1998 (1) TMI 261 - AT - Central Excise

Summary

Issues:
- Duty demand for the years 1984-85, 1985-86, and 1986-87
- Imposition of penalties on the firm and partners under Rule 173Q

Analysis:

Duty Demand:
The appeal was filed against the orders passed by the Collector, demanding a duty of Rs. 5,74,044.14 from the appellant company, M/s Aarem Chemicals, along with penalties imposed on the firm and its partners. The appellant did not contest the duty demand for the years 1984-85 and 1986-87 but raised concerns regarding the duty demand for 1985-86. The appellant argued that the department had quantified the invoice value of clearances through M/s. Devi Agencies, leading to a doubling of the invoice value due to the goods being supplied by M/s. Aarem Chemicals to M/s. Devi Agencies and then sold back to M/s. Aarem Chemicals. The appellant contended that the duty demand needed to be reduced based on these circumstances and the lack of evidence of manufacturing activity by M/s. Devi Agencies.

The department justified the duty calculation based on the clearances by M/s. Devi Agencies, which were floated by M/s. Aarem Chemicals. The adjudicating authority held that unless it was shown that M/s. Devi Agencies had an alternative source of supply for the goods, their clearances would be considered part of the value of clearances of M/s. Aarem Chemicals. However, the Tribunal disagreed with this approach and remanded the matter for the correct quantification of duty, suggesting a reduction in the duty demand by the value of goods supplied by M/s. Devi Agencies.

Imposition of Penalties:
Regarding the imposition of penalties under Rule 173Q, the appellant argued that the penalty on the partners was not warranted as per the facts and circumstances of the case. The appellant highlighted that the show cause notice mentioned liability under Rule 173Q but did not specify the provision under which the partners were penalized. The department contended that each partner could be penalized under Rule 173Q, emphasizing the wording of the rule.

The Tribunal considered the arguments from both sides and upheld the penalty of Rs. 1 lakh imposed on the firm. However, it set aside the penalties imposed on the individual partners, S/Shri Sri Ram, Rathnasamy, and Malaikutty, stating that since the firm had already been penalized, no separate penalties needed to be imposed on the partners. Therefore, the penalties on the partners were revoked, while the penalty on the firm was confirmed.

In conclusion, the Tribunal disposed of the appeals by reducing the duty demand for the year 1985-86, confirming the penalty on the firm, and setting aside the penalties on the individual partners based on the arguments presented and the findings regarding the duty calculation and penalty imposition.