2006 (8) TMI 428 - AT - Central Excise

Demand of duty - Bar of limitation u/s 11A(1) - Abatement of duty - Closure of stenter - Penalty imposed u/s 11AC - description of the grey fabrics not given by Co-optex so as to enable them to identify the goods as powerloom fabrics - HELD THAT - It is evident tfrom record that, when the Mills were removing the subject goods (processed powerloom fabrics) without payment of duty, they were aware of the fact that they were removing dutiable goods. They were so doing apparently with intent to evade payment of duty. We found that the Mills were clearing dutiable goods (processed powerloom fabrics) without payment of duty during the period of dispute, without disclosing to the Department the correct identity of the goods. They have not shown that their monthly returns contained any particulars enabling the Department to discern that they had actually removed processed powerloom fabrics. It was only after visit by Departmental officers to their premises that the Mills admitted having removed dutiable goods without payment of duty. Suppression of material fact with intent to evade payment of duty is evident in this case. Thus, we held that the extended period of limitation was rightly invoked in this case for demanding duty from the Mills in respect of the processed powerloom fabrics supplied to Co-optex during the period of dispute. The appeal of the Mills contains a claim for abatement of duty on the ground of closure of some of their stenters. This is a claim under Compounded Levy Scheme. Now that the appellants themselves have repudiated the scheme and have chosen to follow Section 3 of the Central Excise Act in respect of the goods processed and cleared by them during the compounded levy period, this claim for abatement of duty is untenable. The Mills have also claimed the benefit of Section 4(4)(d)(ii) of the Act. This claim is admissible to them in terms of the Supreme Court s decision in Commissioner v. Maruti Udyog Ltd. 2002 (2) TMI 101 - SUPREME COURT . The Commissioner has to re-quantify the demand of duty on this basis. As we have found against the Mills suppression of facts with intent to evade duty, interest on duty is leviable u/s 11AB of the Act as held by the Commissioner. For the same reason, penalty is imposable on the Mills u/s 11AC of the Act. But we do not think that an amount equal to duty should compulsorily be imposed under this provision in the facts and circumstances of this case. It is settled law that the quantum of penalty prescribed u/s 11AC is the maximum and it is open to the adjudicating authority, in proper exercise of his discretion, to impose a lesser penalty, having regard to the facts and circumstances of the case. We leave this aspect to be considered by learned Commissioner, who is directed to re-determine the quanta of duty and penalty after giving the party a reasonable opportunity of being heard. Appeal No. 451/2005 is, accordingly, disposed of. We have already found that, on the available evidence, Co-optex cannot be held to have misdeclared the grey fabrics or to have abetted the offence committed by the Mills. Any penalty on them is unwarranted. Hence appeal No. 491/2005 is allowed.

Issues Involved:
1. Demand of duty for the period 1996-97 to 2000-01 and the invocation of the extended period of limitation.
2. Imposition of penalty on the Mills under Section 11AC of the Central Excise Act.
3. Imposition of penalty on Co-optex under Rule 209A of the Central Excise Rules, 1944 and Rule 26 of the Central Excise (No. 2) Rules, 2001.
4. Demand of duty under the Compounded Levy Scheme for the period from 16-12-98 to 28-2-2001.
5. Claim for abatement of duty by the Mills.
6. Claim for benefit under Section 4(4)(d)(ii) of the Central Excise Act by the Mills.

Detailed Analysis:

1. Demand of Duty for the Period 1996-97 to 2000-01 and the Invocation of the Extended Period of Limitation:

The Mills were engaged in processing fabrics and received raw materials from various agencies, including Co-optex. The Mills were liable to pay duty on powerloom fabrics but claimed exemption for handloom fabrics. The department found that the Mills processed and removed powerloom fabrics without paying duty. The Mills conceded their duty liability but contested the invocation of the extended period of limitation, arguing they had no intention to evade duty and were unaware the fabrics were powerloom.

The Tribunal found that the Mills could differentiate between handloom and powerloom fabrics and had knowingly processed powerloom fabrics without paying duty. The Mills' failure to disclose the correct identity of the fabrics constituted suppression with intent to evade duty, justifying the invocation of the extended period of limitation under Section 11A(1) of the Central Excise Act.

2. Imposition of Penalty on the Mills under Section 11AC of the Central Excise Act:

Given the Mills' suppression of facts with intent to evade duty, the Tribunal upheld the imposition of a penalty under Section 11AC but noted that the quantum of penalty prescribed is the maximum and can be reduced at the discretion of the adjudicating authority. The Commissioner was directed to re-determine the quanta of duty and penalty after giving the Mills a reasonable opportunity to be heard.

3. Imposition of Penalty on Co-optex under Rule 209A of the Central Excise Rules, 1944 and Rule 26 of the Central Excise (No. 2) Rules, 2001:

The Tribunal found no evidence that Co-optex misdeclared the grey fabrics or abetted the Mills' offense. Therefore, any penalty on Co-optex was deemed unwarranted, and the appeal by Co-optex was allowed.

4. Demand of Duty under the Compounded Levy Scheme for the Period from 16-12-98 to 28-2-2001:

The Mills challenged the demand of duty under the Compounded Levy Scheme based on the Annual Capacity of Production (ACP) determined by the Commissioner. The Tribunal noted the decision in Beauty Dyers v. UOI, which rendered such demands unsustainable. However, the Mills conceded their duty liability under Section 3 of the Central Excise Act for this period, subject to the limitation period.

5. Claim for Abatement of Duty by the Mills:

The Mills claimed abatement of duty due to the closure of some stenters. The Tribunal found this claim untenable as the Mills had repudiated the Compounded Levy Scheme and opted to follow Section 3 of the Central Excise Act.

6. Claim for Benefit under Section 4(4)(d)(ii) of the Central Excise Act by the Mills:

The Tribunal acknowledged the Mills' claim for the benefit under Section 4(4)(d)(ii) of the Act, citing the Supreme Court's decision in Commissioner v. Maruti Udyog Ltd. The Commissioner was directed to re-quantify the duty demand on this basis.

Conclusion:

The appeal by the Mills was disposed of with directions to the Commissioner to re-determine the quanta of duty and penalty. The appeal by Co-optex was allowed, and any penalty on them was deemed unwarranted.

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