2024 (1) TMI 450 - AT - Central Excise

Levy of Penalty u/r 26 of CER on the buyer / purchaser of goods - appellant were the other party who had received the non-duty paid goods from the said M/s. St. Roch Enterprises, who crossed the SSI limit - HELD THAT - The appellant had outsourced the manufacture of AVS, for which the said manufacturer was to affix the brand name of V-Service , it is also a fact borne on the record that the said manufacturer was marketing the stabilizers manufactured by it under its own name Info Power . That there is a possibility of the said manufacturer catering to the needs of other similar purchasers holding different brand names cannot be ruled out. The Revenue has not brought on record as to the role of the appellant in the non-payment of Excise Duty by the said manufacturer; the appellant has pleaded that it was only procuring the said AVS and the only relationship that existed was that of manufacturer and purchaser and nothing more than that, which is not disputed by the Revenue. Even the fact that the said manufacturer was enjoying the exemption being the SSI unit, has also been claimed by the appellant as being unaware of, which is also not denied by the Revenue. The granting of exemption for SSI unit is based on certain criteria of the particular claimant/unit and it does not depend on the business understanding, if any, of the said unit with any other person. Having obtained the SSI exemption, it was for the said unit to comply with the requirements of the applicable statutes including the Central Excise provisions insofar as the liability to duty of the product/s manufactured by it are concerned, and it is not the case of the Revenue that the said manufacturer is catering to the needs of the present appellant alone. The penalty levied under Rule 26 ibid. cannot sustain - Appeal allowed.

Issues involved:
The issues involved in the case are whether the Revenue is justified in levying penalty under Rule 26 of the Central Excise Rules, 2002 on the appellant.

Summary:

Issue 1: Allegation of Non-Duty Paid Goods

The Revenue suspected that M/s. St. Roch Enterprises had manufactured and cleared goods bearing another brand name without paying appropriate duty, post crossing the SSI exemption limit. Consequently, a Show Cause Notice was issued to M/s. St. Roch Enterprises, and the appellant was also called upon to show cause for receiving these non-duty paid goods.

Issue 2: Adjudication and Penalty

Both parties filed separate replies. The appellant, M/s. Voltas Ltd., contended that their relationship with the manufacturer was purely commercial, governed by purchase orders, and they had no knowledge of the non-payment of Excise Duty by the manufacturer. The Commissioner of Central Excise confirmed the proposals against the appellant, leading to the imposition of a penalty under Rule 26 of the Central Excise Rules, 2002.

Issue 3: Appeal Against Penalty

M/s. Voltas Ltd. appealed against the penalty levied under Rule 26. During the appeal, arguments were presented by the appellant's advocate and the Assistant Commissioner for the Revenue. The primary question for determination was whether the Revenue was justified in imposing the penalty on the appellant.

Judgment:

Upon review of the documents and arguments, it was found that the appellant had outsourced the manufacture of Automatic Voltage Stabilizers (AVS) bearing the brand name "V-Service" to M/s. St. Roch Enterprises. The appellant claimed ignorance of the manufacturer's non-payment of Excise Duty and exemption status as an SSI unit, which was not disputed by the Revenue. The granting of SSI exemption was the responsibility of the manufacturer, and the appellant's role in the non-payment of duty was not established. Therefore, the penalty under Rule 26 was deemed unjustified, leading to the setting aside of the impugned order in favor of the appellant.

*(Order pronounced in the open court on 10.01.2024)*

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