2009 (3) TMI 787 - AT - Central Excise

Demand - extended period of Limitation - undervaluation of the grey fabrics - job-work - penalty - mis-declaration of goods

Summary

Issues:
- Confirmation of duty under Section 11A(2) of CEA, 1944 and penalties imposed.
- Allegations of undervaluation of grey fabrics by the merchant-manufacturers.
- Dispute regarding the awareness of appellants regarding undervaluation.
- Arguments on the responsibility for the undervaluation.
- Legal position on extended period for recovery of duty from job workers.
- Applicability of judgments in similar cases.
- Supreme Court's stance on misdeclaration by merchant-manufacturers.
- Limitation period for imposing demand and penalties.

Analysis:
1. The case involved appeals against an Order-in-Appeal passed by the Commissioner of Central Excise, confirming duty under Section 11A(2) of CEA, 1944, penalties, and denial of deemed credit. The Joint Commissioner had initially confirmed the duty, penalties, and denied credit, which was upheld by the Commissioner (Appeals).

2. The dispute arose from the alleged undervaluation of grey fabrics by the merchant-manufacturers, leading to a demand for differential duty and penalties on the appellants, who were job workers processing fabrics. The adjudicating authority invoked penalties under Section 11AC of CEA, 1944 and Rule 173Q(1) of CER, 1944.

3. The main contention of the appellants was their lack of awareness regarding the correct prices, as they relied on declarations provided by the merchant-manufacturers for the assessable value of processed fabrics. The authorities, however, concluded that the appellants were aware of the undervaluation, justifying the extended period for demand.

4. The appellants argued that they had no knowledge of the undervaluation, citing statements from merchant-manufacturers admitting responsibility for undervaluation. They claimed that they filled values based on grey bills supplied by the merchants, without means to verify their accuracy.

5. The Advocate for the appellants presented statements from various merchant-manufacturers acknowledging undervaluation and taking responsibility for it. They emphasized that the appellants acted in good faith based on the information provided by the merchants.

6. The Revenue contended that the appellants were aware of the undervaluation and accused them of manipulating details provided by the merchant-manufacturers, including blank declaration forms.

7. In response, the appellants reiterated their lack of awareness of undervaluation, highlighting the statements of merchant-manufacturers and the authenticity of grey bills provided to them.

8. The Tribunal found in favor of the appellants on the issue of limitation, noting that while the case was against them on merits, the extended period for demand was not justified. The Tribunal emphasized that the responsibility for undervaluation lay with the merchant-manufacturers, as supported by their statements.

9. The Tribunal referenced previous judgments to support its decision, indicating that for wrong declarations by suppliers, the extended period for recovery of duty from job workers was not applicable.

10. Citing a Supreme Court judgment, the Tribunal clarified that for misdeclaration by merchant-manufacturers, the extended period could not be invoked without evidence that the assessee knew or deliberately failed to declare correct values.

11. Based on the settled legal position and the lack of knowledge on the part of the appellants regarding undervaluation, the Tribunal ruled that the demand and penalties were time-barred, leading to the allowance of the appeals.

This comprehensive analysis of the judgment covers all the issues involved and provides a detailed breakdown of the arguments, findings, and legal principles applied in the case.