2019 (12) TMI 849 - AT - Central Excise

Imposition of penalty u/r 26 (1) of Central Excise Rules, 2002 - Clandestine removal - supply of polyester metalizing on job work basis under the cover of Job work challan - alleged evasion of duty - benefit of N/N. 214/86-CE - HELD THAT - The Riva Exports Ltd. Wherein the present appellant is working as Accounts Manager has supplied the films for job work under the cover of job work challan. This is more than sufficient compliance for transaction of the goods. Since Riva Exports Ltd.is not a manufacturer and not registered under Central Excise there is no charge by the revenue that Rivaa Export Ltd. is required to be registered. The supply of goods for job work was admittedly made under challan is in order. Procedure of Notification 214/86-CE followed or not - HELD THAT - Since M/s. Rivaa Export Ltd. is not registered and it is also a fact that they have not filed undertaking as required under Notification 214/86-CE, there is no obligation on M/s. Rivaa Export Ltd. to follow any procedure of notification 214/86-CE. In such case the entire responsibility to discharge Excise Duty if any leviable, is on M/s. MGM Metalizers Ltd. as has been held by Larger Bench of this tribunal in the case of THERMAX BABCOCK AND WILCOX LTD., THERMAX LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-I 2017 (12) TMI 266 - CESTAT MUMBAI . Therefore, if there was any non-payment of duty by MGM neither M/s. Rivaa Export Ltd. nor its employee can be made responsible. The charge of abatement for evasion of duty by MGM has no basis against the present appellant. It is also observed that once M/s. MGM Metalizers Ltd. has discharged Service Tax there is no intention of evasion of duty. Even the department was aware the fact that MGM Metalizers are paying Service Tax on their activity which claimed by the department as manufacture. For this reason also no mala fide is proved against anyone. It can be concluded that penalty was wrongly imposed against the present appellant - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Imposition of penalty under Rule 26(1) of Central Excise Rules, 2002 on the appellant.
2. Allegation of abetment in evasion of duty by the appellant.
3. Compliance with Notification 214/86-CE by M/s. Rivaa Exports Ltd.
4. Liability for payment of Excise Duty on M/s. MGM Metalizers Ltd.

Analysis:
1. The appellant, who is the Manager Accounts of M/s. Rivaa Exports Ltd., was penalized under Rule 26(1) of the Central Excise Rules, 2002, due to the non-payment of excise duty by M/s. MGM Metalizers Ltd. for metalizing polyester PET films supplied by M/s. Rivaa Exports Ltd. The adjudicating authority imposed a penalty of ?10 Lakhs on the appellant for alleged abetment in the clearance of goods clandestinely. The appellant challenged this penalty through an appeal.

2. The appellant's counsel argued that the liability to pay excise duty lies with M/s. MGM Metalizers Ltd., not with M/s. Rivaa Exports Ltd. or the appellant. It was highlighted that the issue of whether metalizing films amounts to manufacture has been under litigation, with precedents suggesting that metalizing may not constitute manufacture. The counsel emphasized that M/s. MGM Metalizers Ltd. paid Service Tax following a Supreme Court judgment, indicating their bona fide intent. Therefore, the penalty imposed on the appellant was deemed incorrect and illegal.

3. The revenue representative contended that the appellant abetted in the evasion of duty by M/s. MGM Metalizers Ltd., justifying the penalty. However, the tribunal found that M/s. Rivaa Exports Ltd. had complied with the necessary procedures for supplying goods for job work under a challan. Since M/s. Rivaa Exports Ltd. was not a manufacturer registered under Central Excise, the responsibility to discharge excise duty, if applicable, rested with M/s. MGM Metalizers Ltd. The tribunal cited a previous ruling that affirmed this principle, absolving M/s. Rivaa Exports Ltd. and its employee from liability for duty non-payment by M/s. MGM Metalizers Ltd.

4. Considering the absence of mala fide intent and the payment of Service Tax by M/s. MGM Metalizers Ltd., the tribunal concluded that the charge of abetment against the appellant lacked a basis. The tribunal noted that the department was aware of M/s. MGM Metalizers Ltd.'s tax payments, indicating no intention of duty evasion. Consequently, the penalty imposed on the appellant was deemed unwarranted, leading to the tribunal setting it aside and allowing the appeal with any consequential relief as per the law.