2006 (3) TMI 26 - AT - Central Excise

Central Excise - Clandestine activities of assessee came to knowledge of Revenue that they were manufacturing circles on job work basis and also wrongly informed about closure of their factory - Demand on limitation - Penalty

Summary

Issues:
1. Alleged clandestine manufacturing and clearance of goods without payment of duty.
2. Application of extended period of limitation for demand of duty.
3. Imposition of personal penalty on the manufacturing unit, proprietor, and manager.

Analysis:
1. The case involved allegations of clandestine manufacturing and clearance of Aluminium Circles without payment of duty. The assessee had intimated the Revenue about the closure of their factory due to cold rolling machine issues. However, upon inspection, it was found that manufacturing activities were ongoing, with evidence of production and clearance of goods. The Revenue issued a show cause notice, leading to the confirmation of duty demand and personal penalties by the Additional Commissioner. The Commissioner (Appeals) later set aside the order, but the appellate authority reinstated the duty demand against the manufacturing unit, reducing the penalty imposed.

2. The dispute regarding the application of the extended period of limitation arose as the appellate authority dropped the demand based on time-barred grounds. The appellate authority considered the information provided by the assessee regarding the factory closure as sufficient, but the Revenue argued that the clandestine activities were not disclosed. The appellate authority's decision was overturned, emphasizing that the assessee's failure to disclose the manufacturing activities on job work basis did not absolve them from duty liability, leading to the reinstatement of the duty demand.

3. The imposition of personal penalties on the manufacturing unit, proprietor, and manager was a key issue. The appellate authority had set aside the penalties, but the appellate tribunal reinstated the penalty on the manufacturing unit while reducing it. The tribunal found no justification for separate penalties on the proprietor and manager, ultimately rejecting the appeals against them. The penalty on the manufacturing unit was reduced to Rs. 25,000, considering the facts and circumstances of the case.

In conclusion, the appellate tribunal upheld the duty demand against the manufacturing unit for clandestine manufacturing and clearance of goods, emphasizing the duty liability even for goods manufactured on job work basis. The decision highlighted the importance of full disclosure to the Revenue and reduced the penalty imposed on the manufacturing unit while rejecting separate penalties on the proprietor and manager.