2008 (9) TMI 606 - HC - Central Excise

Duty, penalty and the interest - petitioner company had no excise registration - manufacturer duly paid excise duty on the detergent powder supplied to the petitioner company - petitioners remained under the bona fide impression that since the petitioners had already made payment of Central Excise duty at the time of purchase of the detergent powder, there could be no question of any further payment of excise duty on the same consignment - it was alleged that the petitioner had been engaged in manufacture of excisable goods and branded washing powder/detergent powder at its factory and had contravened the provisions of Section 6 of the Central Excise Act, 1944 read with Rule 174 of the Central Excise Rules, 1944, Rule 9(1) read with Rules 173F, Rule 52A read with Rule 173G(2), Rule 53 read with Rule 173G(4), Rule 53G(1) read with Rule 173G(3) and Rules 226 and 173B of Central Excise Rules, 1944 with ulterior motive to evade payment Held that - no attempt was made to demonstrate the illegality in levy of Central Excise on the detergents. In any event, pursuant to the order of CESTAT, the disputed duty has duly been deposited, writ application is disposed of by directing the CESTAT to dispose of the appeal filed by the petitioner, expeditiously, preferably within six months from the date of communication of this order.

Summary

Issues:
Challenge to CESTAT order directing deposit of disputed duty, Nature of business activities, Excise Registration Certificate issuance, Memorandum of understanding for detergent supply, Purchase of detergent powder, Central Excise duty payment, Claim of exemption, Search and seizure at company premises, Show-cause notice issuance, Allegations against petitioner, Joint Commissioner's order imposing penalties, Appeal before Commissioner of Central Excise, Appeal before CESTAT, Requirement of pre-deposit of disputed duty, Prima facie case evaluation by CESTAT, Legal arguments for waiver of pre-deposit, Disposition of writ application.

Analysis:

The petitioners challenged the CESTAT order that directed them to deposit a disputed duty amount within a specified time frame. The company engaged in packing and repacking detergent powder purchased from manufacturers, claiming the nature of the product remained unchanged. Initially lacking an Excise Registration Certificate, one was later issued. A memorandum of understanding was executed for detergent supply, and the company purchased detergent powder without an excise registration, relying on the manufacturer's payment of excise duty. The petitioners believed they were entitled to exemption based on their repacking activities and the nature of the product supplied. However, a search at their premises led to a show-cause notice alleging manufacturing of excisable goods, contravening excise rules, and evading payment.

The Joint Commissioner found the petitioner's claims untrue, imposing penalties for duty evasion and non-compliance. The company appealed to the Commissioner of Central Excise, who upheld the decision, citing relevant circulars and rules. Subsequently, the petitioner appealed to CESTAT, seeking a stay on the order. CESTAT directed the deposit of the disputed duty, considering repacking as manufacturing under Chapter 34. The petitioner argued against the pre-deposit requirement, citing Supreme Court decisions on prima facie case waiver. However, CESTAT found no strong prima facie case in the petitioner's favor, leading to the disputed duty deposit.

The High Court upheld CESTAT's order, noting the lack of demonstrated illegality in the excise levy. The disputed duty was deposited as per CESTAT's directive. The Court directed CESTAT to expedite the appeal process within six months. The writ application was disposed of, emphasizing the need for timely appeal resolution.