2007 (4) TMI 91 - AT - Central Excise

Demand and penalty - Department contended that appellant were cleared the Cone yarn in guise of Hank yarn and accordingly demanded duty alongwith interest and penalty - Held that the contention was right and demand interest and penalty sustained

Summary

Issues Involved:
1. Clandestine removal of cotton yarn on cones in the guise of hank yarn.
2. Determination of assessable value and relationship under Central Excise Act.
3. Invocation of extended period of limitation for duty demand.
4. Imposition of penalties on various parties.

Clandestine Removal of Cotton Yarn on Cones in the Guise of Hank Yarn:
M/s. Goodwill Textiles (P) Ltd. and M/s. Global Yarn Spinners were accused of clandestinely removing cotton yarn on cones, which is dutiable, in the guise of hank yarn, which is exempted, without payment of duty. The evidence included seized invoices, statements from the company's directors and employees, and corroborative statements from buyers and brokers. The Tribunal upheld the finding of clandestine removal based on the preponderance of probabilities, as supported by documentary evidence and consistent statements from various parties. The Tribunal rejected the appellants' claim that there was no positive evidence of actual removal, noting that the appellants had admitted to the removal of cone yarn under certain invoices.

Determination of Assessable Value and Relationship Under Central Excise Act:
The Tribunal examined the relationship between M/s. Goodwill, M/s. Global, and M/s. RRT under Sections 4(4)(c) and 4(3)(b) of the Central Excise Act. It was found that the directors and shareholders of these companies were closely related, justifying the rejection of the transaction value on the grounds of 'relationship.' The Tribunal agreed with the lower appellate authority's decision to lift the corporate veil, exposing the mutual business interests and confirming the related-party transactions. M/s. Global conceded the relationship and the duty liability arising from it.

Invocation of Extended Period of Limitation for Duty Demand:
The Tribunal upheld the invocation of the extended period of limitation for demanding duty from M/s. Goodwill and M/s. Global. The finding of clandestine removal and suppression of facts justified the extended period under Section 11A(1) of the Central Excise Act.

Imposition of Penalties on Various Parties:
The Tribunal sustained the penalties imposed on M/s. Goodwill and M/s. Global under Section 11AC of the Central Excise Act due to the clandestine removal and suppression of facts. However, it found no valid justification for personal penalties on the Managing Director, Directors, or employees of M/s. Goodwill under Rule 209A/Rule 26, as they were not found to have physically dealt with the clandestinely removed goods. The penalty on M/s. Golden Dye House was upheld as they were found to have procured non-duty paid cone yarn in the guise of hank yarn.

Conclusion:
The Tribunal dismissed the appeals of M/s. Global, M/s. Goodwill, and M/s. Golden Dye House, upholding the duty demands and penalties imposed on these entities. The remaining appeals were allowed, providing relief to the individuals and entities penalized under Rule 209A/Rule 26.