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2003 (7) TMI 501 - AT - Central Excise
Issues Involved:
1. Demand of duty and imposition of penalties. 2. Classification of the intermediate product. 3. Allegations of evasion of Central Excise duty. 4. Appropriateness of procedures under Rule 57F(4) of the Central Excise Rules. 5. Jurisdiction of the adjudicating authority. Detailed Analysis: 1. Demand of Duty and Imposition of Penalties: The Commissioner of Central Excise, Mumbai-II, demanded Rs. 105,86,37,838.20 towards duty and imposed an equivalent penalty under section 11AC of the Central Excise Act. Additionally, the order confiscated the plant and machinery of both factories and imposed fines and penalties on the employees and the assessee under Rule 173Q of the Central Excise Rules. 2. Classification of the Intermediate Product: The appellant argued that the DIPPED TYRE CORD FABRIC should be classified under heading 59.06 of the Central Excise Tariff Act (CETA) instead of 59.02. They cited several Tribunal judgments to support their claim, asserting that the demand for duty of Rs. 75.23 crores was incorrect. 3. Allegations of Evasion of Central Excise Duty: The department issued multiple show cause notices alleging that the appellant was evading Central Excise duty by clearing dipped tyre cord fabric from Bhandup to Nashik without discharging duty. The Nashik unit was accused of wrongly availing Modvat credit on inputs without receiving or using them. The department charged that the Bhandup factory purchased and consumed raw materials on its account, falsely issuing challans as if the inputs were supplied by Nashik. 4. Appropriateness of Procedures under Rule 57F(4) of the Central Excise Rules: The appellant contended that the procedures under Rule 57F(4) allowed the Bhandup factory to act as a job worker for the Nashik factory. They argued that the raw materials were earmarked for Nashik and sent to Bhandup for necessary processing. The Tribunal agreed, noting that Rule 57F(4) permits inputs to be sent outside the factory for operations necessary for manufacturing the final product or intermediate product. The Tribunal found that the adjudicating authority misinterpreted the rule and the true nature of the Central Excise Rules regarding Modvat. 5. Jurisdiction of the Adjudicating Authority: The appellant argued that the adjudicating authority lacked jurisdiction over the Nashik factory. The Tribunal did not address this argument directly but focused on the misinterpretation of Rule 57F(4) and the improper demand of duty. Separate Judgment on Specific Allegation: After dictating the order, the Tribunal noted an additional demand of Rs. 29 crores related to discrepancies in the quantity of Dipped Tyre Cord fabric cleared by Bhandup and recorded in Nashik's annexure IV Register. The Tribunal found that the adjudicating authority did not properly discuss this issue and remanded it for a proper finding, ensuring adherence to the principles of natural justice. Conclusion: The Tribunal set aside the impugned order concerning the two factories, finding the adjudicating authority's approach legally flawed. The applicability of Rule 209A against the other two appellants was negated. However, the specific allegation of the Rs. 29 crores discrepancy was remanded for further examination.
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