CEAC 6/2013 Page 1 of 30

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IN THE HIGH COURT OF DELHI AT NEW DELHI

5.

+

CEAC 6/2013

FLEVEL INTERNATIONAL

..... Petitioner

Through: Mr C. Hari Shanker, Senior Advocate

with Mr Rajesh Mahna and Mr Ruchir Bhatia,

Advocates.

versus

COMMISSIONER OF CENTRAL EXCISE

..... Respondent

Through: Mr Satish Kumar, Senior Standing

Counsel.

CORAM:

HON'BLE DR. JUSTICE S.MURALIDHAR

HON'BLE MR. JUSTICE VIBHU BAKHRU

O R D E R

%

17.09.2015

Dr. S. Muralidhar, J.

1. This appeal under Section 35G of the Central Excise Act, 1944 ('CE Act')

is directed against an order dated 22^nd November, 2012 passed by the

Customs Excise Service Tax Appellate Tribunal („CESTAT‟) by the

majority of 2:1.

2. By the order dated 22^nd July, 2014 while admitting this appeal, the

following substantial question of law was framed by this Court:

“Whether the decision of the Customs, Excise and

Service Tax Appellate Tribunal upholding demand of

Rs.58,54,825/- and confiscation of 24 air-conditioners

CEAC 6/2013 Page 2 of 30

along with duty and penalty demand of Rs.3,16,800/- is

perverse and contrary to the facts on record?”

Background facts

3. The Appellant, a proprietory concern of which Mrs. Neera Khanna is the

sole Proprietrix, was engaged in the manufacturing of air-conditioners. The

Appellant is also stated to be engaged in the trading of compressors, water

coolers, transformers etc. It was a small scale unit and registered as such

with the Central Excise Department. It was exempted from payment of

excise duty on that basis.

4. On 28^th February, 1992, the officers of the Central Excise Department

(hereafter 'Department') visited the factory premises of the Appellant. They

found 36 air-conditioners (ACs) valued at Rs.7,92,000/-, 281 compressors

valued at Rs.47,77,000/-, 4 deep freezers valued collectively at Rs.41,500/-

and 4 fan motors collectively valued at Rs,1,600/-.

5. On the same day, the officers of the Department visited the residence of

Mr. Pradeep Khanna, the husband of Mrs. Neera Khanna. He was the

Proprietor of M/s Thermoking. The officers seized 24 ACs from the

residence of Mr. Khanna.

6. According to the Appellant, immediately thereafter she appeared before

the officers of the Department, produced the RG-1 Register and claimed that

36 ACs were duly accounted for therein. The Appellant states that on that

very date the 36 ACs, 4 fan motors and 24 ACs seized were released

CEAC 6/2013 Page 3 of 30

provisionally on 13th April 1992, after the Appellant furnished a bond and

bank guarantee.

The show cause notice

7. During the investigation statements were recorded by the officers of the

Department of some of the persons who purportedly purchased ACs from

the Appellant as well of the representatives of M/s. Sri Ram Refrigeration,

Hyderabad ('SRR') and M/s. Kirloskar Brothers Ltd., Pune ('KBL'). The

Department served the Appellant with a Show Cause Notice (SCN) dated

27^th August, 1992 calling upon the Appellant to show cause why:

(a)

36 ACs valued at Rs.7,92,000/-, 4 deep freezers

valued at Rs.41,500/- and four fan motors valued at

Rs.1,600/- seized from their factory premises

should not be confiscated under the provisions of

Rule 173Q and 226 of Central Excise Rules, 1944

(CE Rules).

(b)

Central excise duty amounting to Rs.3,16,800/- on

24 ACs cleared by them on 27th February 1992

without payment of central excise duty should not

be demanded and recovered from the under

provisions of Rule 9 (2) read with Section 11A of

CE Act.

(c)

Duty leviable on ACs amounting to Rs.58,44825/-