2022 (10) TMI 93 - AT - Central Excise

Appeals partially allowed in Central Excise Duty case with penalties reduced and confiscation order set aside.

M/s. Ultramix Computer Support System Pvt. Ltd., Jayant Shirwadkar and Shrikant Shirwadkar Versus Commissioner of CGST & CE, Pune-I

M/s. Ultramix Computer Support System Pvt. Ltd., Jayant Shirwadkar and Shrikant Shirwadkar Versus Commissioner of CGST & CE, Pune-I - TMI Issues Involved:1. Demand of Central Excise Duty.2. Clubbing of clearances.3. Imposition of penalties.4. Confiscation of property.5. Non-issuance of Show Cause Notice to alleged dummy units.6. Classification of goods.7. Applicability of extended period of limitation.8. Validity of penalties under Rule 173Q and Rule 209A.Detailed Analysis:1. Demand of Central Excise Duty:The Commissioner confirmed and demanded Central Excise Duty of Rs. 18,00,000/- on clearances made by M/s Shrikant Refrigeration Company and M/s Excel Technology, ordering recovery from M/s Ultramatix Computer Support Systems Pvt. Ltd. under Sec.11A of the Central Excise Act, 1944. The demand of Rs. 18,44,400/- was not confirmed.2. Clubbing of Clearances:The Commissioner concluded that M/s Shrikant Refrigeration Co. (SRC) and M/s Excel Technology (ET) were dummy units floated by the assessee to avail inadmissible exemptions under Notification No. 75/87. It was determined that all three units had common machinery, labor force, and manufacturing premises. Consequently, clearances of these units were clubbed together, and a demand of Rs. 19,35,000/- was proposed.3. Imposition of Penalties:Penalties were imposed under Rule 173Q of the Central Excise Rules on M/s Ultramatix Computer Support System Pvt. Ltd. (Rs. 2,00,000/-), Rule 209A on Shri Shrikant Shirwadkar (Rs. 1,00,000/-), and Shri Jayant Shirwadkar (Rs. 50,000/-). The penalties were based on the findings that the dummy units were created to evade duty and that there was misclassification of goods.4. Confiscation of Property:The Commissioner ordered the confiscation of land, building, plant, machinery, and materials belonging to M/s Ultramatix Computer Support System Pvt. Ltd. under Rule 173Q(1) of the Central Excise Rules. However, an option of redemption fine of Rs. 10,00,000/- in lieu of confiscation was provided.5. Non-issuance of Show Cause Notice to Alleged Dummy Units:The appellants argued that no Show Cause Notice was issued to SRC and ET, which vitiated the entire proceeding. However, the tribunal held that issuance of notice to the partners of these firms sufficed, as per the Partnership Act, 1932, and the Supreme Court's ruling in Madhu @ C.V. Maadhesh case.6. Classification of Goods:The Commissioner held that the goods claimed as parts of air conditioners were actually complete air conditioners cleared in CKD/SKD condition. The classification lists for SRC and ET were finalized in 2011, denying the benefit of Notification No. 75/87. The tribunal upheld this classification based on Rule 2(a) of the General Rules for Interpretation of the Central Excise Tariff Act, 1985.7. Applicability of Extended Period of Limitation:The extended period of limitation was invoked on the grounds of suppression of facts. The tribunal upheld this, citing the Supreme Court's decision in the Box & Carton India Pvt. Ltd. case, which allowed for the extended period in cases of suppression.8. Validity of Penalties under Rule 173Q and Rule 209A:The tribunal noted that Rule 173Q(2) was omitted w.e.f. 12/5/2000, and any order passed thereafter invoking this rule for confiscation was not sustainable, following the Supreme Court's decision in Punjab National Bank. However, penalties under Rule 173Q(1) and Rule 209A were upheld, as these rules continued under the Central Excise Rules, 2001, and 2002.Conclusion:The appeals were partially allowed. The penalty on M/s Ultramatix under Rule 173Q(1) was reduced to Rs. 1,80,000/-, and the confiscation order under Rule 173Q(2) was set aside. The penalty on Shri Jayant Shirwadkar was set aside, and the penalty on Shri Shrikant Shirwadkar under Rule 209A was reduced to Rs. 50,000/-.