2005 (7) TMI 555 - AT - Central Excise

Duty Demand - confiscation - Penalty - Misdeclaration of the final product due to misstatement with intent to evade payment of duty. - printing of PVC films/sheets - HELD THAT - After considering the applications made it is to be held that for the period of demand viz 1994 to June 1996 vide Show Cause Notice dated 31-5-1999 the penalty u/s 11AC cannot be upheld nor demands of interest u/s 11AB can be made. The orders as regards penalty u/s 11AC and interest u/s11AB are therefore required to be set aside. This Tribunal in a catena of decisions has also held that a joint penalty under Rule 173Q (1) read with Section 11AC of the Act per se cannot be upheld. We would therefore set aside the penalties and interest demands as arrived at. We find merits in the plea made by Mr Pradhan before us that the fact of cum-duty price has to be granted if the goods are being considered to be dutiable and also that Modvat credit of the duty paid on the PVC sheets/films brought in for printing as the printed sheets/films are being held to be dutiable. We also find the ld. D.R. s submission that the admitted position is that goods are going to sister concerns and there is no sale that is also required to be re-looked into to find out if there was any cum-duty sales price existing for the period in question. Modvat credit would also be eligible as per the catena of decisions on the subject. We would therefore set aside this order and remit the matter back to the ld. Commissioner to redetermine the duty liability if any credit eligibility and thereafter determine the liability under Rule 173Q(2) and redemption fine thereof. The penalty clauses as invoked and determined not being upheld. The appeal is therefore allowed in above terms for de novo adjudication.

Summary

Issues:
1. Classification of printed PVC sheets under Central Excise Tariff Act, 1985.
2. Duty demands, penalty, and interest under Section 11A(1) of the Act.
3. Confiscation of plant and machinery under Rule 173Q(2)(a).
4. Applicability of cum-duty price and Modvat credit on dutiable goods.

Analysis:
1. The appellants were involved in printing PVC films/sheets and faced a Show Cause Notice for misclassification of printed PVC sheets under Heading 4901.90 instead of 3920.39. The Tribunal upheld the classification under Heading 3920.19, considering the printing process as manufacturing, leading to a new commercial identity. The duty liability was confirmed accordingly based on settled case law.

2. The Tribunal set aside penalties and interest demands under Section 11AC and 11AB for the period of demand (1994 to June 1996) as joint penalties were not upheld. However, duty demands of Rs. 2,42,14,365 were confirmed under Section 11A(1) along with an equivalent penalty under Rule 173Q(1) and interest under Section 11AB. The order of confiscation was also issued with an option for redemption on a fine.

3. The Tribunal found no merit in the appellant's argument that PVC sheets remain unchanged after printing, emphasizing the new commercial identity created through printing. The appeal was allowed for de novo adjudication to redetermine duty liability, credit eligibility, and penalty clauses, remitting the matter back to the Commissioner for further assessment.

4. Regarding the cum-duty price and Modvat credit, the Tribunal acknowledged the need for reevaluation, especially considering the goods being transferred to sister concerns without sale. The Tribunal directed a review of cum-duty sales price existence and eligibility for Modvat credit, emphasizing the importance of determining duty liability accurately.

In conclusion, the appeal was allowed for remand to reassess duty liability, credit eligibility, and penalty clauses, emphasizing the correct classification of printed PVC sheets under the Central Excise Tariff Act, 1985.