2002 (6) TMI 111 - AT - Central Excise

Issues Involved:
1. Demand of Central Excise duty and imposition of penalties.
2. Definition of 'Manufacture' under U.P. Sales Tax Act vs. Central Excise Act.
3. Use of brand name 'Thermoking' and eligibility for SSI exemption.
4. Allegations of clandestine removal of goods and parallel invoices.
5. Returned goods and their treatment for duty calculation.
6. Imposition of penalties under Rule 173Q, Section 11AC, and Rule 209A.

Issue-wise Detailed Analysis:

1. Demand of Central Excise Duty and Imposition of Penalties:
The Commissioner of Central Excise demanded Rs. 58,39,070/- from M/s. Thermotech and imposed a penalty of an equivalent amount. Additionally, a penalty of Rs. 5 lakhs was imposed on Shri Pradeep Khanna. The demand was based on allegations of clandestine removal of goods and use of parallel invoices.

2. Definition of 'Manufacture' under U.P. Sales Tax Act vs. Central Excise Act:
The appellant argued that the definition of 'Manufacture' under the U.P. Sales Tax Act is broader than under the Central Excise Act. They contended that activities like affixing brand names and painting, which qualify as 'manufacture' under the Sales Tax Act, do not necessarily constitute 'manufacture' under the Central Excise Act. The Tribunal found that the activities described did not meet the Central Excise Act's definition of 'manufacture' and thus could not justify the non-payment of duty.

3. Use of Brand Name 'Thermoking' and Eligibility for SSI Exemption:
The appellant claimed that the brand name 'Thermoking' was not registered, and thus, they were entitled to SSI exemption. The Tribunal noted that the brand name need not be registered to deny SSI exemption as per Notification No. 1/93. It was established that 'Thermoking' was used by M/s. Thermoking, a unit owned by Shri Pradeep Khanna, and thus, the use of this brand name by M/s. Thermotech disqualified them from SSI exemption.

4. Allegations of Clandestine Removal of Goods and Parallel Invoices:
The Tribunal found substantial evidence, including statements from employees and recovered documents, indicating that M/s. Thermotech engaged in clandestine removal of goods and maintained parallel invoices. The Tribunal upheld the demand for duty, except for entries in a diary already settled under the Kar Vivad Samadhan Scheme (KVSS).

5. Returned Goods and Their Treatment for Duty Calculation:
The appellant argued that some goods were returned by customers and resold under regular invoices, and thus, the value of such goods should be deducted from the duty calculation. The Tribunal held that once excisable goods are removed from the place of manufacture, duty becomes payable regardless of subsequent returns. However, the Tribunal agreed that duty should not be demanded twice for entries already settled under KVSS.

6. Imposition of Penalties under Rule 173Q, Section 11AC, and Rule 209A:
The Tribunal noted that penalties under Section 11AC could not be imposed for periods before its enactment. As the adjudicating authority imposed a combined penalty under Section 11AC and Rule 173Q, the Tribunal set aside the penalty and remanded the matter for reconsideration under Rule 173Q. The penalty on Mrs. Neera Khanna was set aside due to the lack of a show cause notice under Rule 209A. However, the penalty on Pradeep Khanna was upheld, as evidence showed he controlled the affairs of M/s. Thermotech.

Conclusion:
The Tribunal upheld the demand for duty, except for entries already settled under KVSS. The penalty under Section 11AC was set aside, and the matter was remanded for reconsideration under Rule 173Q. The penalty on Mrs. Neera Khanna was set aside, while the penalty on Pradeep Khanna was upheld. Both appeals were disposed of accordingly.

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