2011 (12) TMI 513 - HC - Central Excise

Summary

Issues involved: Challenge to orders passed by authorities and Tribunal regarding duty demand and penalty on a limited company for activities at factory premises leased to an individual.

Summary:

Issue 1: Adjudication of duty demand and penalty on the limited company for activities at factory premises leased to an individual.

The appellant, a limited company, owned factory premises in Surat and was registered as a manufacturer with the excise authority. Following a raid in 2001, a duty demand of Rs. 39,51,943/- was raised against the appellant, along with penalties. The appellant contended that the factory was leased to an individual, making him the manufacturer liable for duty payment. The Adjudicating Authority confirmed the duty demand and penalties, holding the appellant responsible. The Commissioner (Appeals) upheld this decision, citing excess material found and clandestine removal of goods. The Tribunal also dismissed the appeal, emphasizing that the excise license remained with the appellant, making them liable for duty payment.

Issue 2: Interpretation of legal responsibility for duty payment in the context of factory lease.

The appellant argued that the individual to whom the factory was leased should be responsible for duty payment, citing a Calcutta High Court decision. However, the Tribunal noted that the excise license and registration remained with the appellant, making them the central excise assessee and manufacturer. The Tribunal rejected the appellant's contention, emphasizing that the physical manufacturer is not relevant for duty payment, and internal arrangements do not alter liability. The Tribunal found no merit in the appellant's argument and confirmed the duty demand and penalties.

Issue 3: Examination of factual evidence and legal principles in determining duty liability.

The High Court observed that the excise license was granted to the appellant, not transferred to the individual operating the factory. The individual was appointed as an authorized signatory of the appellant, and no agreement establishing him as a lessee was presented. The High Court concluded that the appellant, as the manufacturer, was responsible for unpaid duty and penalties, as confirmed by the authorities. The High Court also noted that the Directors of the appellant had admitted clandestine removal of goods, further supporting the liability determination.

In conclusion, the High Court dismissed the Tax Appeal, affirming the decision that the limited company was liable for duty payment and penalties due to activities at the factory premises, despite the lease arrangement with an individual. The Court emphasized the importance of legal ownership of the excise license in determining duty liability and rejected the appellant's arguments based on previous court decisions.