2017 (3) TMI 1284 - HC - Central Excise

Natural justice - Sections 35 G and 35 L of the Act - whether the impugned order made by the Hon ble Tribunal can be said to be an order made in accordance with Law, when the Tribunal has set aside the order to the extent of clandestine removal without giving any reasoning and ignoring the submissions of the Department with regard to facts and evidences on record? - Held that - The decision of the Tribunal in respect of the respondent itself related to questions that fall within the ambit of Section 32 G as well as in respect of questions that fall outside the ambit of Section 32 G - The position, therefore, is that even as regards the respondent alone the Tribunal by the impugned order decided questions that fall within the ambit of Section 35 G as well as with questions that fall outside the ambit of Section 35 G and within the ambit of Section 35 L of the Act. Whether an appeal lies to the High Court under Section 35 G or to the Supreme Court under Section 35 L cannot possibly depend upon the nature or scope of the appeal that the party intends filing. A party may seek to challenge only that part of the order of the Tribunal which relates to questions other than those relating to the rate of duty of excise or the value of the goods for the purposes of assessment. Such an appeal would, absent any other questions, lie to the High Court. Once it is held that an appeal against the order of the Tribunal which deals with questions that fall within the ambit of Section 35 L as well as other questions lies to the Supreme Court under Section 35 L the mere fact that the party chooses to challenge only that part of the order that falls within the ambit of Section 32 G would make no difference. It is not the order-in-original i.e. the order of the adjudicating authority but the order of the Tribunal that would determine the issue as to whether the appeal lies to the High Court under Section 35 G or to the Supreme Court under Section 35 L. Section 35 G provides for an appeal to the High Court from every order passed in appeal by the appellate Tribunal. It is, therefore, the order of the Appellate Tribunal that must determine the issue. The determination of the question as to whether Section 32 G applies or whether Section 32 L applies requires the consideration of the order of the Tribunal - Appeal dismissed as not maintainable u/s 32 G of the CEA, 1944.

Issues Involved:
1. Maintainability of the appeal under Section 35 G of the Central Excise Act, 1944.
2. Relationship and transactions between the three assessees.
3. Allegations of clandestine removal and undervaluation of goods.
4. Applicability of exemption under Notification No. 5/99/CE and 6/2000.
5. Determination of duty demands and penalties.

Detailed Analysis:

1. Maintainability of the Appeal under Section 35 G of the Central Excise Act, 1944:
The primary issue raised was whether the appeal was maintainable under Section 35 G of the Central Excise Act, 1944. The appellant contended that the appeal raised a substantial question of law regarding the Tribunal's order on clandestine removal without proper reasoning. The respondent argued that the appeal was not maintainable as the order involved questions related to the rate of duty and value of goods, which should be appealed to the Supreme Court under Section 35 L. The court agreed with the respondent, stating that the appeal was not maintainable under Section 35 G because the Tribunal's order dealt with issues relating to the rate of duty and value of goods. The court emphasized that appeals should be consolidated in one court to avoid conflicting findings and procedural complications.

2. Relationship and Transactions Between the Three Assessees:
The case involved three assessees: SBM Woolen Mills, Raja Dyeing (the respondent), and Rosy Woolen Mills. SBM Woolen Mills, a partnership firm, manufactured grey acrylic spun yarn. Raja Dyeing, another partnership firm, manufactured dyed acrylic yarn. Rosy Woolen Mills sold the dyed yarn. The appellant alleged that SBM evaded duty by undervaluing goods sold to the respondent and Rosy Woolen Mills, indicating a close relationship between the assessees.

3. Allegations of Clandestine Removal and Undervaluation of Goods:
The appellant alleged that SBM Woolen Mills sold goods at undervalued prices to the respondent and Rosy Woolen Mills, evading duty. The Commissioner adopted the average price of similar goods sold to other buyers to determine the duty demand. Additionally, it was alleged that goods sold in cash to other buyers were actually cleared to the respondent for the manufacture of unaccounted goods, leading to a demand for duty of ?32,64,160/- against the respondent. The Tribunal, however, found no evidence to substantiate the allegation of clandestine removal and set aside the duty demand of ?36,78,122/-.

4. Applicability of Exemption Under Notification No. 5/99/CE and 6/2000:
The respondent claimed exemption under Notification No. 5/99/CE and 6/2000, which prescribed a concessional rate of duty for dyed acrylic spun yarn. The exemption was subject to the condition that the goods were manufactured from materials on which appropriate duty had been paid, and no credit of Central Excise Duty had been taken. The Commissioner concluded that SBM had not paid the appropriate duty, making the respondent ineligible for the exemption, leading to a demand of ?19,86,648/-.

5. Determination of Duty Demands and Penalties:
The Commissioner confirmed the duty demands and penalties against the assessees. SBM Woolen Mills was demanded ?5,19,100/- and penalized an equal amount plus ?50,000/-. The respondent was demanded ?15,14,161/- for incorrect exemption claims and ?36,78,122/- for clandestine removal, along with penalties on individuals involved. The Tribunal upheld the demand of ?15,14,161/- but set aside the demand of ?36,78,122/- due to lack of evidence.

Conclusion:
The appeal was dismissed on the grounds of non-maintainability under Section 35 G, as the Tribunal's order involved issues related to the rate of duty and value of goods, which fall under the jurisdiction of the Supreme Court as per Section 35 L. The court emphasized the need to consolidate appeals in one court to avoid conflicting findings and procedural complications.

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