1998 (7) TMI 283 - AT - Central Excise

Summary

Issues Involved:
1. Floating of dummy units and clearing goods in the name of dummy units.
2. Under valuation of mannequins.
3. Clandestine clearance of mannequins.
4. Clubbing of clearances.
5. Imposition of penalties and fines.

Detailed Analysis:

1. Floating of Dummy Units:
The show cause notice alleged that a dummy unit by the name of Favourite Mannequin Company (FMC) was shown on paper and that part of the clearance of JMC was being billed as clearance of FMC to fraudulently avail the exemption under Notification 175/86. Evidence included statements from the owner of the premises, suppliers, and the use of JMC's address for FMC's correspondence. The Collector accepted the party's claim that FMC was a legitimate unit sublet by a tenant, supported by affidavits and rent receipts. The Board found this acceptance prima facie incorrect and noted that the department was not given an opportunity to cross-examine the alleged workers of FMC.

2. Under Valuation of Mannequins:
The allegation of undervaluation was based on various documents including order forms, price lists, statements of distributors and partners, and seized records. The Collector found that the intrinsic value of identical-looking mannequins could vary significantly and that JMC, being a small-scale unit, was exempt from filing price lists. The Collector held that the department must prove receipt of extra commercial considerations for each transaction. The Board disagreed, noting that voluminous evidence of additional considerations was ignored, and the affidavits submitted by the party were accepted without proper scrutiny.

3. Clandestine Clearance of Mannequins:
The show cause notice alleged that mannequins valued at Rs. 51,55,458/- were removed without payment of duty, based on various documents and statements. The Collector accepted the party's contentions regarding duplication of entries, non-dispatched goods, and returned/rejected goods without proper verification. The Board criticized the lack of detailed findings and verification, suggesting that the exclusion of certain values was incorrect. The Tribunal remanded this issue for re-verification and recalculation, noting the absence of detailed working sheets in the Collector's order.

4. Clubbing of Clearances:
The Collector found that FMC and JMC were independent units with separate SSI registration, ST registration, and IT assessment. The evidence included affidavits from workers and owners, and statements from suppliers. The Board upheld the Collector's finding, noting that the units were functioning independently without any flow back, and relied on the judgment in Alpha Toyo Ltd. v. CCE.

5. Imposition of Penalties and Fines:
The Collector imposed penalties on the respondents and certain individuals, while dropping proceedings against others. The Tribunal directed the Collector to re-determine the quantum of penalty if clandestine removals were found to be more than what was confirmed. The imposition of a fine of Rs. 20,000/- on Ram J. Harpalani and the confiscation of 79 mannequins were confirmed. The unconditional release of 105 mannequins and the dropping of proceedings against various persons were also upheld.

Conclusion:
The Tribunal confirmed the Collector's findings on under-valuation, clubbing of clearances, confiscation, and dropping of proceedings against various persons. However, it remanded the issue of clandestine removal and imposition of personal penalties for re-verification and recalculation. The appeal was disposed of with these directions.