2010 (7) TMI 428 - AT - Central Excise

Duty liability clandestine removal and manufacture - textile processing unit - The plea that the factory was leased out to Shri Jariwala who was running the same was never taken by the appellant either before the Original Adjudicating Authority or before Commissioner (Appeals). In any case we find that central excise licence or registration continued to be with M/s. Varun Silk Mills Pvt. Ltd. As such for all intents and purposes M/s. Varun Silk Mills Pvt. Ltd. continued to be the central excise assessee and manufacturer of the goods. Any internal arrangement between Varan and Shri Jariwala, without intimation to the Revenue and without getting the licence cancelled by M/s. Varun Silk Mills Pvt. Ltd. and reissued in the name of Shri Jariwala, M/s. Varun Silk Mills Pvt. Ltd. would remain the manufacturer and hence the central excise assessee. It is not the actual physical manufacturer of the goods which is relevant for the purposes of payment of duty. Inasmuch as Varun continued to remain the central excise licence holder, the goods manufactured in their factory premises are required to be treated as having been manufactured by them irrespective of the internal arrangement between Varun and Jariwala. Demand and penalty sustainable

Summary

Issues:
Demand of duty against M/s. Varun Silk Mills (P) Ltd. for clandestine manufacture and clearance of MMF (P) dyed Fabrics post lease agreement with Shri Shashikant Popatlal Jariwala.

Analysis:
The lower authorities confirmed a duty demand of Rs. 39,51,943/- against M/s. Varun Silk Mills (P) Ltd. for clandestine manufacture and clearance of MMF (P) dyed Fabrics. The confirmation of duty and penalty was based on a search conducted by departmental officers and statements of various individuals. The appellant did not contest the findings of clandestine removal but argued that during the relevant period, the factory was leased to Shri Shashikant Popatlal Jariwala, absolving them of liability.

The advocate for the appellant argued that the textile processing unit was leased to Shri Shashikant Popatlal Jariwala after which the clandestine activities occurred. However, it was revealed that the central excise license remained in the name of M/s. Varun Silk Mills (P) Ltd., and all filings were done under their name. Referring to a Calcutta High Court decision, the advocate contended that excise duties are recoverable from the lessee who actually produced the goods, not the lessor.

The Tribunal noted that Shri Shashikant Popatlal Jariwala provided statements as an authorized signatory of M/s. Varun Silk Mills (P) Ltd. The central excise license and registration continued to be in the name of M/s. Varun Silk Mills (P) Ltd., making them the assessee and manufacturer. The internal arrangement between Varun and Jariwala did not change this fact. The Tribunal rejected the appellant's argument, stating that Varun remained the manufacturer and central excise assessee, regardless of the internal lease agreement.

Given that the demand was not contested on merits and the liability to pay duty was established against the appellant, the Tribunal confirmed the impugned order passed by the lower authorities and dismissed the appeal. The judgment was pronounced on 6-7-2010.