2004 (9) TMI 267 - AT - Central Excise

Summary

Issues Involved:
1. Demand of duty and penalties for the period 1998-99.
2. Demand of duty and penalties for the period 1999-2000.
3. Imposition of interest.
4. Imposition of penalties on various parties.
5. Imposition of redemption fines.
6. Dropping of duty demand on yarn based on paper cones.

Issue-Wise Detailed Analysis:

1. Demand of Duty and Penalties for the Period 1998-99:
The Commissioner confirmed and demanded a duty of Rs. 23,26,451/- from the proprietor of M/s. Komalagoure Textile (KGT) under Proviso to Section 11A(1) of the Central Excise Act, 1944. The appellant challenged this on the grounds that the finding of clandestine removal of goods was based on uncorroborated statements and that the request to cross-examine witnesses was denied. The Tribunal found that the adjudicating authority did not allow the appellant to cross-examine the witnesses, which was necessary to test the veracity of their statements. Consequently, the demand of duty and the penalty imposed under Rule 173Q read with Section 11AC were set aside, and the case was remanded for fresh adjudication.

2. Demand of Duty and Penalties for the Period 1999-2000:
The Commissioner confirmed and demanded a duty of Rs. 41,92,460/- from the proprietor of M/s. Selvaganapathy Textiles (SGT) and M/s. Komalagoure Textile (KGT) under Proviso to Section 11A(a) of the Central Excise Act, 1944. The appellant argued that it was not permissible for the Department to demand duty from two persons on the same goods for the same period. The Tribunal agreed, noting that the adjudicating authority had demanded duty from both KGT and SGT for the same period, which was impermissible. Consequently, the demand of duty and the penalties imposed were set aside.

3. Imposition of Interest:
The Commissioner demanded interest at appropriate rates for the above duty amounts under Section 11AB of the Central Excise Act, 1944. Since the duty demands were set aside, the interest demands were also implicitly set aside.

4. Imposition of Penalties on Various Parties:
The Commissioner imposed various penalties under Rule 173Q and Rule 209A of the Central Excise Rules, 1944. The penalties on Shri V. Madhu and M/s. Selvaganapathy Textiles were set aside due to the improper demand of duty. The penalties on Shri P. Dinesh and Shri C. Devaraj under Rule 209A were also set aside as there was no finding that they had acquired possession of or physically dealt with the excisable goods with the knowledge that they were liable to confiscation.

5. Imposition of Redemption Fines:
The Commissioner imposed a fine of Rs. 20,000/- in lieu of confiscation for the cotton yarn and a fine of Rs. 5,000/- in lieu of confiscation for the vehicle. The Tribunal found that the fine on the cotton yarn was not specified as to who should pay it, leading to its setting aside. However, the fine on the vehicle was upheld as it was reasonable and the vehicle was used for transporting goods without duty-paying documents.

6. Dropping of Duty Demand on Yarn Based on Paper Cones:
The Commissioner dropped the demand of duty of Rs. 6,81,536/- on the yarn valued at Rs. 74,08,000/- based on paper cones purchased by M/s. Komalagoure Textiles during the period from 17-6-1999 to 15-2-2000. This decision was not contested and hence remained as it was.

Conclusion:
The Tribunal allowed the appeals in part, setting aside the demands of duty and penalties for the periods 1998-99 and 1999-2000, and remanded the case for fresh adjudication with directions to allow cross-examination of witnesses. The penalties under Rule 209A were also set aside, while the redemption fine on the vehicle was upheld.