2018 (3) TMI 1705 - AT - Central Excise

Valuation - contention of the appellants is that they have done job work and accordingly the transaction relates to the period June, 2000 to September, 2001 and hence they are not liable for payment of duty - Held that - There is ample evidence on record which supports the contention of the appellants that there was no mala fide, the transaction was job work, being in the shape of receipt of goods on invoices, wherein job work was mentioned. Thereafter on conversion of the goods, again returned by challan s which is marked as job work and there being job work charges collected by the appellants. However there is failure on the part of the appellant s to take care to follow the prescribed procedure or as prescribed under N/N. 214/86-CE, and due to this reason they have become disentitled for the exemption Notification. There is no mala fide and/or contumacious conduct on the part of the appellants in not paying the duty at the time of clearance. Penalty u/s 11AC set aside - the penalty imposed on the other two appellants- Directors Shri Shubash Chand Gupta and Shri Sharad Chand Gupta under Rule 209-A of Central Excise Rules, 1944 read with Section 308A of the Central Excise Rules, 1944 is also set aside - appeal allowed in part.

Summary

Issues:
1. Dispute over duty payment related to job work transactions under Central Excise Rules.

Analysis:
1. The appellants, engaged in manufacturing Paper Tubes, Paper Core, Containers, and Reel Core, were availing SSI exemption with MODVAT/CENVAT facility until 2000-01. In 2001-02, they did not avail the exemption and paid full duty. An inspection revealed a shortage of materials with MODVAT credit, leading to a dispute over duty payment of ?1,24,638. The appellants claimed the transactions were job work and not liable for duty, while the revenue contended the clearances were dutiable contraventions of Central Excise Rules.

2. Allegations in the show cause notice indicated that the appellants supplied Paper Tubes/Core under the guise of job work to non-existent firms or firms not dealing in such products. The appellants were observed to manufacture Paper Tubes/Core from Kraft/Straw Board supplied by these firms, removing them without proper account or duty payment. The authority held the appellants liable for Excise duty as they were considered manufacturers selling under the guise of job work, failing to meet Notification conditions.

3. The appellants presented invoices and statements to support their claim of job work transactions with specific firms. The documents indicated the supply of Kraft Board for conversion into Paper Tubes/Core. While the appellants believed they were conducting job work, the authority found discrepancies in adhering to Notification requirements, leading to duty liability. The appellants sought leniency due to a bona fide mistake.

4. After reviewing the contentions, the Tribunal acknowledged the absence of mala fide intent in the appellants' actions. While the transactions resembled job work, the appellants failed to comply with prescribed procedures, rendering them ineligible for exemption. The penalty under Section 11AC was set aside due to the lack of contumacious conduct. Penalties on the directors were also revoked, ruling in favor of the appellants partially and the directors fully, granting consequential benefits.

This detailed analysis of the legal judgment highlights the key issues, arguments, findings, and outcomes of the case involving duty payment disputes related to job work transactions under the Central Excise Rules.