2013 (11) TMI 986 - AT - Central Excise

Under-declaration of Assessable value of processed fabric Job Work - Held that - The under-declaration was on account of wrong declaration given by the merchant manufacturer and not the appellant - This matter relates to the period when the system of filing of price list and getting its approval was still in vogue and the impugned duty payments were made against approved price lists - suppression on the part of the first appellant cannot be held to be proved in this case - the proposal to deny Modvat credit is not sustainable - So demand consequent to such denial is set aside - For the same reasoning the penalties imposed on the first appellant also are set aside. Since duty demand is not contested the same is confirmed. Penalty imposed upon second appellant Held that - It was the responsibility of the first appellant to give correct value - even in cases where fabrics were purchased and supplied there was under declaration of value - For giving correct information of value at which goods were purchased no great understanding of law or costing is needed - The argument raised regarding wastages also is not properly explained and not understood - when the matter was pointed out during investigation, the second appellant immediately paid differential duty demonstrating that the second appellant was aware of the mis-declaration there was no reason to interfere with the penalty imposed on the second appellant. The appeal filed by second appellant is rejected Decided partly in favour of Assessee.

Summary

Issues:
1. Under-declaration of value of processed fabrics leading to incorrect excise duty payment.
2. Denial of deemed Modvat credit under notification 29/96-CE(NT).
3. Imposition of penalties under various rules.
4. Appeal against penalties imposed on the second appellant.

Issue 1: Under-declaration of value of processed fabrics:
The appellant was engaged in processing fabrics supplied by merchant manufacturers, who authorized the appellant to pay excise duty as per Notification 27/92-CE (NT). Revenue found under-declaration of prices of grey fabrics received from merchant manufacturers, resulting in incorrect assessable value of processed fabrics and excise duty payment. The Commissioner (Appeal) upheld the demand for differential duty and imposed penalties under various rules. The appellant contested penalties and denial of deemed Modvat credit, arguing that they paid duty based on approved price lists and there was no suppression of information. The Tribunal noted evidence of under-declaration but found no clear knowledge on the part of the appellant. The differential duty was confirmed, but denial of Modvat credit and penalties were set aside.

Issue 2: Denial of deemed Modvat credit under notification 29/96-CE(NT):
The Revenue denied Modvat credit of Rs.12,80,328/- to the appellant due to alleged suppression of value of processed fabrics. The appellant argued that they followed approved price lists and there was no intent to evade duty. The Tribunal found that suppression on the part of the appellant was not proved, setting aside the denial of Modvat credit and corresponding penalties.

Issue 3: Imposition of penalties under various rules:
Penalties were imposed on both appellants under different rules for under-declaration of fabric values. The first appellant's penalties were contested based on lack of suppression, collusion, or fraud. The Tribunal set aside the penalties on the first appellant due to insufficient evidence of suppression. However, the penalty imposed on the second appellant was upheld as they were found aware of mis-declaration, demonstrated by immediate payment of differential duty during investigation.

Issue 4: Appeal against penalties imposed on the second appellant:
The second appellant contested penalties, claiming ignorance of Central Excise laws and arguing that the mis-declaration was due to lack of understanding rather than an attempt to evade duties. The Tribunal rejected the appeal of the second appellant, noting their awareness of mis-declaration and immediate payment of differential duty upon discovery.

In conclusion, the Tribunal partially allowed the appeal of the first appellant, setting aside the denial of Modvat credit and penalties, while rejecting the appeal of the second appellant, upholding the penalties imposed.