TaxTMI 
TaxTMI 
2009 (8) TMI 997
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....ub-Heading No. 70023900) being captively consumed while manufacturing the final products i.e. Glass Beads (Chapter Sub-Heading no. 70181020), which are exempted from whole of the Central Excise duty as per Tariff entry, the officers Central Excise, Division-Agra, visited the factory of the appellant no. 1 on 12-7-2007. As a result, the officers found that the appellant no. 1 was engaged in manufacturing of exempted product glass bead by captively consuming the goods glass tubes being manufactured by using power operated compressor. The officers also found that during financial years, 2003-04 to 2007-08 till 12-7-2007, the appellant no. 1 has cleared glass tubes over and above the SSI exemption limit as provided under Notification No. 08/2003-C.E., dated 1-3-2003, as amended during the respective financial years. The officers seized the 17440 bundles of glass tubes available in the factory of appellant no. 1 totally weighing 43600 Kgs and valued at Rs. 10,90,000/- on 3-10-2007 and gave the same in the custody of Shri Praveen Sharma under proper supurdnama dated 3-10-2007. The goods were seized because the same were manufactured without filing declaration as required under Notificati....
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.... 5. The adjudicating authority however, ordered for confiscation of seized goods under Rule 25 vide impugned order and also imposed redemption fine of Rs. 2,75,000/- in lieu of confiscation. Apart from above, a penalty equivalent to duty involved on the seized and confiscated goods was imposed under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944 upon the appellant no. 1 and a penalty of Rs. 25,000/- was imposed upon the appellant no. 2 under Rule 26 for the alleged misdeeds. The adjudicating authority held that the appellant no. 1 was not eligible for SSI exemption in terms of Notification No. 8/2003-C.E., dated 1-3-2003, as amended as both the glass tubes as well as glass beads were not falling under the schedule to the list of the items eligible for SSI benefit appended with the aforesaid notification, therefore, the seized glass tubes used captively in manufacture of glass beads were dutiable and contraband in nature. It was also held that the dutiable goods were manufactured and cleared without payment of duty, without maintaining statutory records, without obtaining registration or filing declaration and without filing any m....
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....ere well within the factory and there neither any intention nor any preparation for alleged clandestine removal and as such the seizure along with confiscation was infructuous and void ab initio. Reliance is placed on the following decisions : - (a) Icy Cold Commercial Enterprise v. CCE - 1994 (69) E.L.T. 337 (T) (b) Kartar Steel (P.) Ltd. v. CCE - 1997 (93) E.L.T. 443 (T) = 1997 (18) RLT 138 (CEGAT). (c) Telemechanique & Control India Ltd. v. CCE - 2000 (117) E.L.T. 614 (T) = 1995 (10) RLT 475 (CEGAT). (d) Vee Kay General Industries v. CCE reported in 2001 (129) E.L.T. 57 (T). (e) CCE. v. Rose Metal Pvt. Ltd. - 2001 (133) E.L.T. 217 (T) (f) Bhillai Conductor Pvt. Ltd. v. CCE - 2000 (125) E.L.T. 781 (T). (g) Garden Silk Mills v. CCE reported in 1991 (51) E.L.T. 373 (T) (d) Dhebar Steel Re-rollers v. CCE, Raipur - 2002 (142) E.L.T. 194, wherein it has been held that - 'Without actual weighment - Neither the duty Demanded could be confirmed nor penalty could be imposed on the assessee. • That the appellants further submit that the impugned Order is even otherwise manifestly erroneous and without application of mind inasmuch as followin....
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....e appellant further say that when the intermediate product i.e. Glass Tubes itself being exempt from levy of CENVAT duty as being entitled for SSI Exemption, the provisions for proposed seizure as well as confiscation of the goods was without the authority of law and the impugned order imposition a redemption fine to the tune of Rs. 2,75,000/- on the Glass Tubes being well within the factory premises is liable to be struck down on this ground alone and the appellants say that it be held that no redemption fine on the intermediate goods well available in the factory and entitle for benefit of SSI exemption is liable to be charged from the appellants. The impugned Order not being legally sustainable is liable to be struck down on this ground alone. • That the learned Authority below has passed the order due to oversight and non-application of mind inasmuch as the ld. Respondent invoking both Rule 25 and Section 11AC have proposed as follows :- "I impose a penalty equal to the duty amount upon M/s. J.P. Glass Industries, Jiloli, Makhnpur, under Rule 25 of Central Excise Rules, 2002 read with Section 11AC of the Central E....
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.... in a land mark judgment delivered on 12-5-2009, has ruled that mandatory penalty under Section 11AC of the Central Excise Act, 1944 will not apply to every case of non-payment or short payment of duty. It held that for imposing such penalty, condition mentioned in the Section should exist. The Court, however, held that once Section 11AC is applicable, the authorities would have no discretion on quantum and penalty equal to duty must be imposed. The Apex Court was clarifying its Larger Bench Ruling in Dharamendra Textile Processors [2008 (231) E.L.T. 3 (S.C.)], while passing orders on appeals by the Government against CESTAT orders setting aside such penalty in respect of two parties. In the significant pronouncement, the Bench comprising Hon'ble Justice Mr. S.H. Kapadia and Hon'ble Justice Mr. Aftab Alam, held :- "the decision in Dharamendra Textile must, therefore, be understood to mean that though the application of Section 11AC would depend upon the existence otherwise of the conditions expressly stated in the Section, once the Section is applicable in a case the concerned....
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...., in accordance with law, and in light of this Judgment - Appeal allowed." • That the appellants say that in his impugned Order as well as Show Cause Notice the learned adjudicating authority has taken up hypothetical value of Glass Tubes i.e. the intermediate product. The appellants point out that as per the market price the value of Glass Tubes is Rs. 9.78 per kg which has also been accepted by the Commissioner in Adjudication Order dated 13-1-2009 and in internal page No. 70 para No. 4, the learned Commissioner, accepting the cost accountant certificate has accepted the cost of intermediate product as Rs. 9.78 per kg and emphasis is made internal pages 70 to 76 of the learned Commissioner's Order. It therefore behoves that the assumed figure of Rs. 10,90,000/- as taken up by the Revenue is patently wrong and the correct figure should be read as Rs. 4,26,408/-. B. Submissions made by the Appellant No. 2 :- • That with regard to invocation of penal provisions under Rule 26 of Central Excise Rules, 2002 as well as imposition of penalty against appellant No. 2 i.e. Neeraj Maheshwari, partner of M/s. J.P. Glass Industries, appellan....
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....missioner • That even otherwise the appellant was not exposed to any penalty under the provisions of Rule 26 of Central Excise Rules, 2002, inasmuch as there is no evidence nor any allegation raised by the Department that appellant No. 2 acted deliberately in defiance of law or was guilty of conduct, contumacious or dishonest or acted in conscience disregard of his obligation or as to how the appellant was instrumental in contravention of the provisions of Rule 26 of the Central Excise Rules, 2002. Hence, not even a minimum penalty is imposable upon the appellant. The appellant No. 2 relied upon the case law of M/s. Farwood Industries v. CCE reported in 2005 (185) E.L.T. 401 (Tri.), wherein the Hon'ble Tribunal has held as follows :- "Personal penalty upon Managing Director/Partner under Rule 209A or Rule 26 can be imposed only if there is finding that the person concerned acquired possession of or otherwise physically dealt with excisable goods with knowledge or belief that such goods are liable to confiscation." • That there is no admission by appellant No. 2 with regard to dealing in any excisable goods, which he knew were liable to confiscation. The....
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.... (Tri.-LB). Since there is nothing in the Show Cause Notice that appellant No. 2 has handled the goods physically, penalty under Rule 26 cannot be imposed; • That in these circumstances, the appellant cannot be said to have been in any way responsible or liable for being proceeded against under the provisions of Rule 26 of the Central Excise Rules, 2002. Therefore, Show Cause Notice proposing penalty on the appellant is liable to be set aside; and • That with regard to imposition of penalty, appellant No. 2, says that his case being covered by decision of the Apex Court on imposition of penalty. Appellant No. 2 says that even otherwise he is not exposed to any penalty under the provisions of Rule 26 of Central Excise Rules, 2002, inasmuch as there is no evidence nor any allegation raised by the department that the appellant No. 2 acted deliberately in defiance of law or was guilty of conduct, contumacious or dishonest or acted in conscience disregard of his obligation. Not even a minimum penalty is imposable upon the appellant No. 2. Reliance is placed on the decision of Hon'ble Supreme Court in Hindustan Steel Ltd. v. State of Orrisa reported in 1978 (2) ....
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....ed 1-3-2006 (Sl. No. 16); that the glass tubes under dispute were lying in the factory and no allegation to make any attempt for their clandestine removal has been made; that the benefit of SSI exemption Notification No. 08/2003-C.E., dated 1-3-2003, as amended, has been denied on wrong appreciation of the provisions of notification; that the SSI exemption was available on the said glass tubes because they were the specified items of Chapter 70 as mentioned in the eligibility list of the annexure appended to the said notification and that the said fact was also admitted by the Commissioner, Central Excise, Kanpur at page No. 70 of the Order-in-Original No. 13/Commissioner/MP/ 2008 dated 31-12-2008 that the glass tubes were specified items being used for manufacture of unspecified goods i.e. glass beads and that when the intermediate product i.e. glass tubes are exempted from levy of CENVAT duty being entitled for SSI Exemption, thus the provisions for proposed seizure as well as confiscation of the goods was without the authority of law. 10. The appellant no. 1 has also contested the penalty imposed under Rule 25 read with Section 11AC on the ground that the adjudicating au....
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....re appended to the said notification at the relevant time. The entry is as under :- [ANNEXURE] Description of excisable goods falling under Chapter, heading, sub-heading or tariff items of the First Schedule to the Central Excise Tariff Act, 1985, namely :- (i) all goods falling under Chapters 2, 3, 4 and 5; (ii) all...........; (iii) ...........; (xxviii) all goods falling under Chapter 70 or 71; (xxix) all goods.......; 13. From the above entry, I observe that the entire Chapter 70 of the First Schedule to the Central Excise Tariff Act, 1985 was eligible for SSI exemption but on going through the preamble of the notification, I find that exemption was available with some restriction given in the second proviso appearing in the preamble of the notification which reads as under :- "Provided further that exemption contained in this notification shall not apply to goods which are chargeable to nil rate of duty or am exempt from the whole of the duty of excise leviable thereon." 14. As is evident, the department has intended to deny the benefit of Not....