2019 (7) TMI 824 - AT - Central Excise

100% EOU - Valuation - material found unaccounted in the premises - raw materials procured by the appellant duty free from others - demand of duty at rates applicable to goods manufactured by 100% EOU - applicability of proviso to section 3 of CEA - HELD THAT - In the instant case, the appellant are failed to account for a certain quantity of raw material procured by them and consequently, they are liable to pay duty. It is seen that the proviso to section 3 applies only to goods manufactured or produced by a 100% EOU. It therefore cannot be applied to the said goods which were clearly not produced by the appellant. In these circumstances, demand of duty in terms of proviso to section 3 of Central Excise Act cannot be upheld - demand to the extent exceeding the demand of duty forgone on procurement of said goods is set aside. Penalty is consequently, revised under section 11AC to the re-quantified duty. Invocation of penalty u/r 26 of CER - HELD THAT - In the instant case there was diversion of significant quantity of material procured duty free under CT-3. Joy M. Godiwala was director of the unit and he had also admitted in his statement that all day to day activities of the unit including work related to central excise and customs was carried out as per his direction and instructions. In these circumstances, there is significant force to invoke rule 26 of Central Excise Rules and to impose penalty on Sh. Joy. M. Godiwala. The matter is remanded solely for qualification - appeal allowed in part.

Summary

Issues:
- Confirmation of Central Excise interest and penalty against M/s Kiran Syntex Ltd.
- Appeal against penalty by M/s Joy M. Godiwala.

Analysis:
1. Confirmation of Central Excise Interest and Penalty:
The appeals were filed by M/s Kiran Syntex Ltd. against the confirmation of Central Excise interest and penalty. The revenue demanded duty on unaccounted raw materials procured duty-free by the appellant on the strength of CT-3 certificate. The appellant argued that the demand of duty under the proviso to section 3, treating the goods as manufactured by them, was not legal. They cited relevant case laws to support their argument. The issue of limitation was raised as the show cause notice (SCN) was issued much later than the date of visit by Central Excise Officers. The Tribunal analyzed the facts and held that the demand of duty was not applicable under the proviso to section 3 as the goods were not produced by the appellant. The Tribunal set aside the demand exceeding the duty forgone on procurement of the goods under CT-3.

2. Appeal Against Penalty by M/s Joy M. Godiwala:
An appeal was also filed by M/s Joy M. Godiwala against the penalty imposed. The Tribunal found that there was a diversion of a significant quantity of material procured duty-free under CT-3, and Mr. Joy M. Godiwala, as the director of the unit, admitted to directing day-to-day activities related to central excise and customs. The Tribunal invoked rule 26 of the Central Excise Rules and imposed a penalty on Mr. Joy M. Godiwala. The penalty was revised under section 11AC to the re-quantified duty. The Tribunal partially allowed the appeal of M/s Kiran Syntex and dismissed the appeal filed by Mr. Joy M. Godiwala. The matter was remanded solely for qualification.

In conclusion, the Tribunal's judgment addressed the issues of confirmation of Central Excise interest and penalty against M/s Kiran Syntex Ltd. and the appeal against the penalty by M/s Joy M. Godiwala. The decision provided detailed analysis based on legal arguments, case laws, and relevant provisions to arrive at a reasoned conclusion for each issue.