rule 25 prescribes the maximum amount of penalty which can be imposed and it is not a mandatory penalty. Therefore, enhancing of penalty to ₹ 10,000/- is set aside - The penalty imposed upon M/s Neelam Prints under Section 11AC being mandatory in nature cannot be reduced and is upheld. Appeal allowed in part. Issues involved:1. Confiscation of goods and imposition of penalty under CER, 2002.2. Demand of central excise duty under CEA, 1944, interest, and penalty.3. Appeal against the adjudication orders.4. Imposition of penalties on the appellant and proprietor.5. Eligibility for exemption under Notification No. 7/2003-CE.6. Use of power-operated equipment in the manufacturing process.7. Applicability of penalties and limitation period.Analysis:1. The case involved the confiscation of goods and imposition of penalties under the Central Excise Rules, 2002. The appellant, engaged in printing Man Made Fabric, faced a show cause notice proposing confiscation of goods and penalties. The adjudicating authority imposed fines and penalties on the appellant and the proprietor, which were challenged in subsequent appeals.2. Another issue was the demand of central excise duty under the Central Excise Act, 1944, along with interest and penalties. The original authority confirmed the duty demand and penalties, leading to appeals by the appellant and the proprietor against the adjudication orders.3. The appeals against the adjudication orders were decided by the Commissioner (Appeals), who upheld the duty demand and penalties. The Commissioner allowed the revenue's appeal by enhancing penalties, leading to further appeals by the appellant and the proprietor before the Appellate Tribunal.4. The imposition of penalties on both the appellant and the proprietor was a significant issue. The Tribunal considered the relationship between the firm and the proprietor, concluding that imposing penalties on both was not warranted. The penalties imposed were reviewed and modified accordingly.5. The eligibility for exemption under Notification No. 7/2003-CE was a crucial aspect of the case. The Tribunal analyzed the provisions of the notification and concluded that units using power-operated equipment in the manufacturing process were not eligible for the exemption, citing relevant case law to support its decision.6. The use of power-operated equipment in the manufacturing process was extensively discussed. The Tribunal found that the appellant was using power for processing their products, making them ineligible for the exemption under the notification. The statements and actions of individuals involved in the process were considered in reaching this conclusion.7. The applicability of penalties and the limitation period were also addressed. The Tribunal set aside the penalties imposed on the proprietor, reduced the penalty under Rule 25, and upheld the mandatory penalty under Section 11AC. The Tribunal clarified the nature of penalties and the limitations in this context, modifying the impugned order accordingly.