M/S. Sudha Engineering Works vs Commissioner Of Central Excise, ...

[Arising out of Order-in-Appeal No. 07/2010 (H-IV) CE dated 28/01/2010 passed by the Commissioner of Customs, Central Excise and Service Tax (Appeals-II), Hyderabad.]

For approval and signature:

HON'BLE SMT. ARCHANA WADHWA, JUDICIAL MEMBER

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3 Whether Their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes

M/s. SUDHA ENGINEERING WORKS F1,/A, IDA, KUKATPALLY, GANDHINAGAR, HYDERABAD-37. Appellant(s)

Versus

Commissioner of Central Excise, Customs and Service Tax HYDERABAD-II L.B STADIUM ROAD, BASHEERBAGH, HYDERABAD  500 004. ANDHRA PRADESH Respondent(s)

Appearance:

Mr. T. JAGAPATHI RAO, CONSULTANT CUSTOMS AND CENTRAL EXCIS E, 91/2, RT, VIJAYANAGAR COLONY, HYDERABAD  500057. AP For the Appellant

Mr. Mohd. Yusuf, Addl. Com. (AR) For the Respondent

Date of Hearing: 20/02/2015

Date of Decision: 20/02/2015

CORAM:

HON'BLE SMT. ARCHANA WADHWA, JUDICIAL MEMBER

Final Order No. 21212 / 2015

Per : ARCHANA WADHWA

The brief facts of the subject matter are that the appellants are manufacturers of motor vehicle parts falling under Chapter 87 of the Central Excise Tariff and were clearing goods on payment of duty @ 9.6% availing the benefit of Notification NO.9/2003 dated 1.3.2003. They cleared goods worth Rs.25,40,748/- and discharged appropriate duty during the period April 2003 to June 2003. Due to the sudden demise of Sri M. Sudhakar, the proprietor of the unit in May 2003, the appellants vide letter dated 19.5.2003 informed the department that Smt. M. Kalpana, wife of the deceased proprietor being the legal heir had taken over the charge of the proprietor. The appellants continued the activity of manufacture and clearance of goods and also filed the ER1 returns for the months of May 2003 to June 2003. Subsequently, vide letter dated 1.7.2003 the appellants surrendered the Central Excise registration certificate on the ground that the unit was closed down and stopped filing ER1 returns. On 30.3.2004, the appellants once again applied for and obtained Central Excise registration in the same name. During the audit of the unit conducted in June 2006, it was noticed that from 1.7.2003 onwards the appellants continued manufacturing in the same premises for the same customers in the same name and style i.e., M/s. Sudha Eng. Works and cleared goods without payment of duty. The value of goods so cleared during the period July 2003 to May 2004 worked out to Rs.87,64,673/-. It was also noticed that the appellants at the time of closure of the unit had duty paid inputs lying in the stock valued at Rs.1,89,250/- which were carried forward and utilized in the manufacture of their finished goods. Hence, a demand notice was issued to the appellants demanding duty of Rs.9,24,955/- under the proviso to Section 11A(1) of Central Excise Act, 1944 for the period July 2003 to March 2004 along with interest and proposing penalty. Vide the impugned order, the lower authority confirmed the demand along with interest and appropriated the amounts paid by the appellants towards the demand. Penalties of Rs.9,24,955/- under Section 11AC of the Central Excise Act and Rs.25,000/- under Rule 25 of the Central Excise Rules, 2002 were also imposed. The said order of the original adjudicating order was to be challenged before Commissioner (A), he upheld the same.

Hence the present appeal.

2. Learned advocate appearing for the appellant makes it clear that the appellant is not challenging the duty confirmation or confirmation of interest and only challenge is for imposition of penalty upon the appellant. He submits that the earlier manufacturer under the name and style of M/s. Sudha Engineering was a proprietary concern and with the death of the proprietor, the same ceased to exist. The appellant was under a bona fide belief that the new manufacturing unit, though under the same name and style was a new unit with Mrs. Kalpana being the proprietrix of the same and as such was independently entitled to Notification No.8/2003-CE dated 1.3.2003. The plea of limitation also stands raised.

3. The sole issue required to be decided is whether the appellant is liable to penalty for clearance of goods during the period July 2003 to March 2004, without payment of duty. The appellants are not challenging the duty element but submit that as they were under a bona fide belief that with the death of proprietor of the unit, the manufacturing unit had stopped working, they cleared the goods without payment of duty. It is also their stand that they did not avail any benefit of CENVAT credit or duty paid on the inputs and used in the manufacture of such exempted goods. I find that inasmuch as all the goods were cleared on paper transactions and all the documents were maintained by the appellant, no malafide can be attributed to them. There could be a bona fide belief on their part that the new unit with a new proprietrix is entitled to fresh exemption. As such I do not consider this to be a case of malafide intention and by extending the benefit of doubt to the appellant, set aside the imposition of penalty upon them. Duty and interest is confirmed as not challenged.

(Operative portion of the order was pronounced in open court on 20.2.2015.)

ARCHANA WADHWA JUDICIAL MEMBER rv 4