2023 (9) TMI 912 - AT - Central Excise

Process amounting to manufacture or not - appellant has been receiving basic raw materials from their principals and were fabricating the goods - Levy of personal penalty on Managing Director - HELD THAT - The detailed findings show that the appellant was indeed engaged in activity amounting to manufacture in terms of Section 2(f) of CE Act 1944 and has also indulged in suppressing the facts which have come to light because of the investigation undertaken by the Department. Accordingly there are no merits in the Appeal filed by the appellant both on account of merits as well as on account of limitation. The Appeal filed by Sri Sai Ram Industrial Equipments Pvt Ltd is dismissed. In case of personal penalty imposed on Shri K. Rambabu Managing Director since the Adjudicating Authority has not brought out the role of appellant resulting in the non-payment of service tax which nevertheless is a negligence on his part the penalty of Rs 5, 00, 000/- is reduced to Rs 1, 00, 000/-. Appeal disposed off.

Summary

Issues: Manufacturing activity under Central Excise Act 1944, Payment of Excise Duty, Payment of Service Tax, Limitation of time for demand notice, Marketability of goods.

Manufacturing Activity: The appellant received basic raw materials from their principals and fabricated goods, constituting manufacturing under Section 2(f) of the Central Excise Act 1944. The Department found non-payment of Excise Duty while the appellant paid Service Tax under BAS, misleading the Department. The Adjudicating Authority extensively examined the submissions and held that the appellant indeed engaged in manufacturing activities, supported by statements from involved individuals.

Limitation of Time: The Adjudicating Authority rejected the appellant's contention on limitation of time for the demand notice. The Authority emphasized that mere payment of Service Tax does not absolve the liability of paying Central Excise duty. The investigation revealed evidence of fabrication and non-payment of duty, indicating the appellant's failure to disclose activities to the Department.

Marketability of Goods: The appellant argued that the goods were not marketable as there was no transformation and market assessment. However, the Adjudicating Authority clarified that the goods underwent operations, transforming into distinct products meeting client requirements. Referring to the definition of 'excisable goods,' the Authority concluded that the goods were marketable and capable of being bought and sold.

Personal Penalty: A personal penalty was imposed on the Managing Director for negligence in non-payment of service tax. The Adjudicating Authority reduced the penalty from Rs 5,00,000 to Rs 1,00,000 due to lack of clarity on the appellant's role in the non-payment. The Appeal by the appellant was dismissed based on the findings related to manufacturing activity, non-disclosure, and payment discrepancies.

Conclusion: The judgment upheld the findings of manufacturing activity, non-payment of Excise Duty, and the liability for Central Excise duty despite Service Tax payments. The Adjudicating Authority's detailed analysis and evidence led to the dismissal of the Appeal, with a reduced personal penalty for the Managing Director.