PANKAJ KASTURI HERBALS INDIA LTD. Vs. CCE, THIRUVANANTHAPURAM

JUDGEMENT

(1.) ALL these appeals are directed against the Order -in -Appeal No. 9/2006 -C.E., dated 31 -1 -2006, passed by, the Commissioner of Central Excise (Appeals), Thiruvananthapuram. Since all these appeals are against the very same Order -in -Appeal, we dispose of the same by a common order.

(2.) THE relevant facts of the case are that the appellants, M/s. Pankaj Kasturi Herbals India Ltd. (hereinafter referred to as the appellant No. 1) were manufacturing Ayurvedic medicines falling under Chapter Heading 30.03 of the First Schedule to the Central Excise Tariff Act, 1985. Based on the intelligence inputs collected by the officers of the Directorate General of Central Excise Intelligence (DGCEI) that the appellants were evading Central Excise duty by resorting to gross undervaluation, adopting the modus of selling a major portion of their products to their dummy firms created by them, and also by resorting to clandestine clearance of the goods, the officers conducted search operations at various premises connected with the business of the appellant No. 1. During the search in office premises and other related/connected establishments, several documents were recovered. Detailed investigation were conducted and based upon the documents recovered, a Show Cause Notice was issued to the appellant for demand of duty amounting to Rs. 35,82,832/ - along with interest under Section 11AB of the Act; and equal penalty to the duty demanded was also sought to be imposed. The Show Cause Notice also directed to three individuals to show cause as to why penalty should not be imposed on them under Rule 209A of the erstwhile Central Excise Rules, 1944 and Rule 26 of the Central Excise Rules 2001/2002. The appellants contested the show cause notice before the Adjudicating authority and the Adjudicating authority after considering the submissions made by the appellants before him set aside the proceedings initiated in respect of clandestine removal, inclusion of transportation cost and some amount as ingredients of Section 4 is not applicable since the product is assessed based on MRP under Section 4A of the Act. The Adjudicating authority upheld the demand of Rs. 18,84,598/ - on the ground that the said demand is in respect of undervaluation of the goods cleared to their sister concerns/related persons and imposed equal amount of penalty under Section 11AC of the Act on the appellant No. 1; asked to pay interest at appropriate rate under Section 11AB of the Act; also imposed penalty of Rs. 25,000/ - each on the Chairman and Managing Director of the company and Rs. 20,000/ - on Finance Director under Rule 209A of the erstwhile Central Excise Rules, 1944 and Rule 26 of the Central Excise Rules, 2001/2002. Aggrieved over the said order, the appellants moved an appeal before the Commissioner (Appeals). The Commissioner (Appeals) after considering the written and oral submissions made by the appellants before him, came to the conclusion that there is a relationship between the appellant No. 1 and other dummy units created by them and hence, value of the goods cleared to the related persons has to be considered for discharge of duty liability. While arriving at such a conclusion, he upheld the Order -in -Original as regards the confirmation of duty demand and imposition of penalty in respect of the appellant No. 1. He also upheld the penalty imposed each on the Chairman and the Managing Director of the Company, but the penalty imposed on Finance Director from Rs. 20,000/ - to Rs. 5,000/ -. All the appellants filed appeal before the Tribunal against the said order.

(3.) THE learned Counsel appearing for the appellants submitted that the impugned order is incorrect for the following reasons : -