2006 (3) TMI 498 - AT - Central Excise

Summary

Issues: Duty demand confirmation, setting up of dummy units, penalty imposition

Duty Demand Confirmation:
The case involved an appeal against the confirmation of a duty demand of Rs. 29,38,759 against M/s. Jagadamba Polymers Ltd. The Commissioner of Central Excise, Ahmedabad had upheld the duty demand, alleging that the company had established dummy units like Mangal Plastics, Daksha Packaging, and Shree Ayyappa Packaging to benefit from concessional duty rates meant for Small Scale Industry (SSI) units. The Commissioner also imposed a penalty of Rs. 30 lakhs on M/s. Jagadamba Polymers Ltd. and additional penalties under Rule 209A of the Central Excise Rules, 1944 on the company's Director and the alleged dummy units.

Setting up of Dummy Units:
The Tribunal noted that M/s. Jagadamba Polymers Ltd. was involved in manufacturing HDPE Tapes, fabrics, and sacks through job workers who were availing benefits under SSI Notification No. 175/86-CE. The department had classified the products under Chapters 54 and 59 of the Schedule of the Central Excise Tariff Act, 1985. However, the Tribunal referred to a decision by the Madhya Pradesh High Court in the case of Raj Pack Well Ltd. v. Union of India, which classified similar goods under Chapter 39 and granted exemptions under specific notifications. The Tribunal also cited a previous case, Promact Plastics Pvt. Ltd. v. Collector of Central Excise, where a similar classification was upheld. Consequently, as the goods in question were exempt from duty under Chapter 39, the allegation of setting up dummy units to avail concessional rates became irrelevant.

Penalty Imposition:
Given the exemption from duty for the goods manufactured by M/s. Jagadamba Polymers Ltd., the Tribunal set aside the duty demand and penalties imposed on the company and its associated entities. The Tribunal concluded that since the goods were classified under Chapter 39 and were exempt from duty payment, the charges related to the establishment of dummy units lost their legal basis. As a result, the appeals were allowed, and the duty demand and penalties were revoked.

This detailed analysis of the judgment highlights the key issues of duty demand confirmation, the establishment of dummy units, and penalty imposition, providing a comprehensive overview of the legal reasoning and outcome of the case before the Appellate Tribunal CESTAT, Mumbai.