2017 (3) TMI 1141 - AT - Central Excise

Clandestine removal - natural justice - Held that - It appears that Revenue has made out a case based on statements and circumstances that appellant-assessee routed clearances through another unit to evade duty - The appellant is aggrieved that a number of documents furnished to substantiate their defence have been peremptorily discarded in the proceedings before the lower authorities. Further, the key issue here is the defence of the appellant-assessee that they did manufacture compact fluorescent lamps for M/s Bajaj Electricals Ltd. No effort appears to have been made to ascertain the terms of the agreement of supply with M/s Bajaj Electricals Ltd which would conclusively establish whether the manufacturing took place at premises of M/s Solar Copier Pvt Ltd. This is required to be undertaken - appeal allowed by way of remand.

Issues:
Dispute regarding alleged duty evasion by routing clearances through another unit; Confirmation of duty liability on the appellant; Challenge to penalty imposed on appellant and individuals; Contention of closely connected entity relationship between lessee and appellant; Allegation of evasion of duty by the appellant; Rejection of documents by lower authorities; Lack of scrutiny of transaction with M/s Paragon Plastics; Claim of manufacture being mere assembly; Onus of tax administration on appellant to refute allegations; Appellant's defense of manufacturing compact fluorescent lamps for M/s Bajaj Electricals Ltd; Lack of investigation into terms of agreement with M/s Bajaj Electricals Ltd; Requirement for scrutiny of agreements of M/s Solar Copier Pvt Ltd.

Detailed Analysis:

1. Duty Evasion Allegation:
The dispute in this case revolves around the accusation of duty evasion by the appellant through the alleged clearance of finished goods via another unit to benefit from an exemption. The demand for duty liability of the appellant was confirmed for clearing goods through a front unit, leading to the initiation of proceedings against them.

2. Confirmation of Duty Liability and Penalty Challenge:
The confirmed duty liability on the appellant, along with the penalty imposed under Central Excise Rules, was challenged in the appeal. The lower authorities upheld the demand, albeit with a reduced amount, leading to the matter being brought before the Tribunal for further review.

3. Contention of Closely Connected Entity:
The appellant contended that the lessee was a closely connected entity, which explained the absence of rental records. They argued that crucial documents and transactions were disregarded by the appellate authority, including the scrutiny of dealings with M/s Paragon Plastics.

4. Allegation of Evasion and Lack of Scrutiny:
The Revenue alleged that the appellant evaded duty by routing clearances through another unit. The onus was placed on the appellant to provide evidence to refute these claims, which they purportedly failed to do. The lower authorities relied on statements and circumstances to support the duty liability.

5. Defense of Manufacturing and Lack of Investigation:
A key defense raised by the appellant was that they manufactured compact fluorescent lamps for M/s Bajaj Electricals Ltd. However, there was a lack of investigation into the terms of the agreement with M/s Bajaj Electricals Ltd to establish where the manufacturing actually took place, necessitating a deeper scrutiny of the agreements of M/s Solar Copier Pvt Ltd.

6. Remand and Fresh Orders:
The Tribunal, after considering the arguments and discrepancies in the case, allowed the appeal by remanding the matter back to the original authority. The appellant was directed to furnish the necessary records for scrutiny to determine the actual scope of manufacturing and to facilitate the issuance of fresh orders based on the findings.

This detailed analysis encapsulates the various issues, contentions, and outcomes of the legal judgment, providing a comprehensive understanding of the case and the subsequent decision by the Tribunal.

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