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2019 (3) TMI 666 - AT - Central ExciseCompounded Levy Scheme - processed textile fabrics - Section 3A of the Central Excise Act, 1944 - Appellant claimed that it was an independent textile processor and applied for compounded levy scheme (CLS) as per Rules 96ZNA to 96ZND of erstwhile CER, 1944 and Notification No.32/2001 CE (NT) dated 30.04.2001 - Held that - Rule 96ZNA prescribes certain criteria for filing the application whereas, 96ZNB prescribes conditions for availing of special procedure. Hence, in the background of our findings that here in the case on hand and the facts of this case, the appellant has not got through in its first hurdle as far as threshold investment limit is concerned, thus the mere application filed under 96ZNA per se will not confer any benefit, much less of the kind sought for by the appellant herein. Valuation of fabrics cleared on job work basis to M/s. Jansons Industries Ltd. - Held that - What cannot be dispute is that the appellant was only doing a job work on materials provided by their principals. In this regard, there are merits in the contention of the appellants that in such cases, the method of valuation laid down in M/s. Ujagar Prints Ltd. 1989 (1) TMI 124 - SUPREME COURT OF INDIA and reiterated in M/s. Pawan Biscuits Co. (Pvt.) Ltd. Vs. Collector of Central Excise, Patna 2000 (7) TMI 78 - SUPREME COURT OF INDIA will necessarily have to be followed, in which case, the value to be adopted will be restricted to the material cost of job work charges. There cannot then be any question of adding the profit of the principals. Valuation - processed goods sent via appellant to M/s. Jansons Exports - the appellants have contended that no findings have been given by the adjudicating authority with regard to the detailed submissions made on this aspect by the appellant in their reply to the Notice. It is also brought out that in the reply to the Show Cause Notice, they had submitted a revised quantification of demand, as per which the duty payable is only ₹ 68,65,550/- - Held that - There is a definite case for re-consideration of the quantum of demand in this case - The matter is therefore remanded to the adjudicating authority. Penalty - Held that - No suppression can be assailed against the appellant - the penalty of ₹ 2,17,05,582/- under Section 11AC of the Central Excise Act, 1944 and Rule 173Q of the erstwhile Central Excise Rules, 1944 read with Section 38A of the Act ibid cannot be sustained and is therefore set aside. Appeal allowed in part and part matter on remand.
Issues Involved:
1. Eligibility for Compounded Levy Scheme (CLS) under Section 3A of the Central Excise Act, 1944. 2. Usage of Open Air Stenter for drying fabrics. 3. Valuation of plant and machinery exceeding ?3 crores. 4. Imposition of penalties on the assessee and its partners. Detailed Analysis: 1. Eligibility for Compounded Levy Scheme (CLS): The assessee, engaged in manufacturing woven fabrics, applied for CLS under Section 3A of the Central Excise Act, 1944. The application was rejected due to discrepancies found during investigations, including the use of Open Air Stenter and investment in plant and machinery exceeding ?3 crores. 2. Usage of Open Air Stenter for Drying Fabrics: - The Department argued that the use of Open Air Stenter violated conditions stipulated for availing benefits under Notification No. 16/2001-CE (NT) and Notification No. 32/2001-CE. - The assessee contended that the Mahazar dated 31.10.2001 did not conclusively prove the actual drying of fabrics using the Open Air Stenter. The statement of the Manager also did not admit to its use for heat setting or drying. - The Tribunal found that the mere presence of an Open Air Stenter did not satisfy the conditions under Rule 96ZNA, and the application under 96ZNA did not confer any benefit. 3. Valuation of Plant and Machinery Exceeding ?3 Crores: - The Department included the value of generator, electrical and mechanical spares, pollution control equipment, and lift in the plant and machinery valuation, which exceeded ?3 crores. - The assessee argued that these items should not be included in the plant and machinery valuation. - The Tribunal referred to Accounting Standards (AS-10) which includes tangible items held for use in production or administrative purposes. The Tribunal held that the assessee failed to meet the threshold investment limit as the value of plant and machinery exceeded ?3 crores. 4. Imposition of Penalties: - The Commissioner imposed penalties on the assessee and its partners under Section 11AC of the Central Excise Act, 1944, and Rule 173Q of the Central Excise Rules, 1944. - The Tribunal found that the penalties were based on differences in interpretation of the provisions of the CLS and that there was no suppression of facts by the assessee. - The penalties of ?2,17,05,582/- on the assessee and ?25,00,000/- each on the partners were set aside. Separate Judgments: - The appeal by the assessee (Appeal No. E/552/2010) was partly remanded for re-quantification of net duty liability. The penalty imposed under Section 11AC was set aside. - The appeals by the partners (Appeal Nos. E/553/2010, E/554/2010, and E/555/2010) were allowed, and the penalties imposed on them were set aside. Conclusion: The Tribunal remanded the matter for re-quantification of duty liability and set aside the penalties imposed on the assessee and its partners. The appeals were disposed of accordingly.
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