1989 (2) TMI 270 - AT - Central Excise

Summary

Issues:
- Duty liability and penalty imposed on the appellants for the period 1985-86.
- Whether the present appellants can be held liable for duty and penalty due to irregularities committed by the previous firm and its partners.
- Interpretation of Central Excise Rules and Act regarding liability of duty on the actual manufacturer.
- Justification of penalty amount imposed on the appellants.

Analysis:

The appeal challenged an order demanding duty and imposing a penalty on the appellants for the period 1985-86 under Central Excise Rules and the Central Excises & Salt Act, 1944. The appellants, a partnership firm manufacturing Ethyle Acetate, argued that they were not the manufacturers during the period in question as they had purchased the firm in May 1986. The previous owners had failed to obtain a Central Excise License and pay duty. The appellants voluntarily disclosed their manufacturing activities in 1986-87 and requested a license. The main issue was whether the duty liability for 1985-86 could be imposed on the present appellants. The Tribunal analyzed the provisions of the Act and Rules, emphasizing that duty liability rests on the actual manufacturer. The appellants, not being the manufacturers in 1985-86, were not liable for duty during that period. The Tribunal highlighted that the terms of sale absolved the present appellants from any liabilities of the previous firm. The Department could pursue recovery from the previous owners. The demand for duty from the appellants for 1985-86 was set aside.

Regarding the penalty, the Tribunal considered the appellants' proactive disclosure of their activities. The penalty amount of Rs. 15,000 was deemed disproportionate to the duty involved. Acknowledging the appellants' cooperation, the penalty was reduced to Rs. 5,000. The Tribunal concluded that the demand for duty from the appellants for 1985-86 was unfounded, and the penalty amount was reduced based on the circumstances. The appeal was disposed of in favor of the appellants with the duty demand set aside and the penalty reduced.