2005 (2) TMI 637 - AT - Central Excise

Summary

Issues:
- Duty demand confirmation with interest and penalty
- Confiscation of seized goods and property
- Allegation of wrongfully claiming SSI exemption
- Determination of real manufacturer
- Recalculation of duty and penalty

Duty Demand Confirmation with Interest and Penalty:
The adjudicating authority confirmed a duty demand of Rs. 4,22,013/- along with interest under the proviso to Section 11A(1) of the Central Excise Act, 1944 against M/s. Kumaran Implements for being the real manufacturers of agricultural implements cleared by them and M/s. Sree Sastha Industries. A penalty equal to the duty amount was imposed. The Tribunal upheld the duty demand but ordered recalculating duty after extending the benefit of abatement of duty and modvat credit, remanding the case for redetermination of penalty.

Confiscation of Seized Goods and Property:
The authority confiscated agricultural implements and dies seized from Sree Sastha Industries, bearing the brand name 'Kumaran,' with an option to redeem upon payment of a fine. Additionally, land, building, plant, and machinery of both Kumaran Implements and Sree Sastha Industries were ordered to be confiscated with an option to redeem them on payment of fines. The Tribunal upheld the confiscation of seized goods but set aside the confiscation of land, plant, building, machinery, etc., deeming it too harsh for first-time offenders.

Allegation of Wrongfully Claiming SSI Exemption:
The department alleged that both units functioned as one entity, created separately only to benefit from the Small Scale Industries (SSI) exemption. The fragmentation of the value of clearances was seen as an attempt to wrongfully claim the SSI exemption. The Tribunal found evidence of regular exchange of resources between the units, common operations, and shared branding, supporting the department's case.

Determination of Real Manufacturer:
The Tribunal established that Kumaran Implements was the real manufacturer liable to pay duty based on the regular exchange of resources, shared operations, and admissions by the proprietor and wife of Sree Sastha Industries' owner. The Tribunal referred to previous orders and a Supreme Court decision to uphold the duty demand but directed a recalculation of duty after adjustments and verification of duty paying documents.

Recalculation of Duty and Penalty:
The Tribunal partly allowed the appeals, remanding the case for recalculation of duty after considering abatement of duty and modvat credit. The original adjudicating authority was tasked with redetermining the penalty post the duty recalculation. The Tribunal emphasized the need for a fair approach in determining duty and penalty, considering the circumstances of the case and the severity of confiscation actions against first-time offenders.