2024 (9) TMI 1023 - HC - Central Excise

Clandestine removal - evasion of duty by misusing small scale Exemption Notification No.08/2003-CE as amended - Clubbing of clearances - inspection charges paid to M/s. RITES by Indian Railways for inspection of the goods being supplied by MM and MMPL should be part of the assessable value of such goods cleared and be liable to central excise duty or not - levy of duty on goods manufactured and used for repairs and reconditioning - sale proceeds of unaccounted goods cleared clandestinely or not - confiscation - penalty. HELD THAT - This Court is of the view that when the consideration has been given by the original authority by taking into consideration the various documents, i.e., Stock Register for Brush Holder etc. and hence, it was incumbent upon the appellate authority to re-appreciate the said documents for the purpose of coming to the conclusion and not only by going through the identity of both the firms, i.e., one being the Proprietary concern and another a Private Limited Company. The issue of clubbing together for the purpose of getting exemption requires consideration on the basis of the transaction of the business which cannot be assessed only on the basis of the fact that one unit is a Proprietary concern and another is Private Limited Company. The issue has been raised that the appellant has not raised the issue of perversity. Even accepting that the issue of perversity has not been raised but if the error is apparent on the face of the order, then the Court while considering the propriety of the order which has been challenged is to consider on the basis of the principle as to whether the order assailed suffers from perversity or not - Perversity means that if anything has not been considered if so placed or erroneously been considered and if that be so, it is incumbent upon the Court to law to go into the propriety of the order by taking into consideration the issue of perversity. This Court has considered the order impugned and after taking into consideration the specific consideration given by the original authority based upon the documents which is lacking in the order passed by the Tribunal - the finding so recorded in the impugned order needs to be interfered with. Appeal disposed off.

Issues Involved:
1. Whether value of clearances of MM and MMPL are to be clubbed for determining Central Excise duty payable as MMPL.
2. Whether duty of excise on goods valued at Rs. 40,56,508 is recoverable.
3. Whether inspection charges paid to M/s. RITES by Indian Railways for inspection of the goods being supplied by MM and MMPL should be part of the assessable value of such goods cleared and be liable to central excise duty.
4. Whether duty on goods manufactured and used for repairs and reconditioning is leviable.
5. Whether the amount of Rs. 1.23 Crore seized from the premises of MM/MMPL pertained to the sale proceeds of unaccounted goods cleared clandestinely and hence are liable to confiscation.
6. Whether they are liable for penalty as proposed in the notices.

Issue-wise Detailed Analysis:

Issue 1: Clubbing of Clearances for Central Excise Duty
The main contention revolves around whether the clearances of MM and MMPL should be clubbed for determining the Central Excise duty payable by MMPL. The original authority determined that both entities should be treated as one for excise duty purposes due to mutuality of interest, common procurement of raw materials, common storage, common manufacturing, and common accounting of goods. The Tribunal, however, reversed this finding, stating that MM and MMPL are distinct entities with separate legal existence, with MM being a proprietorship and MMPL a private limited company. The High Court found that the Tribunal failed to adequately consider the documentary evidence and testimonies that indicated mutual interest and common business operations. Consequently, the High Court quashed the Tribunal's decision and remitted the matter for fresh adjudication with a directive to consider all relevant documents.

Issue 2: Duty on Goods Valued at Rs. 40,56,508
The original authority confirmed the excise duty on goods valued at Rs. 40,56,508. This issue was not specifically contested in the current appeal, and thus the Tribunal's decision stands.

Issue 3: Inspection Charges as Part of Assessable Value
The original authority included inspection charges paid to M/s. RITES by Indian Railways as part of the assessable value of goods supplied by MM and MMPL, making them liable for central excise duty. The Tribunal's decision on this issue was not challenged in the present appeal, indicating that the Tribunal's decision stands.

Issue 4: Duty on Goods for Repairs and Reconditioning
The original authority levied duty on goods manufactured and used for repairs and reconditioning. The Tribunal decided this issue in favor of the assessee, and this decision was not contested in the current appeal.

Issue 5: Confiscation of Seized Currency
The original authority confiscated Rs. 1.23 Crore seized from MM/MMPL's premises, deeming it proceeds from unaccounted goods cleared clandestinely. The Tribunal remanded this issue for fresh adjudication. This issue was not part of the current appeal.

Issue 6: Penalty
The original authority imposed penalties on MM, MMPL, and individuals involved. The Tribunal set aside the penalties, and this decision was not contested in the present appeal.

Conclusion:
The High Court primarily addressed Issue 1, finding that the Tribunal failed to consider relevant documents and testimonies indicating mutual interest and common business operations between MM and MMPL. The High Court quashed the Tribunal's decision on this issue and remitted it for fresh adjudication. Other issues decided by the Tribunal were not contested in the current appeal, and thus those decisions stand. The High Court directed the appellate authority to decide the appeal within six months.

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