2009 (5) TMI 855 - AT - Central Excise

Summary

Issues:
1. Imposition of excise duty on Erode Rana Textile Processors Pvt. Ltd. (ERTP) for processing fabrics without payment.
2. Penalty imposed on Shri V. Ramachandran of M/s. Nag Enterprises under Rule 209A of the Central Excise Rules, 1944 (CER).

Issue 1: Imposition of excise duty on Erode Rana Textile Processors Pvt. Ltd. (ERTP) for processing fabrics without payment:

The judgment details how the Department found evidence of ERTP processing fabrics without paying excise duty between 1-12-1996 to 15-12-1998. The investigation revealed that Shri V. Ramachandran of M/s. Nag Enterprises facilitated the processing and return of fabrics to exporters. The Commissioner demanded excise duty of Rs. 4,00,72,500 from ERTP and imposed a penalty under Section 11AC of the Central Excise Act. The Tribunal had remanded the matter initially due to a violation of natural justice. The judgment notes that ERTP did not challenge the evasion allegations. However, it highlights that most customers of ERTP were exporters, indicating they had no motive to evade excise duty. The judgment concludes that ERTP's evasion was not contested, but the penalty imposed on Shri V. Ramachandran was not sustainable as there was no evidence of his knowledge of the liability to penalty under Rule 209A of the CER.

Issue 2: Penalty imposed on Shri V. Ramachandran of M/s. Nag Enterprises under Rule 209A of the Central Excise Rules, 1944 (CER):

The appellant challenged the penalty on the grounds that there was no evidence showing his knowledge of the fabrics being liable for confiscation under the Act or rules. The judgment discusses how the customers of ERTP, who received processed fabrics, had no obligation to pay excise duty as the goods were meant for export. It emphasizes that the appellant's involvement in coordinating the processing activity did not prove his knowledge of the duty liability. The judgment highlights that the Commissioner's finding was based on a statement made by the appellant regarding receiving fabrics without invoices, but no concrete evidence supported this claim. Ultimately, the judgment rules that the penalty of Rs. 5 lakhs imposed on Shri V. Ramachandran under Rule 209A was not sustainable due to lack of evidence proving his knowledge of the fabrics' liability to confiscation, leading to the appeal being allowed.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT CHENNAI showcases the issues involved, the arguments presented, and the ultimate legal reasoning behind the decision regarding the imposition of excise duty and penalty in the case.