2002 (2) TMI 209 - AT - Central Excise

Summary

Issues Involved:
1. Legality of the directions given by the Central Board of Excise and Customs (CBEC) to the Commissioner of Central Excise, Meerut-II.
2. Determination of whether M/s. J.R. Electronics (JRE) and M/s. J.R. Consumer Electronics Pvt. Ltd. (JRCEPL) were dummy units of M/s. Baron International Ltd. (BIL).

Issue-wise Detailed Analysis:

1. Legality of the Directions Given by CBEC:

The primary issue raised by the counsel for M/s. BIL was the legality of the directions given by the CBEC to the Commissioner of Central Excise, Meerut-II, under Section 35E(1) of the Central Excise Act, 1944. The counsel argued that the directions should have been given to the Commissioner of Central Excise, Vadodara, who was the adjudicating authority in this case, rather than the Commissioner of Central Excise, Meerut-II. This argument was based on the interpretation that the very Commissioner who passed the adjudication order must be the one to file the application.

The Tribunal examined the relevant provisions of Section 35E(1), which empowers the Board to direct the adjudicating authority to make an application to the appropriate appellate authority. The Tribunal also referred to the Supreme Court judgment in the case of M.M. Rubber Co., which emphasized that the direction to file an appeal should be given to the very adjudicating authority who passed the order.

The Tribunal noted that the term "adjudicating authority" should not be rigidly interpreted to mean only the specific individual who passed the order. Instead, it should include successor Commissioners who take over the functions of the previous Commissioner. The Tribunal observed that Commissioners are frequently transferred, and a rigid interpretation would render the provision non-functional. The Tribunal found that the Commissioner of Central Excise, Meerut-II, remained competent to file the application even after the transfer of adjudication functions to the Commissioner of Central Excise, Vadodara.

The Tribunal concluded that there was no infirmity in the application made by the Commissioner of Central Excise, Meerut-II, and therefore, the appeals filed by the Revenue were tenable.

2. Determination of Whether JRE and JRCEPL Were Dummy Units of BIL:

The Commissioner of Central Excise, Vadodara, concentrated on the allegation that JRE and JRCEPL were dummy units of BIL. The investigation revealed that there was a substantial difference between the manufacturer's price and the market price of the CTVs and audio systems. It was found that the manufacturer was receiving only Rs. 250/- per set as cost and profit, with key components being supplied by BIL and other components heavily undervalued.

The agreements and statements of concerned persons indicated that BIL exercised absolute control over JRE. The Commissioner examined the allegations and concluded that JRE was a dummy unit of BIL. However, for the period after JRCEPL was formed, the Commissioner held that it could not be termed as a dummy unit. Consequently, part of the demand for the period after JRCEPL was formed was dropped.

Despite this, the Commissioner confirmed a duty of Rs. 5,48,92,612/- as differential duty on goods supplied by JRE to BIL. The Commissioner chose not to impose a penalty or levy interest, citing that the assessments were provisional.

Conclusion:

The Tribunal addressed the legality of the directions given by CBEC and the determination of whether JRE and JRCEPL were dummy units of BIL. The Tribunal upheld the legality of the directions given to the Commissioner of Central Excise, Meerut-II, and found no infirmity in the application made by him. The Tribunal also acknowledged the findings of the Commissioner of Central Excise, Vadodara, regarding the dummy unit allegations, confirming the differential duty while dropping part of the demand for the period after JRCEPL was formed.