2024 (11) TMI 920 - AT - Central Excise

Job worker manufacturing semi-finished biris cannot be penalized for clandestine removal as principal already paid excise duty

M/s. Samar Biri Factory Versus Commr. of CGST & Central Excise, Siliguri And Md. Samsuddin Ahmed Versus Commr. of Customs, Central Excise & Service Tax, Siliguri

CESTAT Kolkata allowed the appeal partially in a clandestine removal case involving unbranded biris. The appellant was engaged in job work for ... Clandestine removal - unbranded biris - appellant submitted that they were carrying job work for Samar Biri Factory and the unbranded biri is not full manufactured condition - Non-compliance with N/N. 214/86-CE. - HELD THAT:- The factual documentary evidence prove that the Samsuddin Ahmed was undertaking the job work of semi-finished Biri making which was not in a fully manufactured and marketable condition. Hence, the same cannot be treated as finished goods for demanding the Excise Duty. Further, as per the verification report given by the Assistant Commissioner, Siliguri, Samar Biri factory has for the receipt of semifinished biris and has carried out certain more work and have paid the applicable excise duty and the same have been cleared from their end. Therefore, there are no justification in the seizure, confiscation and imposition of Redemption Fine on 297 bangs of unbranded biris. Thus, non following of the procedure under Notification No. 214/86-CE on its own cannot be the ground for demanding the duty from the appellant particularly when it is getting clarified that the principal has paid the Excise Duty at his end. However the appellant and principal should have been followed the procedure and given proper intimation to the respective jurisdiction which has not been done in this case. For such procedural lapse, the appellant is required to be imposed penalty. Accordingly, taking over all view of the factual details of the case, the penalty imposed on Samsuddin Ahmed modified to Rs. 10,000/- and Rs. 25,000/- on Samar Biri Factory. Appeal disposed off. Issues:1. Demand of excise duty on unbranded biris allegedly cleared clandestinely.2. Dispute regarding job work done by Samsuddin Ahmed for Samar Biri Factory.3. Allegation of demanding duty twice on the same product.4. Non-compliance with Notification No. 214/86-CE.5. Legal precedent cited in defense of the appellants.6. Verification of records and activities at Samar Biri Factory.7. Justification of confirmed demand, interest, confiscation, and penalties.8. Interpretation of Transit Notes and verification reports.Analysis:The judgment by the Appellate Tribunal CESTAT Kolkata involved a case where a vehicle carrying unbranded biris was intercepted, leading to the seizure of goods allegedly cleared clandestinely by Samsuddin Ahmed for Samar Biri Factory. The appellants argued that the unbranded biris were in semi-finished condition and not marketable until further processing by Samar Biri Factory, which included toasting, leveling, and packing to become fully manufactured and marketable products. The appellants contended that the goods were properly accounted for, and excise duty was paid at Samar Biri Factory, thus opposing the demand for excise duty on the same product twice.The Appellate Tribunal reviewed the evidence, including Transit Notes and verification reports, which indicated that Samsuddin Ahmed's job work was accounted for at Samar Biri Factory, and excise duty was paid upon removal of the finished goods. The Tribunal found that the unbranded biris were not fully manufactured products subject to excise duty when cleared by Samsuddin Ahmed, as they required additional processing by Samar Biri Factory. The Tribunal referenced legal precedents to support the appellants' argument that excise duty cannot be demanded until goods are fully manufactured.Regarding non-compliance with Notification No. 214/86-CE, the Tribunal acknowledged the procedural lapse but emphasized that the benefit of exemption should not be denied solely on that basis, especially when proper accountal of goods and excise duty payment were ensured by the principal. Consequently, the Tribunal modified the penalties imposed on Samsuddin Ahmed and Samar Biri Factory due to the procedural lapse, reducing them to Rs. 10,000 and Rs. 25,000, respectively.In conclusion, the Appellate Tribunal set aside the seizure, confiscation, and redemption fine on the unbranded biris, ruling in favor of the appellants based on the evidence of proper accounting and excise duty payment at Samar Biri Factory. The judgment highlighted the importance of following procedures while acknowledging that procedural lapses may warrant penalties but should not invalidate the excise duty exemption when goods are properly accounted for and excise duty is paid by the principal.