2015 (10) TMI 898 - AT - Central Excise

Denial of SSi Exemption - Penalty u/s 11AC - Held that - Prima-facie, there is an evidence of existence of M/s WAE. In any event, as the appellants are not contesting on merit, there is no need to go into the facts of the case. In overall consideration of facts and circumstance of the case, as the appellant already paid the duty alongwith interest and penalty under Section 11AC of the Act, during investigation, imposition of penalty on Shri Bhargavbhai H Jain is not warranted. It is seen that that Adjudicating authority already imposed penalty under Section 11AC of the Act and therefore, the penalty of ₹ 50,000/- under Rule 173Q on M/s NHPL is not justified. The Learned Counsel submits that the appellant is entitled to get the benefits of cum-duty benefit - impugned order in so far as the demand of duty alongwith interest and imposition of penalty of ₹ 1,50,000/- under Section 11AC on M/s NHPL is upheld. Penalty imposed under Rule 173Q on NHPL is set aside. The penalty imposed on the other appellants are set aside - Decided in favour of assessee.

Summary

Issues:
1. Existence of dummy units for irregular availment of SSI exemption benefit.
2. Imposition of penalties on the dummy units and individuals involved.
3. Dispute regarding the involvement of the Director of the Company.
4. Applicability of cum-duty benefit.

Analysis:
1. The case involved the manufacturing activities of M/s Nachmo Humidifiers Pvt Ltd (NHPL) and M/s Wasteomat Air Engineers (WAE) where it was alleged that WAE and another firm, M/s Shree Gayatri Engineers (SGE), were dummy units of NHPL created to irregularly avail SSI exemption benefits. Central Excise Officers found that semi-finished goods were processed at NHPL's premises after initial manufacturing at WAE's premises. A show cause notice was issued proposing duty demand and penalties for the period from 1995-96. The Adjudicating authority confirmed the demand and penalties.

2. The appellants did not contest the duty demand but challenged the penalties imposed on NHPL, WAE, and the proprietor of SGE. The Counsel argued that WAE was a legitimate unit and penalties on dummy units were unjustified. The Tribunal agreed that penalties on dummy units were not warranted. The involvement of the Director of NHPL was disputed, but since duty, interest, and penalties were paid during investigation, the Tribunal did not delve into the merits. The penalty on the Director was deemed unwarranted.

3. Considering the facts and circumstances, the Tribunal upheld the duty demand and penalty under Section 11AC on NHPL but set aside the penalty under Rule 173Q. Penalties on other appellants were also revoked. The Tribunal directed the Adjudicating authority to recalculate the duty demand considering cum-duty benefit entitlement claimed by the appellants.

4. In conclusion, the Tribunal modified the order, upholding the duty demand and penalty under Section 11AC on NHPL while setting aside other penalties. The dispute over dummy units and the involvement of the Director did not affect the decision due to the appellants' non-contestation on merit. The case highlighted the importance of adhering to excise regulations and the consequences of creating dummy units for benefit aversion.