2026-VIL-1811-CESTAT-ALH-CE
  1. Home
  2. 2026-VIL-1811-CESTAT-ALH-CE

CENTRAL EXCISE CESTAT Cases

Central Excise - Abatement of appeal of corporate debtor on approval of resolution plan by the National Company Law Tribunal - Appellant company, which was held to be the real manufacturer of fabrics processed in the leased process-house and was saddled with duty, interest and penalty on the basis of SCN, had its resolution plan approved by the NCLT, which took note of the confirmed demands and provided for payment of a specified sum towards Government dues - Appellant contended that all proceedings stand settled in terms of the resolution plan and the appeal should abate under Rule 22 of the CESTAT Procedure Rules, 1982 - Whether the appeal of the corporate debtor abates in view of the approved resolution plan - HELD - The NCLT order approving the resolution plan was passed after taking note of the confirmed demands along with interest and penalties, and the Hon'ble Supreme Court has held that claims not forming part of the approved resolution plan stand extinguished - In view of the approval order read with the decisions of the Hon'ble Supreme Court, the appeal is to be abated under Rule 22 of the CESTAT Procedure Rules, 1982 - The appeal filed by the corporate debtor is abated - Liability to pay duty of lessee company held not to be the manufacturer under Section 2(f) of the Central Excise Act, 1944 - Appellant, the lessee company which took over the process-house on lease from a related company, cleared processed fabrics on payment of duty after claiming deductions in the price declarations, and SCNs were issued demanding differential duty - The impugned order held that the lessor company was the manufacturer and the lease arrangement was a colourable device, and also held that the Appellant did not hold the position of a manufacturer and revoked its registration, whereas the demand was nevertheless confirmed against the Appellant - Appellant contended that once it is held not to be the manufacturer under Section 2(f), the demand against it is bad in law - Whether duty can be demanded from the Appellant who is held not to be the manufacturer - HELD - Though the incidence of duty arises on activities covered by the definition of manufacture, the duty is determined and payable at the time of clearance, and the statutory scheme distinguishes between the person who manufactures the goods and the person legally bound to pay duty upon clearance. Section 3 of the Act charges duty on goods manufactured, but the responsibility of payment is placed on the person who removes or clears the goods, and the Hon'ble Supreme Court has held that the taxable event is manufacture while the liability to pay duty is postponed till removal. Any person who presents the goods for clearance from the premises assumes the obligation to pay duty. The impugned order does not hold that the Appellant was not liable to pay duty on the goods cleared by it, and the Appellant cannot dispute this position since it cleared the goods on payment of duty by issuing invoices - The contention of the Appellant is rejected and the liability to pay duty on goods cleared by it is upheld - Admissibility of deductions towards grading expenses, cartage, handling charges, brokerage and interest on stock in determining assessable value under erstwhile Section 4 of the Central Excise Act, 1944 - Appellant claimed these deductions as post-clearance expenses in the price declarations, and the adjudicating authority allowed only the deduction towards value loss and denied the rest - Appellant contended that the expenses relate to activities after clearance and relied on decisions concerning packing and repacking and valuation on the basis of comparable goods - Whether the deductions claimed are admissible while arriving at the assessable value - HELD - The sale transaction between the lessee company and the lessor company was held by the adjudicating authority to be a colourable device, so that the goods entered the course of wholesale trade only when they were finally cleared to independent buyers. Expenses incurred up to the stage when goods enter the stream of wholesale trade, even if incurred after manufacture, are includible in the assessable value, as held by the Hon'ble Supreme Court in the decisions on storage charges, handling expenses and interest on stocks carried after clearance. The decision relied upon by the Appellant dealt with packing and repacking and the other decision determined value on the basis of comparable goods and not on the expenses claimed as deductions, so that both are distinguishable. The reasons recorded in the impugned order for allowing value loss and denying the other deductions are in agreement with the settled law - The demand of differential duty along with interest in respect of the SCNs is upheld - Liability of person taking over premises along with stock of processed fabrics to pay duty and imposition of penalty under Section 11AC - Appellant took over the process-house along with stock of processed fabrics from the lessee company and cleared the same for home consumption, and SCN demanded short paid duty with penalty - Appellant contended that it is not the manufacturer of the goods taken over - Whether the Appellant is liable to pay duty on the stock cleared by it and whether penalty under Section 11AC is imposable on the lessee company and on the Appellant - HELD - The observations that the duty is payable by the person who clears the goods apply equally to the clearances effected by the Appellant of the stock taken over along with the premises, so that the demand of duty with interest is upheld. In respect of the SCNs against the lessee company, the demand was made within the normal period of limitation and the impugned order recorded no finding that the Appellant was responsible for any of the acts specified in Section 11AC with intent to evade duty. Mere claim of deductions which as per Revenue were inadmissible cannot justify penalty, following the decision of the Hon'ble Supreme Court - The demand of duty with interest is upheld, while penalty under Section 11AC imposed in respect of these SCNs is not sustainable and is set aside - Penalty under erstwhile Rule 209A of the Central Excise Rules, 1944 on directors and officers in the absence of finding of confiscation - Penalty was imposed under Rule 209A on the Appellants who were directors, managing director, general managers and proprietors connected with the companies, in proceedings where the manufacturing company had been held liable to pay duty, interest and penalty - Appellants contended that penalty under Rule 209A requires that the excisable goods be held liable to confiscation and no such finding existed - Whether penalty under Rule 209A is sustainable against the Appellants - HELD - The proceedings against the manufacturing company stand abated, and the prerequisite for penalty under Rule 209A is that the person should be found guilty of the acts of omission and commission specified in the Rule in respect of excisable goods held liable for confiscation, which was not satisfied. However, each of the Appellants had played a part in the acts leading to evasion of a huge amount of duty, which is an undisputed fact - The penalty under Rule 209A is not sustainable, and a general penalty as prescribed by Rule 210 of the Central Excise Rules, 1944 is imposed upon each Appellant.
Download File

Quick Search

/

Advance Search

GST Resources

/

Gst Rate Finder

Tax Vista

Your Weekly Tax Recap

By Dr. G. Gokul Kishore

Weekly Summary

VIL Video

57th GST Council Decisions...
By CA Vivek Jalan

Create Account

Security-Code
New Code?

Log In

New User ? Forgot Password ?

Forgot Password

Security-Code
New Code?
Please Note: This facility is only for Subscribing Members.

Email this page

Security-Code
New Code?

Feedback this page

Schedule a Demo

Schedule a demo to know the features and advantages of VILGST portal. Get to know the tips to find the desired results in faster way.

Security-Code
New Code?

Caselaw Request Form (CRF)

Didn’t find what you are searching for? No worries, please give us the following details and VIL will email you the desired Caselaws at the earliest:

Security-Code
New Code?