2018 (5) TMI 284 - AT - Central Excise

Clandestine removal - voluntary winding up of the assessee - Held that - once the entire amount stands discharged prior to the issuance of Show Cause Notice (Amount has been debited by the said Kiritida Silk Mills on 31.03.2005) no demand survives against the appellant Anjani Dying & Printing Mills as the said company is liquidated and wound up - the question of confirming demand again from the appellant herein does not arise. Penalty on M/s Kiritida Silk Mills (to whom assets were sold subsequent to winding up) u/r 26 of CER - Held that - the said penalty is imposed under Rule 26 of the Central Excise Rules, 2002 and to uphold to such penalty, the 1st Appellate Authority has not even recorded a single line finding as to how penalty imposed on M/s Kiritida Silk Mills is sustainable the facts of this case - penalty set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Confirmation of demand of duty on grounds of clandestine removal of goods, validity of penalty imposed on M/s Kiritida Silk Mills.

Analysis:
The appeals were filed against Order-in-Appeal No. RKA/256-257/SRT-I/2009 dated 09.04.2009. The issue revolved around the confirmation of demand of duty due to alleged clandestine removal of goods. The appellant's representative highlighted that the company was under voluntary winding up, and the assets were sold to M/s Kiritida Silk Mills with approval from the High Court. It was argued that the payments made by M/s Kiritida Silk Mills included amounts due to the Revenue from the investigation that led to the Show Cause Notice. The Order-in-Original was passed on 23.03.2006, and the 1st Appellate Authority's decision on 09.04.2009 was under challenge. The Tribunal noted that the appellant company was liquidated, and the entire amount was discharged before the issuance of the Show Cause Notice. The Tribunal emphasized that the debits made by M/s Kiritida Silk Mills in the Cenvat account constituted the discharge of duty liability, as clarified by Circular No. 962/05/2012-CX.8. Consequently, the demand against the appellant was deemed unsustainable, including the interest and penalties imposed.

Regarding the penalty imposed on M/s Kiritida Silk Mills, the Tribunal found that the 1st Appellate Authority did not provide any reasoning to support the sustainability of the penalty under Rule 26 of the Central Excise Rules, 2002. Consequently, the penalty imposed on M/s Kiritida Silk Mills was set aside. The Tribunal disposed of the appeals by ruling in favor of the appellant and setting aside the penalty imposed on M/s Kiritida Silk Mills. The judgment was pronounced in court on 13.02.2018.