2019 (5) TMI 656 - HC - Central Excise

Maintainability of appeal before High Court - imposition of penalty under Rule 25/26 of the Central Excise Rules, 2002 upon the Directors/ partners of the companies/firms - Valuation - SSI Exemption - contentious issues posed by the appellants are as to whether the Rules 9 and 11 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 are applicable or not and also that in the facts of the case, the clubbing of clearance of all the concerns was justified or not? HELD THAT - Section 35G(1) of the Act of 1944 provides an appeal to the High Court against an order of the tribunal, however, with an exception to the effect that an appeal involving question of valuation of goods or rate of duty shall lie before Hon'ble the Supreme Court under Section 35L of the Act of 1944 - Upon a bare reading of the provision contained in Section 35G(1) of the Act of 1944, we are of the considered opinion that since in all the appeals enumerated in Table-A above, the basic question revolves around valuation of goods or applicability of Rule 9 or 11 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules 2000, they are not maintainable as initially Section 35G of the Act. The appellant-assessee is required to challenge these orders of the tribunal before Hon'ble the Supreme Court as provided under Section 35L of the Act of 1944 - A perusal of the orders impugned reveals that the penalty in question has been levied under Rule 25/26 of the Rules of 2002 on the allegation that the valuation of the goods has not been properly made and/or value of clearances of all the manufacturing units need to be clubbed together. Hence, the appeals (mentioned in Table-B and Table-C above) are also required to be heard by Hon'ble Supreme Court. In any case, it will be in the fitness of the things that all the appeals involving common facts and question of law are heard and decided by one forum. The appeals at hands are not maintainable before this Court and the same are required to be preferred under Section 35L of the Act of 1944, before Hon'ble Supreme Court - appeal dismissed as not maintainable.

Issues Involved:
1. Applicability of Rules 9 and 11 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.
2. Justification of clubbing the clearances of all the concerns.
3. Imposition of penalty under Rule 25 of the Central Excise Rules, 2002.
4. Imposition of penalty under Rule 26(1) of the Central Excise Rules, 2002.
5. Maintainability of appeals under Section 35G of the Central Excise Act, 1944.

Detailed Analysis:

1. Applicability of Rules 9 and 11 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000:
The appeals in Table-A primarily deal with the valuation of goods and the consequential determination of duty. The contentious issue posed by the appellants was whether the Rules 9 and 11 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 are applicable or not. The adjudicating officer found that the appellants had circumvented legal provisions to evade central excise duty by floating multiple firms under different names but with mutual financial interests and control by a single person, thereby misusing the SSI exemption notification No.08/2003.

2. Justification of Clubbing the Clearances of All the Concerns:
The adjudicating authority determined that the clearances of all the concerns should be clubbed together as they were essentially part of the same organization, controlled and administered by a single individual. It was found that the firms were floated in the names of family members who were not involved in the business activities, thus evading the payment of central excise duty. The clubbing of clearances was justified based on the mutuality of interest and pervasive control by one entity.

3. Imposition of Penalty under Rule 25 of the Central Excise Rules, 2002:
The appeals in Table-B involve penalties under Rule 25 of the Central Excise Rules, 2002, inflicted by the adjudicating authority while confirming the demand of duty. The penalties were imposed due to the improper valuation of goods and the evasion of excise duty through the misuse of SSI exemption by floating separate entities.

4. Imposition of Penalty under Rule 26(1) of the Central Excise Rules, 2002:
The appeals in Table-C question the imposition of penalties upon the directors/partners of the companies/firms under Rule 26(1) of the Central Excise Rules, 2002. The adjudicating authority found these individuals guilty of circumventing and misusing the provisions of the SSI exemption notification No.08/2003, thus imposing penalties for their involvement in the fraudulent activities.

5. Maintainability of Appeals under Section 35G of the Central Excise Act, 1944:
The primary issue was whether the appeals involving the valuation of goods or the rate of duty should be filed under Section 35G before the High Court or under Section 35L before the Supreme Court. The court concluded that since the basic question in the appeals revolved around the valuation of goods or applicability of Rule 9 or 11 of the Central Excise Valuation Rules, 2000, they are not maintainable under Section 35G. The appellants should challenge these orders before the Supreme Court under Section 35L. Additionally, the appeals related to penalties (Table-B and Table-C) are also dependent on the valuation of goods and should be heard by the Supreme Court to ensure consistency in the decision-making process.

Conclusion:
The High Court held that the appeals at hand are not maintainable before it and should be preferred under Section 35L of the Central Excise Act, 1944, before the Supreme Court. The Registry was directed to return the certified copies of the tribunal's orders to the appellants' counsel to enable them to take appropriate remedies in accordance with the law. All appeals were disposed of accordingly.

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