2003 (3) TMI 233 - AT - Central Excise

CD ROMs, audio and video - Adjudication - Natural justice - Exemption - Provisional assessment - EOU - Confiscation - Plant and machinery

Issues Involved:
1. Change of cause title.
2. Demand of duty and imposition of penalties.
3. Classification of goods.
4. Valuation of goods.
5. Applicability of Notifications for concessional rates.
6. Confiscation of unaccounted goods.
7. Imposition of penalties under different sections.
8. Confiscation of plant and machinery.

Detailed Analysis:

1. Change of Cause Title:
The appellants filed an application to change the cause title from M/s. Pentafour Software & Exports Ltd. to M/s. Pentamedia Graphics Limited. The Tribunal accepted this prayer and changed the cause title accordingly.

2. Demand of Duty and Imposition of Penalties:
The Commissioner of Central Excise, Chennai, demanded a duty of Rs. 20,18,901/- under Rule 9(2) of the Central Excise Rules, 1944, read with the proviso to Sub-section (1) of Section 11A of the C.E. Act, 1944. A mandatory penalty of Rs. 14,38,561/- was imposed under Section 11AC of the Act, and an additional penalty of Rs. 2,00,000/- under Rule 173Q of the Rules. The Commissioner also appropriated Rs. 4.5 lakhs from the security amount furnished for the B11 bond and confiscated the plant and machinery with an option to redeem the same on payment of a fine of Rs. 10,000/-. The sum of Rs. 20,00,000/- paid was ordered to be adjusted against the above levies.

3. Classification of Goods:
The appellants manufactured and cleared Compact Discs (CD Audio, CD Video, and CD ROMs) without payment of duty during the period from 30-7-1996 to 28-10-96. They also cleared CDs during the period from 29-10-96 to 24-12-96 without applying the appropriate rate of duty. The Commissioner classified these goods based on user understanding, which the appellants contested, arguing that all products were identical and manufactured by the same process.

4. Valuation of Goods:
The appellants argued that the valuation of the goods was not an issue in the present case and that the goods were identical irrespective of their labels. The Commissioner, however, did not appreciate this aspect and proceeded with the valuation based on the user understanding.

5. Applicability of Notifications for Concessional Rates:
The appellants claimed the benefit of Notification No. 2/95, which was denied by the Commissioner on the grounds that no export had taken place. The Tribunal noted that the period of dispute was prior to the applicability of Notification No. 11/97, and therefore, the denial of the benefit was not justified.

6. Confiscation of Unaccounted Goods:
The Commissioner confiscated the unaccounted CDs valued at Rs. 44,47,047/- and appropriated Rs. 4.5 lakhs from the bond. The appellants argued that they had maintained all records and there was no intent to evade duty. The Tribunal found that the confiscation was justified due to the unaccounted goods but remanded the matter for reconsideration.

7. Imposition of Penalties under Different Sections:
The Commissioner imposed penalties under both Section 11AC and Rule 173Q. The appellants argued that penalties under both provisions could not be imposed simultaneously. The Tribunal noted that the penalty under Section 11AC was excessive and remanded the matter for reconsideration, taking into account the discretion provided by law.

8. Confiscation of Plant and Machinery:
The Commissioner ordered the confiscation of plant and machinery with an option to redeem on payment of Rs. 10,000/-. The appellants contended that they were not habitual offenders and that the confiscation was not justified. The Tribunal directed the lower authority to reconsider this aspect, noting that specific reasons for confiscation were not recorded.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter for de novo consideration, directing the lower authority to reconsider all aspects in accordance with law, including providing the appellants with a copy of the expert opinion and taking into account all relevant case laws and circulars.

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