2004 (12) TMI 191 - AT - Central Excise

Demand - Job worker - suppression of facts - manufacture of corrugated paper boxes - Manufacture excisable commodity on job work basis liable for payment of excise duty? - HELD THAT - M/s. Excel had received raw materials from M/s. Pepsi. They converted the same into boxes and sent them back to M/s. Pepsi. This fact is not disputed. Moreover the raw materials have been sent under Rule 57F(3) challans. Therefore the responsibility to pay duty by giving an undertaking under Notification No. 214/86-C.E. squarely rests on the principal manufacturer i.e. M/s. Pepsi. M/s. Excel had undertaken the job work for others. The other raw material suppliers have followed the right procedure in filing declaration under Notification No. 214/86-C.E. It is only M/s. Pepsi who have filed a belated declaration on account of which the Revenue proceeded against M/s. Excel. In our view it would be against equity to punish M/s. Excel for the fault of the raw material suppliers. Thus the demand of duty on M/s. Excel is not sustainable. Moreover there are no strong grounds to invoke longer period and proviso to Section 11A. In this respect the Commissioner (Appeals) s findings are correct. Hence the Department appeal cannot be sustained. We also hold that the demand of duty and interest in both the Orders-in-Appeal cannot be sustained. We allow the appeals of M/s. Excel with consequential relief and dismiss the Department s appeal. These 3 (Three) appeals are disposed of in the above terms.

Summary

Issues involved: Appeal against Order-in-Appeal No. 232/03-C.E. dated 31-7-2003 and Order-in-Appeal No. 32/04 dated 26-2-2004, involving duty demand, penalty, and interest under Central Excise Act, 1944.

Summary:
1. Duty Demand and Penalty: M/s. Excel Corrugated Boxes (P) Ltd. received raw materials from M/s. Pepsi Cola for manufacturing corrugated boxes without paying duty. Original Authority demanded duty of Rs. 12,53,953/- and imposed penalties under Section 11A and Section 11AC. Appellate Authority confirmed duty demand for one year but upheld a penalty under Rule 25.

2. Revenue's Grievance: Revenue contended that M/s. Excel suppressed facts, exceeding the exemption limit, justifying invoking proviso to Section 11A due to clear suppression of facts.

3. M/s. Excel's Defense: M/s. Excel claimed they were unaware of duty changes post 1-3-2001 and received raw materials on job work basis. They argued for acceptance of belated declaration by M/s. Pepsi and challenged penalty imposition citing lack of mens rea.

4. Legal Arguments: Advocate cited a Tribunal decision stating duty obligation lies with the principal manufacturer, not the job worker. The issue of retrospective effect of declarations was raised.

5. Judgment: Tribunal held M/s. Excel not liable for duty as raw materials were supplied under Rule 57F(3) challans, making M/s. Pepsi responsible for duty payment. Longer period and proviso to Section 11A were deemed inapplicable. Appeals of M/s. Excel were allowed, dismissing the Revenue's appeal.

Conclusion: The Tribunal ruled in favor of M/s. Excel, absolving them of duty demand and penalties, emphasizing the responsibility of the principal manufacturer for excise duty payment and rejecting the Revenue's arguments of suppression of facts.