1995 (12) TMI 109 - AT - Central Excise

Tribunal reduces penalty for duty demand on fabrics, cites Supreme Court ruling

The Tribunal reduced the penalty amount imposed on the appellants for duty demand on grey cotton/polyester blended fabrics. It emphasized the correct ... Valuation - Demand Issues:1. Duty demand on grey cotton/polyester blended fabrics without proper license and permission.2. Contention regarding duty payment by the processor and absence of clandestine removal.3. Denial of exemption under Notification No. 253/82.4. Assessment of assessable value as per Supreme Court ruling in Ujagar Prints v. Union of India.Analysis:1. The case involved a duty demand on grey cotton/polyester blended fabrics manufactured without the required Central Excise License and Textile Commissioner's permission. The appellants had cleared a significant quantity of fabrics without paying duty, resulting in a demand for additional duty of excise and a penalty imposed by the Collector. The Collector also held that the seized fabrics were liable for confiscation but allowed provisional release upon the payment of a fine.2. The appellants argued that the duty had been duly paid by the processor to whom they sent the fabrics for processing. They contended that there was no clandestine removal and questioned the validity of the demand under Rule 9(1) of the Central Excise Rules. The imposition of a penalty was also challenged as unjustified. The Supreme Court's decision in Ujagar Prints v. Union of India was cited to support the argument that duty liability lies with the processor due to causing the manufacture of goods.3. The Respondent, represented by the learned SDR, contended that the exemption under Notification No. 253/82 was rightfully denied due to the absence of duty payment on the grey fabrics in question.4. The Tribunal, after considering the submissions from both sides, relied on the Supreme Court's ruling in Ujagar Prints v. Union of India to assess the correct assessable value of the processed fabrics. It was emphasized that the assessable value should include not only processing charges but also the intrinsic value of the processed fabrics. The Tribunal found that no duty had been paid on the grey fabrics by the appellants and acknowledged their misunderstanding regarding the levy of additional excise duty. The limitation period for demanding duty beyond six months was deemed inapplicable due to the fabric movement being under cover of D 3 intimation to the Department. Consequently, the quantum of penalty imposed was reduced to Rs. 10,000 considering the circumstances of the case.In conclusion, the Tribunal disposed of the appeal by reducing the penalty amount and emphasizing the correct assessment of assessable value as per the Supreme Court's interpretation in Ujagar Prints v. Union of India.