2012 (7) TMI 830 - AT - Central Excise

Manufacture of Kimam - Clearance of goods to other factory without duty payment - Intention of evasion of duty - Whether the appellant are liable for penalty under Rule 173Q(1) of the Central Excise Rules - Held that - appellant were fully aware that other traders who produced similar compounds had obtained licence or registration and yet the appellant did not take steps to get their units, in which the kimam was being manufactured, registered or licenced and these circumstances together with other violation of Rules constitute the evidence of suppression - In assessee s own previous case 2005 (4) TMI 66 - SUPREME COURT OF INDIA - Apex Court itself has given a finding that the non-payment of duty was deliberate and not a bona fide mistake, penalty under Rule 173Q(1)(d) would be attracted and looking to the quantum of duty demand upheld against the appellant, the penalty of Rs. 2,00,00,000/- cannot be called excessive - Decided against assessee.

Summary

Issues:
- Applicability of Central Excise duty on the product Kimam
- Eligibility for benefit of Notification No. 121/94-C.E.
- Imposition of penalty under Rule 173Q(1)(d) of the Central Excise Rules

Analysis:

Applicability of Central Excise duty on Kimam:
The case involved the manufacture of Kimam or compound by the appellant, which was further processed into branded chewing tobacco. The dispute arose regarding the duty liability on the Kimam cleared to other units without payment of duty. The Commissioner, Tribunal, and Apex Court confirmed the excisability of Kimam and the duty liability under specific tariff headings. The Tribunal remanded the matter to the Commissioner to determine the applicability of an exemption notification. The Commissioner confirmed the duty demand against the appellant, denying the benefit of the exemption notification. The Tribunal upheld this decision, citing a Supreme Court judgment.

Eligibility for benefit of Notification No. 121/94-C.E.:
The appellant contended that they were eligible for full duty exemption under Notification No. 121/94-C.E. for the Kimam cleared to their other units for use in manufacturing chewing tobacco. However, the Tribunal dismissed the appeal, stating that the appellant was not eligible for this benefit based on a Supreme Court judgment.

Imposition of penalty under Rule 173Q(1)(d) of the Central Excise Rules:
The appellant challenged the penalty of Rs. 2,00,00,000 imposed on them under Rule 173Q(1)(d) of the Central Excise Rules. The appellant argued that there was no intention to evade duty payment and that the penalty was unjustified. The Department defended the penalty, citing findings from the Apex Court judgment that upheld the extended period for duty recovery. The Tribunal analyzed the circumstances, including the appellant's failure to register or license their manufacturing units, and concluded that the penalty was justified based on deliberate non-payment of duty. The Tribunal dismissed the appeal, stating that the penalty was not excessive given the upheld duty demand.

In conclusion, the Tribunal upheld the duty liability on Kimam, denied the benefit of an exemption notification, and justified the imposition of the penalty under Rule 173Q(1)(d) based on deliberate non-payment of duty.