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2006 (11) TMI 383 - AT - Central Excise
Issues involved: Determination of duty liability on traders who purchase grey fabrics, get them processed by processors, and sell them without payment of Central Excise duty.
Summary: The Appellate Tribunal CESTAT, Mumbai heard the case involving traders who purchase grey fabrics, have them processed by processors, and sell them without paying Central Excise duty. The processed fabrics were seized from the traders for not having Central Excise invoice cover and non-payment of duty. The adjudicating authority ordered confiscation of seized goods, recovery of additional duty, and imposed penalties. The Commissioner (Appeals) set aside the adjudication orders stating that traders are not manufacturers, and processors are liable based on a Supreme Court judgment. The revenue appealed against this decision. Upon hearing both sides, the Tribunal noted that processing houses are liable to pay excise duty as they bring about the manufacture of goods. The revenue's reliance on Notification No. 27/92 was deemed untenable as it does not make traders liable for duty payment. Previous Tribunal decisions supported the view that traders are not responsible for duty payment. The Tribunal upheld the lower authority's finding that traders cannot be held liable for duty payment. Regarding confiscation, the Tribunal upheld it as traders received processed fabrics knowing the duty had not been paid. Traders were also held liable for penalties under relevant provisions for dealing with goods that were liable for confiscation. The Tribunal concluded that traders are liable for penalties and restored the adjudication orders imposing penalties. In conclusion, the Tribunal upheld the finding that no duty can be recovered from traders but held them liable for penalties. The revenue's appeals were partly allowed in terms of penalty imposition. This judgment clarifies the duty liability of traders in cases where goods are processed by third parties and sold without payment of Central Excise duty.
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