2018 (12) TMI 12 - AT - Central Excise

100% EOU - penalty u/r 26 of CER - Clandestine removal - duty free yarn procured domestically as well as imported - Held that - It is an admitted fact that the premises of job workers were used to show supply of duty free yarn and manufacture there from in that job worker s premises but in the investigation, it is established that the job workers had no manufacturing facility. Therefore, the job work premises were used only to mislead the department by showing fake job work and consequently cleared the duty free yarn in the open market. In the process of duty evasion, the job workers have actively contributed in duty evasion inasmuch as the premises of job worker were shown to have rented out to M/s. PPL. Moreover, the job work challans were also signed by those job workers. Despite the fact known to them that there is only paper transaction is being done, the job workers have signed the blank challans which were used by M/s. PPL for showing the job work. Therefore, the appellants (job workers) mentioned at serial No. 1 to 7 were actively involved in facilitating M/s. PPL for clandestine removal of duty free yarn - they are rightly liable for penalties under Rule 26 / 209A. Penalty on other appellants, M/s. Regent Overseas Pvt. Limited and M/s. Pooja Tex Prints Pvt. Limited to whom M/s. PPL had shown clearance, - Held that - It is seen that they had also actively and knowingly connived with M/s. PPL in diversion of duty free raw materials inasmuch as manipulating the documents to show the receipt of grey fabrics of heavier GSM whereas in fact they had received the grey fabrics of lighter GSM. Thus, they have facilitated M/s. PPL by showing receipt of goods from M/s. PPL and are correctly liable for penalty under Rule 209A of erstwhile Central Excise Rules, 1944 / Rule 26 of Central Excise Rules, 2001/2002. Penalties upheld - appeal dismissed - decided against appellant.

Summary

Issues:
- Confirmation of demand of Central Excise and Customs duty on duty free imported and indigenous raw material
- Imposition of penalties under Rule 26 on job workers and purchasers of goods
- Liability of job workers and purchasers for abetting duty evasion by the principal company
- Ex-parte order against one of the purchasers due to incorrect address

Analysis:
1. The judgment addressed the confirmation of a significant demand of Central Excise and Customs duty amounting to ?16,99,92,134 on duty free imported and indigenous raw material. The order-in-original dated 25.02.2008 confirmed this demand against M/s. Prime Poly Weaves Limited (PPL) along with penalties and redemption fines imposed on the company.

2. The issue of imposing penalties under Rule 26 on various job workers and purchasers of goods was also examined. Penalties of ?50 lakh each were imposed on job workers involved in the job work of the goods on behalf of M/s. PPL. Additionally, purchasers of goods, M/s. Regent Overseas Pvt. Limited and M/s. Pooja Tex Prints Pvt. Limited, were penalized with amounts of ?1 crore each.

3. The judgment delved into the liability of the job workers and purchasers for abetting duty evasion committed by M/s. PPL. It was established that the job workers actively contributed to duty evasion by allowing their premises to be used for misleading the authorities and signing blank challans used for fake job work. Similarly, the purchasers connived with M/s. PPL in manipulating documents to facilitate the diversion of duty free raw materials.

4. Furthermore, the judgment discussed the ex-parte order against M/s. Regent Overseas Pvt. Limited due to the incorrect address, which led to the company not being able to represent their case before the Adjudicating Authority. However, the judgment concluded that the penalties imposed on all the appellants, including the job workers and purchasers, were justified based on their active involvement in facilitating duty evasion.

5. Ultimately, the Appellate Tribunal upheld the findings of the Adjudicating Authority and dismissed all the appeals, affirming the imposition of penalties on the job workers and purchasers for their roles in abetting duty evasion. The judgment was pronounced in the open court on 29.11.2018 by the Tribunal.