2007 (9) TMI 192 - AT - Central Excise

Goods (Gutka Pan Masala) removed clandestinely demand justified but will be re-calculated after deducting excise duty from sale price - SCN served to partner is valid notice on firm if partner has asked copies of relied upon document to made effective defense in reply to SCN

Summary

Issues:
1. Validity of service of show cause notice on a partner of the firm.
2. Demand raised for goods supplied without payment of duty.
3. Interpretation of Partnership Act regarding notice to a partner.
4. Assessment of excise duty based on sale price.

Analysis:
1. The appeal was filed against an order imposing a demand and penalty on the appellants for manufacturing Gutka Pan Masala without paying duty. The appellant contended that the show cause notice was not served on them but on a partner who was not actively involved in the firm. The Commissioner (Appeals) remanded the matter to provide the notice to the firm, which was done after five years. The appellant relied on the Partnership Act, specifically Section 24, and argued that the notice served on the partner was not valid. However, the Tribunal held that the notice to the partner was valid as she actively participated in the firm's affairs by responding to the revenue authorities' letter, requesting relied-upon documents for an effective defense.

2. The revenue authorities argued that excisable goods were manufactured at an unregistered location, and duty was not paid for goods supplied to a trading firm. The demand was made based on this non-payment of duty. The Tribunal found the demand to be valid as the goods were manufactured at an unregistered place, and duty was not paid for goods supplied to the trading firm.

3. The appellant also contested the demand based on the interpretation of the Partnership Act regarding notice to a partner. The Tribunal reiterated that notice to a partner who habitually acts in the firm's business is considered notice to the firm. In this case, the partner actively participated in the firm's affairs, making the notice valid on the firm.

4. Regarding the assessment of excise duty based on the sale price, the appellant argued for the benefit of cum duty price deduction, citing a Supreme Court decision. The Tribunal agreed with this argument and recalculated the demand after deducting excise duty from the sale price. The penalty imposed was reduced, but the impugned order was otherwise upheld, disposing of the appeal accordingly.