2015 (10) TMI 1128 - AT - Central Excise

Duty demand - Imposition of penalty under Rule 9(2) read with Rule 173Q - Clubbing of clearances - Held that - There was no material on record to suggest that fictitious units were in reality manufacturers. Those were neither registered with the Excise Authorities nor machinery were installed by them to carry out manufacture. There is no evidence of any purchase of raw material, consumable or packing material nor payment of electricity charges to prove manufacture was made. There was also no muster roll of the workers engaged. No registration under the PF Act or ESI Act was made to disclose identity of workers. Therefore, appellant failed to contradict allegations of Revenue in absence of credible evidence led by it. Accordingly, Revenue succeeds on the allegation of creation of fictitious units by the appellant and clubbing sustains. Clubbing of fictitious units by the appellant and clubbing sustains. Clubbing is accordingly confirmed and adjudication on this score sustains with levy of duty in adjudication untouched by this order subject to recomputation due to valuation defect caused by Revenue. There was no allegation as to under-valuation in the show-cause notice. There is also no evidence on record from Revenue to prove that there was under-valuation of the clearances made. Therefore, adjudication on such count of arbitrary valuation fails and value disclosed by appellant shall be followed to recompute duty liability of appellant on clubbing all four clearances. - Decided partly in favour of assessee.

Summary

Issues:
1. Clubbing of clearances with fictitious units
2. Valuation of goods
3. Penalty imposition

Clubbing of clearances with fictitious units:
The appellant was accused of clubbing clearances made by its manufacturing unit with three fictitious units, leading to duty demand and penalties. The appellant argued that the alleged fictitious concerns were genuine and existing, supported by confirmation from municipal authorities. However, the tribunal found no evidence of these units being actual manufacturers, lacking registration, machinery, raw material purchases, worker records, or statutory registrations. Consequently, the clubbing of clearances was upheld, with the duty levy sustained subject to revaluation due to a defect caused by Revenue.

Valuation of goods:
The show-cause notice did not allege under-valuation of clearances, and no evidence was presented to prove such under-valuation. The tribunal ruled that the adjudication based on arbitrary valuation failed, and the value declared by the appellant was to be used for re-computing the duty liability on all four clearances.

Penalty imposition:
Regarding penalties, the appellant's argument that the imposed penalty was unwarranted under Rule 9(2) was not accepted. The tribunal held that upon redetermination of the duty element using the appellant's declared values, penalties to the extent of the evaded duty were deemed justifiable. Consequently, the appeal was allowed in part, with the decision favoring the Revenue on the clubbing issue, while the valuation and penalty aspects were adjusted in favor of the appellant.