2016 (11) TMI 770 - AT - Central Excise

Classification of goods - HDPE stripes/tapes is subject to classification under CETH 3920.32 - Penalty - benefit of notification No.221/86 and 217/86 whether is admissible to appellant? - Held that - he final products should be stripes and like of synthetic textile material falling under CETH 5406.90. But the goods manufactured by the appellant was falling CETH 3920.32 relying on the decision of the Madhya Pradesh High Court as stated above. In para-15 of the order, the authority has recorded that the said notification relates to captive consumption for which that is not available to input viz. HDPE tapes since the final product of the appellant was HDPE fabrics. Accordingly, on merit, there is no scope to grant any relief to the appellant. When the gravity of the matter is looked into, there shall be penalty under Rule 173Q of Central Excise Rules, 1944 since clandestine removal was established. Further, the quantum of penalty imposed appears to be on a higher side in absence of mens rea being brought on record. Therefore, the penalty of ₹ 2 lakhs imposed under that Rule is reduced to ₹ 1,00,000/- In so far as penalty of ₹ 2 lakhs and ₹ 1 lakh imposed respectively on Shri S.R. Selvaraj, Managing Partner and Shri G. Sugumar, Manager is concerned, there was an established case of clandestine removal of excisable goods unaccounted. Therefore, imposition of penalties on both the persons who were instrumental to the clandestine removal is confirmed. In so far as penalty of ₹ 10,000/- each on the four partners are concerned, it appears that the firm having suffered penalty as above under Rule 173Q, there shall be no penalty on these partners - appeals allowed. Appeals disposed off.

Summary

Issues involved: Classification of goods under CETH 3920.32, clandestine removal of goods, benefit of notifications No. 221/86 and 217/86, imposition of penalties under Rule 173Q of Central Excise Rules, 1944.

The judgment by the Appellate Tribunal CESTAT CHENNAI involved several key issues. Firstly, regarding the classification of goods under CETH 3920.32, the Tribunal upheld the classification of HDPE stripes/tapes under this category based on the precedent set by the Hon'ble Madhya Pradesh High Court in a specific case. The Tribunal found no reason to disturb this classification as no cogent argument was presented by the appellant.

Secondly, the issue of clandestine removal of goods without payment of duty was raised. The Tribunal noted that the Revenue provided clear evidence of such removal, which was not rebutted by any contrary evidence from the appellant. Consequently, this aspect was held in favor of the Revenue.

Thirdly, the question of the benefit of notifications No. 221/86 and 217/86 was considered. The Tribunal determined that the appellant was not eligible for the benefits under these notifications as the final product manufactured did not align with the requirements specified in the notifications. Therefore, no relief was granted to the appellant on this ground.

Regarding the imposition of penalties, the Tribunal analyzed the penalties imposed under Rule 173Q of the Central Excise Rules, 1944. The Tribunal found that penalties were justified due to the established clandestine removal of goods. However, the Tribunal reduced the penalty amount from ?2 lakhs to ?1,00,000 considering the absence of mens rea on record.

Specifically addressing the penalties imposed on individuals involved, the Tribunal confirmed the penalties on the Managing Partner and Manager for their involvement in the clandestine removal of goods. However, penalties on the other partners were waived considering the penalty imposed on the firm.

In conclusion, the Tribunal partially allowed one appeal related to penalties, dismissed two appeals confirming penalties on specific individuals, and allowed the appeals of the remaining partners due to the penalty imposed on the firm.