2022 (10) TMI 93 - AT - Central Excise

Levy of penalty - Applicability of ration of decision made in the case of co-noticee - SSI Exemption - Clubbing of clearances - dummy units - Split Air conditioners - all such different entities are being owned by same person or not - documents which were obtained fraudulently by suppressing the facts or not - Confiscation - HELD THAT - The Appellant 2 and Appellant 3 admitted to their role in the alleged activities for evading the central excise duty they also admitted the fact that they were collecting the duty @ 30 % on the value of goods supplied to their Customers as Central Excise Duty as per the contract, but were not paying the same to government account. Hence, there are no hesitation in holding that the both Shri Shrikant Shiwadkar and Shri Jayant Shiwadkar were in complete knowledge of the things in relation to clearance of these goods without payment of duty. These goods which have been cleared without payment of duty are liable for confiscation and hence penalties under Rule 2009A is justifiable and cannot be faulted with. It is also not in dispute that the no appeal against this order dated 09.01.2002 was filed by the revenue and other co-noticee in the show cause notice i.e. Shri Jayant Shirwadkar and Mrs H S Shirwadkar. In result the proceedings against these two co-noticees have become final and cannot be reopened by the Commissioner in de-novo proceedings as per the order of tribunal remanding the matter back to original authority in the appeals filed by M/s UCSSPL and Shri Shrikant Shirwadkar. Also in absence of the appeal by revenue against this order the order has acquired finality and Commissioner cannot have passed any order beyond the order passed by his predecessor. In view of this fact, the Commissioner order imposing penalty on Shri Jayant Shirwadkar cannot be sustained and the penalty imposed on Shri Shrikant Shirwadkar cannot be in excess of the penalty imposed by this order. Appeal filed by the Appellant 1 against the imposition of penalty under Rule 173 Q (1) is partly allowed to the extent of restricting the penalty imposed under this Rule to Rs 1,80,000/- - Appeal filed by Shri Jayant Shirwadkar (Appellant 2) against the penalty imposed by the Commissioner in this remand proceedings needs to be allowed - the appeal filed by Shri Shrikant Shirwadkar (Appellant 3) against penalty imposed under Rule 209A also is allowed partly restricting the penalty imposed under Rule 209A on him to Rs 50,000/-. Appeal by the Appellant 1 is partly allowed modifying the impugned order to the extent of reducing the penalty imposed under Rule 173 Q (1) to Rs 1,80,000/- and setting aside the impugned order to the extent it relates to confiscation of land, building, plant machinery, material or other belonging of M/s UCSSPL used in connection with the production, storage, removal or disposal of the goods - appeal allowed in part.

Issues Involved:
1. Demand of Central Excise Duty.
2. Clubbing of clearances.
3. Imposition of penalties.
4. Confiscation of property.
5. Non-issuance of Show Cause Notice to alleged dummy units.
6. Classification of goods.
7. Applicability of extended period of limitation.
8. Validity of penalties under Rule 173Q and Rule 209A.

Detailed Analysis:

1. Demand of Central Excise Duty:
The Commissioner confirmed and demanded Central Excise Duty of Rs. 18,00,000/- on clearances made by M/s Shrikant Refrigeration Company and M/s Excel Technology, ordering recovery from M/s Ultramatix Computer Support Systems Pvt. Ltd. under Sec.11A of the Central Excise Act, 1944. The demand of Rs. 18,44,400/- was not confirmed.

2. Clubbing of Clearances:
The Commissioner concluded that M/s Shrikant Refrigeration Co. (SRC) and M/s Excel Technology (ET) were dummy units floated by the assessee to avail inadmissible exemptions under Notification No. 75/87. It was determined that all three units had common machinery, labor force, and manufacturing premises. Consequently, clearances of these units were clubbed together, and a demand of Rs. 19,35,000/- was proposed.

3. Imposition of Penalties:
Penalties were imposed under Rule 173Q of the Central Excise Rules on M/s Ultramatix Computer Support System Pvt. Ltd. (Rs. 2,00,000/-), Rule 209A on Shri Shrikant Shirwadkar (Rs. 1,00,000/-), and Shri Jayant Shirwadkar (Rs. 50,000/-). The penalties were based on the findings that the dummy units were created to evade duty and that there was misclassification of goods.

4. Confiscation of Property:
The Commissioner ordered the confiscation of land, building, plant, machinery, and materials belonging to M/s Ultramatix Computer Support System Pvt. Ltd. under Rule 173Q(1) of the Central Excise Rules. However, an option of redemption fine of Rs. 10,00,000/- in lieu of confiscation was provided.

5. Non-issuance of Show Cause Notice to Alleged Dummy Units:
The appellants argued that no Show Cause Notice was issued to SRC and ET, which vitiated the entire proceeding. However, the tribunal held that issuance of notice to the partners of these firms sufficed, as per the Partnership Act, 1932, and the Supreme Court's ruling in Madhu @ C.V. Maadhesh case.

6. Classification of Goods:
The Commissioner held that the goods claimed as parts of air conditioners were actually complete air conditioners cleared in CKD/SKD condition. The classification lists for SRC and ET were finalized in 2011, denying the benefit of Notification No. 75/87. The tribunal upheld this classification based on Rule 2(a) of the General Rules for Interpretation of the Central Excise Tariff Act, 1985.

7. Applicability of Extended Period of Limitation:
The extended period of limitation was invoked on the grounds of suppression of facts. The tribunal upheld this, citing the Supreme Court's decision in the Box & Carton India Pvt. Ltd. case, which allowed for the extended period in cases of suppression.

8. Validity of Penalties under Rule 173Q and Rule 209A:
The tribunal noted that Rule 173Q(2) was omitted w.e.f. 12/5/2000, and any order passed thereafter invoking this rule for confiscation was not sustainable, following the Supreme Court's decision in Punjab National Bank. However, penalties under Rule 173Q(1) and Rule 209A were upheld, as these rules continued under the Central Excise Rules, 2001, and 2002.

Conclusion:
The appeals were partially allowed. The penalty on M/s Ultramatix under Rule 173Q(1) was reduced to Rs. 1,80,000/-, and the confiscation order under Rule 173Q(2) was set aside. The penalty on Shri Jayant Shirwadkar was set aside, and the penalty on Shri Shrikant Shirwadkar under Rule 209A was reduced to Rs. 50,000/-.

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