2018 (12) TMI 3 - AT - Central Excise

100% EOU - imposition of penalty - whether penalty can be imposed on M/s. Monalisha garments whose EOUs is situated within the jurisdiction of the Haldia Commissionerate? - Held that - M/s. Monalisha Garments has claimed receipt of duty free material from M/s. Spectrum Silk Mills as well as M/s. Marvel Fashion (both EOUs). However, it stands established that only invoices were received from M/s. Spectrum Silk Mills as well as M/s. Marvel Fashion, but no goods were received - From the facts of the case, it stands established that both the above persons have facilitated M/s. Monalisha Garments in misusing the EOU Scheme, resulting in huge evasion of duty to the Government. For the role played by M/s. Spectrum Silk Mills and M/s. Marvel Fashion, penalties imposed on them also. Appeal allowed - decided in favor of Revenue.

Summary

Issues:
1. Jurisdiction for imposition of penalty on two co-noticees situated outside the Commissionerate's jurisdiction.
2. Misuse of the EOU Scheme leading to evasion of duty by the appellant.

Analysis:
1. The case involved two appeals by the Revenue against an Order-in-Original passed by the Commissioner of Central Excise, Haldia Commissionerate, Kolkata. The appeals were related to the imposition of Central Excise duty on a 100% EOU, M/s. Monalisha Garments, for serious infractions of the EOU Scheme. The Revenue also filed a Misc. Application for ROM against the Final Order of the Tribunal. The issue was whether penalty could be imposed on two co-noticees, M/s. Spectrum Silk Mills and M/s. Marvel Fashion, situated outside the jurisdiction of the Haldia Commissionerate. The Tribunal held that since the alleged offence was committed within the Haldia Commissionerate, the adjudicating authority had the power to penalize the co-noticees under Rule 26.

2. The investigations revealed that M/s. Monalisha Garments had claimed receipt of duty-free material from the two co-noticees, but it was established that only invoices were received, not the actual goods. The Tribunal found that the co-noticees had facilitated the misuse of the EOU Scheme by M/s. Monalisha Garments, resulting in significant duty evasion. Consequently, penalties of &8377; 20.00 lakhs each were imposed on M/s. Spectrum Silk Mills and M/s. Marvel Fashion under Rule 26 for their roles in the scheme's misuse.

In conclusion, the Tribunal dismissed the Misc. Application for ROM filed by the Revenue as infractuous and allowed the appeals against M/s. Spectrum Silk Mills and M/s. Marvel Fashion, upholding the imposition of penalties on the co-noticees for their involvement in the misuse of the EOU Scheme and evasion of duty.