2004 (2) TMI 616 - AT - Central Excise

Demand, penalty and interest - Return of defective goods - Confiscation - Penalty and interest

Summary

Issues:
1. Challenge to Commissioner's order by Revenue for not sustaining entire duty demand, penalty, and interest.
2. Allegations of clearing fresh cold-rolled strips without duty payment under the guise of repaired strips.
3. Contentions regarding proper filing of D-3 intimations and entries in Form V register.
4. Discrepancies in rectifying defects in returned goods and resorting to quantity basis substitution.
5. Lack of facilities for rectification leading to clearance of fresh goods without duty payment.
6. Commissioner's conclusion on duty demand, penalty, and interest imposition.
7. Enquiry absence on utilization of rejected goods by the assessee.
8. Commissioner's findings on duty payment, gains, wrong classification, and undervaluation.
9. Violation of Rule 9(2) and demandable duty extent determination.
10. Imposition of penalties under various rules and disagreement on confiscation proposals.
11. Commissioner's reliance on Tribunal decisions and rejection of entire duty demand confirmation.
12. Application of Sections 11AC and 11AB for duty demand prior to 27-9-96.

Analysis:
1. The appeal was filed by the Revenue against the Commissioner's order, challenging the duty demand, penalty, and interest not sustained. The case involved allegations of the manufacturer clearing fresh cold-rolled strips without duty payment, disguising them as repaired strips received for repairs under Rule 173H. The duty demand, penalty under Section 11AC, and interest under Section 11AB were proposed, along with a confiscation proposal for the plant and machinery used in manufacturing and clearance.

2. The Commissioner's conclusion was based on the proper filing of D-3 intimations and entries in the Form V register by the assessee. However, discrepancies arose in rectifying defects in returned goods, leading to the substitution of fresh goods without duty payment. The Commissioner observed a lack of facilities for rectification, resulting in clearance of fresh goods without duty payment, contrary to the correct procedure under Rule 173H.

3. The Commissioner determined that duty was demandable due to the difference in value between the substituted fresh goods and the returned goods. The duty payable was calculated based on the duty paid on returned goods and the duty payable on fresh goods, resulting in a differential duty payable by the assessee.

4. Penalties were imposed on the assessee for violations of Rules 9(2), 52A, and 173H, along with mandatory penalties under Rule 11AC. The Commissioner disagreed with the confiscation proposals, citing the assessee's lack of intent to evade duty and imposing penalties on the Managing Director.

5. The Tribunal upheld the Commissioner's decision, citing precedents and rejecting the Revenue's contention of confirming the entire duty demand. The Tribunal found no reason to interfere with the Commissioner's findings on duty payment, violations, and penalties imposed, indicating a lack of merit in the Revenue's appeal.

6. The legal position regarding the application of Sections 11AC and 11AB for the period prior to 27-9-96 was settled against the Revenue's contention, leading to the dismissal of the appeal.