2008 (9) TMI 217 - AT - Central Excise

Allegation that goods shown in records to have been manufactured by other units were actually manufactured on job-work by appellant EOU which is not permissible submission of appellant that other job-workers did the job-work was not considered by adjudicating authority bill of job-work produced by appellant were also not considered relied upon documents were not supplied to appellant officers not completed the enquires relating to disposal of final goods matter remanded

Summary

Issues Involved:
(a) Whether the noticee No. 1, which was 100% EOU had done job work of manufacturing grey fabrics as detailed in Annexure I to the show cause notice?
(b) Whether the noticee No. 1, which was 100% EOU, had manufactured grey fabrics for M/s. United Enterprises and M/s. Shree Shyam Syntax as detailed in Annexure-II to the show cause notice?
(c) Whether Central excise duty was payable on the grey fabrics manufactured by the noticee No. 1 in their 100% EOU and cleared without payment of duty?
(d) Whether noticee No. 1 is liable for penalty in terms of provision of Section 11AC of the Central Excise Act, 1944, Rule 25 of the Central Excise Rules, 2001 and Section 112(a) of the Customs Act, 1962?
(e) Whether noticees No. 2 to 17 are liable for penalty in terms of provision of Rule 26 of the Central Excise Rules, 2001?
(f) Whether the finished goods are liable for confiscation under Rule 25 of the Central Excise Rules, 2001?
(g) Whether noticee No. 1 is liable for payment of interest in terms of provision of Section 11AB of the Central Excise Act, 1944?

Detailed Analysis:

Issue (a): Job Work by 100% EOU
The adjudicating authority concluded that M/s. Laxmi Impex, a 100% EOU, had undertaken job work of manufacturing grey fabrics, despite the yarn being shown as received by M/s. Shree Shyam Syntex and M/s. United Enterprises. It was found that these units were fictitious entities created by M/s. Laxmi Impex. The appellants contested this on grounds of violation of natural justice, claiming they were not given full access to seized documents. The Tribunal found merit in the appellant's grievance and decided that the matter needs to be remanded for reconsideration, especially regarding the supply of documents.

Issue (b): Manufacturing for M/s. United Enterprises and M/s. Shree Shyam Syntex
The appellants argued that M/s. United Enterprises and M/s. Shree Shyam Syntex had provided details of weavers who produced the grey fabrics, which the adjudicating authority did not examine. The Tribunal noted that these details, including bank accounts showing payments to weavers, were crucial and required examination. The Tribunal decided to remand the matter for a thorough review of these documents.

Issue (c): Central Excise Duty Liability
The Tribunal noted the appellant's argument that they were under a bona fide belief that the goods were to be exported, as per Board's instructions and relevant notifications, which permit EOUs to conduct job work for domestic units under certain conditions. The Tribunal found that this aspect was not considered by the adjudicating authority and decided to remand the matter for reconsideration.

Issue (d): Penalty on Noticee No. 1
The Tribunal did not specifically address this issue but implied that the reconsideration of the job work and manufacturing activities would impact the penalty determination. The matter was remanded for a fresh adjudication, considering all the documentary evidence and submissions.

Issue (e): Penalty on Noticees No. 2 to 17
Similar to issue (d), the Tribunal implied that the penalties on other noticees would depend on the findings regarding the job work and manufacturing activities. The matter was remanded for a comprehensive review.

Issue (f): Confiscation of Finished Goods
The Tribunal did not directly address this issue but indicated that the reconsideration of the job work and manufacturing activities would affect the decision on confiscation. The matter was remanded for a fresh adjudication.

Issue (g): Interest Liability
The Tribunal did not specifically address this issue but implied that the reconsideration of the job work and manufacturing activities would impact the interest liability determination. The matter was remanded for a comprehensive review.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter to the Commissioner for re-adjudication, ensuring that the appellant's grievance of non-supply of documents is addressed and the principles of natural justice are adhered to. The Tribunal did not express any opinion on the merits of the case and allowed all appeals by way of remand.