2018 (3) TMI 694 - HC - Central Excise

Whether the judgment and order of the Appellate Tribunal is perverse inasmuch as though a specific submission was made on the issue of Rule 25 of the Central Excise Rules, 2002 and on the issue of increase of penalty by the Adjudicating Authority by issuing a Corrigendum before the Appellate Tribunal, the same has not been dealt with by the Appellate Tribunal? Held that - In the Appeal before this Court, we do not have benefit of the reasons recorded on the said two contentions as the Appellate Tribunal has not dealt with the same. As observed earlier, this omission on the part of the Appellate Tribunal raises substantial questions of law. Due to non consideration of the aforesaid two contentions, the impugned judgment and order of the Appellate Tribunal is vitiated, and therefore, there is no option but to pass an order of remand confined to the aforesaid two contentions of law regarding penalty imposed without invoking specific clause under Rule 25 of the said Rules and the penalty being increased by the Adjudicating Authority by issuing a Corrigendum. Matter remanded to Appellate Tribunal.

Issues:
1. Liability of central excise duty on scrap generated during manufacture of exempted goods
2. Limitation of Showcause Notice invoking proviso to Sec.11A of the Central Excise Act
3. Justification of invoking proviso to Sec.11A when Department had prior knowledge
4. Confirmation of duty based on employee's statement
5. Classification of scrap and waste generated during manufacture

Analysis:

1. The Appellant, a Cooperative Society manufacturing sugar and molasses, generated scrap during the manufacturing process, which was cleared outside the factory without duty payment. The Department contended that the scrap was dutiable. The Adjudicating Authority confirmed a demand for duty, interest, and penalty under Rule 25 of the Central Excise Rules, 2002. The Commissioner (Appeals) upheld the demand and enhanced the penalty. The Appellate Tribunal noted submissions challenging the dutiability of the scrap and the penalty imposition process.

2. The Appellate Tribunal considered the submission that the demand was made after the limitation period, but found that the Appellant failed to provide information to the Department, justifying the extended period invocation. The Tribunal upheld the invocation of Section 11AC of the Central Excise Act due to the Appellant's failure to disclose information and clearing scrap without duty payment, constituting suppression of facts to evade duty.

3. The Tribunal, however, did not address two contentions raised by the Appellant regarding the penalty imposition process under Rule 25 of the Central Excise Rules, 2002, and the penalty increase by the Adjudicating Authority through a Corrigendum. The High Court found this omission as a substantial question of law, leading to the judgment being set aside and the case remanded to the Appellate Tribunal for fresh adjudication on these two issues.

4. The High Court directed the Appellate Tribunal to prioritize the disposal of the Appeal, emphasizing the need to address the outstanding issues related to penalty imposition and enhancement. The Court partially allowed the Appeal, highlighting the importance of considering all legal contentions raised by the parties involved in the case.

This detailed analysis of the judgment from the Bombay High Court highlights the complex legal issues surrounding the central excise duty on scrap generated during manufacturing and the procedural aspects of penalty imposition, providing a comprehensive overview of the case.

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