2018 (3) TMI 262 - AT - Central Excise

Penalty u/r 26 of the CER 2002 - short payment of duty - Held that - control of manufacture quality, raw material, storage, packing proves that manufacturer is M/s Nitin Pharmaceuticals Pvt. Ltd and not the appellant. If that is the case, therefore, without coming out any instance of involvement of the appellant for short payment of duty by M/s Nitin Pharmaceuticals Pvt. Ltd., the observation made by the Ld. Commissioner (A) in paragraph 9 of the impugned order is contrary to the facts of the case. Penalty not imposable - appeal allowed - decided in favor of appellant.

Summary

Issues: Penalty under Rule 26 of Central Excise Rules, 2002 imposed on the appellant.

Analysis:
1. The appellant, engaged in manufacturing PP medicaments on a job work basis, was penalized under Rule 26 of the Central Excise Rules, 2002, with a penalty of ?70,000. The dispute arose when the appellant was doing job work for M/s Nitin Pharmaceuticals Pvt. Ltd., paying duty on job charges plus raw material cost, and transferring the goods to M/s Nitin Pharmaceuticals Pvt. Ltd., who then sold the goods at a higher price from their depots. The duty was demanded from M/s Nitin Pharmaceuticals Pvt. Ltd., and a penalty was imposed on the appellant. The appellant appealed against this order.

2. The appellate tribunal considered the submissions and found no evidence in the records to prove the appellant's involvement in the short payment of duty by M/s Nitin Pharmaceuticals Pvt. Ltd. The appellant paid duty on raw material cost and job charges, clearing the goods to M/s Nitin Pharmaceuticals Pvt. Ltd., who later sold the goods at a higher price. The tribunal noted that there was no conspiracy by the appellant to evade excise duty by M/s Nitin Pharmaceuticals Pvt. Ltd.

3. The tribunal referred to the observation made by the Commissioner (A) in the impugned order, highlighting two key issues: whether the appellant should be treated as a manufacturer and determining the assessable value of the medicaments. The agreement between M/s Nitin Pharmaceuticals Pvt. Ltd. and the appellant indicated that the former had control over quality, raw materials, and manufacturing processes. The tribunal emphasized that M/s Nitin Pharmaceuticals Pvt. Ltd. was the principal manufacturer, and the appellant acted on their behalf.

4. The tribunal disagreed with the Commissioner (A)'s conclusion that the appellant appeared as a job worker to evade excise duty. The tribunal found that the controls on manufacturing, quality, and other aspects clearly established M/s Nitin Pharmaceuticals Pvt. Ltd. as the manufacturer, not the appellant. Therefore, the tribunal held that no penalty should be imposed on the appellant, setting aside the impugned order.

5. In conclusion, the tribunal allowed the appeal, providing consequential relief, if any, to the appellant. The judgment emphasized that the appellant was not liable for the penalty under Rule 26 of the Central Excise Rules, 2002, as there was no evidence of their involvement in the duty evasion by M/s Nitin Pharmaceuticals Pvt. Ltd.