2011 (5) TMI 720 - AT - Central Excise

Interest and Penalty under Section 11AC - M/s. Supreme Rubber Industries were manufacturing rubber moulded articles out of raw material supplied by M/s. Batavia Brothers and they were also affixing the goods with the brand name of various traders - S.S.I. exemption Notification 1/93-C.E they would not be eligible for S.S.I. exemption - duty liability on the goods manufactured by M/s. Supreme Rubber Industries is to be discharged on the value determined on the basis of the cost of the raw material plus job charges plus job worker s profit not on the sale price of the owners of the goods - whether the extended period was available to the department - longer period of limitation under Section 11A would not be available in a situation where on some issue of excisability classification valuation or rate of duty involved in a case of alleged short payment of duty there are conflicting judgements of Tribunal and High Courts - longer limitation period under proviso to Section 11A was not available to the department and the duty can be demanded only for normal limitation period - Interest on short paid/not paid duty under Section 11AB and imposition of penalty under Section 11AC was linked to such short payment/non-payment being due to fraud wilful suppression of facts mis-statement etc. with intent to evade payment of duty - these elements are not present in this case - interest on duty under Section 11AB and penalty on M/s. Supreme Rubber Industries under Section11AC not imposable - matter is remanded to the original adjudicating authority for re-quantification of duty demand

Summary

Issues involved:
1. Eligibility for S.S.I. exemption under Notification No. 01/93-CE for manufacturing excisable goods affixed with brand names of other persons.
2. Recovery of short paid Central Excise duty, interest, and penalties.
3. Confiscation of goods and imposition of penalties on involved parties.

Issue 1 - Eligibility for S.S.I. exemption:
The case involved M/s. Supreme Rubber Industries manufacturing rubber automobile parts affixed with brand names of other persons while availing S.S.I. exemption. The tribunal found that as per the Exemption Notification No. 1/93-C.E, they were not eligible for the exemption. The tribunal referred to conflicting judgments but relied on the case of Namtech Systems Ltd. to determine that S.S.I. exemption would not apply even if the brand name owner was a trader. The duty liability was determined based on the cost of raw material plus job charges, not the sale price of the owners of the goods.

Issue 2 - Recovery of duty, interest, and penalties:
The tribunal considered the availability of the extended period for duty recovery and found that conflicting judgments existed on the issue, leading to the conclusion that the longer limitation period under proviso to Section 11A was not available to the department. As there was no willful suppression of facts, fraud, or misstatement, interest under Section 11AB and penalty under Section 11AC were not applicable. However, a penalty was imposed on M/s. Supreme Rubber Industries under Rule 173Q(1)(a) for clearance of goods without discharging duty liability. The penalty on M/s. Batavia Brothers was set aside as there was no evidence that they knowingly dealt with goods liable for confiscation.

Issue 3 - Confiscation and penalties:
The tribunal held that M/s. Supreme Rubber Industries were not eligible for S.S.I. exemption, and penalties under Section 11AC and Rule 209A were set aside. However, a penalty under Rule 173Q(1)(a) was imposed. The duty payable was determined based on the apex court judgment in Ujagar Prints, but limited to the normal limitation period. The matter was remanded for re-quantification of duty demand and penalty. The appeals were disposed of accordingly, with the appeal by M/s. Batavia Brothers allowed.

This detailed analysis covers the issues of eligibility for S.S.I. exemption, recovery of duty, interest, and penalties, as well as confiscation and penalties imposed on the involved parties.