2005 (4) TMI 487 - AT - Central Excise

Summary

Issues Involved:
1. Whether M/s. GTC Industries Ltd. or M/s. North Eastern Tobacco Co. Ltd. (NET) is the manufacturer of the cigarettes in question.
2. Applicability of Central Excise duty on cigarettes manufactured in Mizoram.
3. Validity of penalties imposed under Rule 209A of the Central Excise Rules, 1944.

Issue-wise Detailed Analysis:

1. Manufacturer of the Cigarettes:
The central issue was to determine whether the cigarettes carrying the brand name of M/s. GTC and manufactured in the factory of M/s. NET were to be considered as manufactured by M/s. NET or M/s. GTC. The Commissioner of Central Excise, Shillong, had held that M/s. GTC was the real manufacturer and liable to pay the duty. However, the Tribunal found that M/s. NET was the actual manufacturer. The Tribunal emphasized that M/s. NET had its own factory premises, infrastructure, and necessary registrations, and the assistance provided by M/s. GTC was temporary and contractual in nature. The Tribunal also noted that M/s. NET was a partnership firm, and the agreement between M/s. GTC and M/s. NET did not suggest that M/s. NET was a dummy unit. The Tribunal relied on precedents such as the Pawan Biscuit Company case, where the Supreme Court held that the job worker is the manufacturer even if the principal provides raw materials and specifications.

2. Applicability of Central Excise Duty:
The dispute over the applicability of Central Excise duty on cigarettes manufactured in Mizoram had been settled by the Supreme Court, which held that duty was required to be paid. The Tribunal did not delve into this issue further, as it was already resolved, and focused on who was liable to pay the duty.

3. Validity of Penalties under Rule 209A:
The Tribunal found the imposition of penalties under Rule 209A on M/s. GTC to be erroneous. Rule 209A does not apply to manufacturers, and since M/s. GTC was not considered the manufacturer, the penalty was unsustainable. The Tribunal also noted that imposing a separate penalty on M/s. NET contradicted the finding that M/s. NET was a dummy unit, thereby recognizing its separate legal existence. Consequently, the penalties on M/s. GTC and its officers were set aside.

Conclusion:
The Tribunal held that M/s. NET was the manufacturer of the cigarettes and not M/s. GTC. Therefore, M/s. GTC was not liable to pay the excise duty or the penalties imposed. The penalties on M/s. NET were sustained, recognizing its separate legal entity. The impugned order was partly modified to reflect these findings.