Customs, Excise and Gold Tribunal - Delhi
Sheffield Appliances, Polar ... vs Cce on 5 March, 2003
Equivalent citations: 2003(87)ECC620, 2003(154)ELT625(TRI-DEL)
JUDGMENT C.N.B. Nair, Member (T)
1. These appeals are directed against a common order. Accordingly, they were taken up for hearing together and are disposed of under this common order.
2. The appellants Polar Fan Industries Ltd., Polar Industries Ltd. and Sheffield Appliances are manufacturers of fan. Their entire production is sold to Polar International Ltd., who in turn sells the fans to dealers. All these appellants are Public Limited Companies. The remaining appellants are Officers of these Limited Companies. The impugned order has held that the manufacturing companies and the marketing company are related persons and therefore, the assessable value for Central Excise duty purposes should be the sale price of the marketing company and not the sale price of the manufacturing company to the marketing companies Proviso (iii) to Section 4(1)(a) of the Central Excise Act. However, the assessees paid duty at the time of clearance, taking the sale price to the marketing company as the assessable value. The impugned order has, therefore, reassessed the goods, taking the sale price of the marketing company as the assessable value and has demanded differential duty from the manufacturing companies. Penalties equivalent to the duty evaded have also been imposed. Full details of duty demand, penalty etc. are available in the table below:
Appeal No. Name of the Appellant Date of SCN Period Duty (Rs.) Penalty (Rs.) Polar Fan Industries Ltd.
2.8.1999 July 1994-Feb.1999
1,75,40,439 1,75,40,439 Potar IndustriesLtd.
2.8.1999 July 1994-Feb.
19991,11,07,575 1,11,07,575 SheffieldAppliances 2.8.1999 1996-97 to Feb.
199949,31,402 49,31,402 Anil Agarwal & Ashok Kumar Tibrewala 2.8.1999 1,00,00,000 (Each) Sunil Aganval Hardeep Singh, M.L. Daga, B.P. Aganval S.K. Bardhan 2.8.1999 25,00,000 R.K. Dhanuka; R.K. Bose; K.S. Bhalla 2.8.1999 10,00,000
3. The appeals contest the duty demand an penalties both on merits as well as on the ground of limitation. It is their contention that most of the demand is time barred as the Show Cause Notice dt. 2.8.99 was issued well beyond the normal period for such notice provided in Section 11A of the Central Excise Act. They also submit that proviso to this Section, which permits of demand for five years, is not attracted as there was not wilful suppression or misstatement of facts, in order to justify duty demand beyond the normal period.
4. During the hearing of the case, learned Counsel took us through the records of earlier proceedings and pointed out that it was well known to the revenue authorities that appellant manufacturers were selling their fans through the group marketing Co. He referred to the earlier Show Cause Notice dated 25.8.1994 issued by the Meerut Collectorate against the appellants alleging that the appellant manufacturers and the marketing company were related persons. The Counsel pointed out that the proceedings so initiated led to the passing of Order-in-Original No. 01 X 02 Commr./97 dated 16.1.97 holding that the sale price of the manufacturing companies to the marketing company was required to be loaded at the rate equivalent to the cost of advertisement carried out by the marketing company to arrive at the correct assessable value. Learned Counsel pointed out that this order was set aside by the Tribunal, vide Final Order No. 725/99-A dated 26.5.1999. It is the submission of the learned Counsel that once facts about the marketing arrangement were known to the Central Excise authorities as early as 1994, it was not open to the authorities to subsequently allege that the short levy, if there be any, is the result of suppression of facts. The learned Counsel also pointed out that the facts about the previous proceedings were known to the Commissioner who adjudicated the case but the Commissioner still, quite erroneously, held that Proviso to Section 11A was attracted. He referred to the following observations in the impugned order:
"With reference to their submission that the points relating to advertisement expenses incurred by PNL is not res integra in view of the earlier proceedings involving this issue, I find that in the earlier proceedings this point was examined in isolation. Naturally, it resulted into the proverbial vision of an elephant as rope, pillar, pipe instead of tail, legs and shout of the elephant. Hence reference to the said proceedings cannot be considered as relevant since such order(s) were sub silentio on the major factual points, which have been brought out in these proceedings, but were not before the L'd Authorities for their kind perusal and examination."
5. The learned Counsel has also submitted that the appellants have a strong case on merits, inasmuch as, the transaction between the manufacturing companies and the marketing company was a purely commercial relationship. He submitted that this position would be clear when the marketing company's sale price (after making necessary deductions towards freight, taxes, cash discount and transit insurance) is compared with the purchase price from the manufacturing Cos. The learned Counsel pointed out that all these elements are eligible deductions and the profit after deductions was very small. All the same, he submitted that since most of the demand is time barred, the assessee would not like to press the issue on merits and would comply with the duty demand which related to the short period which fell within the normal time limit under main Section 11A, He, however, pleaded that while working out the duty demand for this period on the basis of the sale price of the Polar International Limited (the marketing company), due deductions be allowed towards freight, taxes, cash discount and transit insurance.
6. We have perused the records and have heard the learned SDR also. It is clear that Revenue Authorities were aware of the marketing pattern of the appellant companies. A show cause notice taking almost the same ground as raised in the present proceedings was issued by the Meerut Collectorate as early as 1994. The thrust of the allegations in that Show-Cause-Notice was also that the manufacturing companies and the marketing company were related persons and that the sale price to the related marketing company cannot constitute the correct assessable value. These proceedings culminated in the passing of this Tribunal's Order No. 725/99-A dated 26.5.99. Therefore, the allegation of suppression of facts with intent to evade payment of duty is not maintainable for a subsequent period. This position was known to the learned Commissioner who passed the impugned order also. However, he has proceeded to pass the impugned order on the ground that "in the earlier proceedings this point was examined in isolation and that it resulted in the "proverbial vision of an elephant". Such a finding cannot constitute the basis for re-opening the proceedings in terms of Proviso to Section 11A. Despite knowledge of the facts, if revenue took a blinkered view, the assessee cannot be blamed for it. Admittedly, bulk of the demand is beyond the permissible time limit. In these facts and circumstances, the demand made for the extended period has to fail at the threshold on the ground of limitation, We are not going into the merits of the case, as the assessees do not consider this an appropriate case to press their submissions on merits. They are rights in their submission that even the demand within the normal time limit is required to be re-computed after making due allowance for freight, taxes, such discount and transit insurance from the sale price of M/s. Polar International Limited.
7. In view of our findings above, the appeals are ordered as under:
1. All duty demands beyond the normal period under Section 11A are set aside.
2. All penalties under the impugned order are quashed in view of the setting aside of duty demands beyond the normal period.
3. Commissioner shall re-compute the duty demand which falls within the normal period and the appellant manufacturers shall honour those demands. Duty amounts shall be re-computed based on the sale price of Polar International Limited after deducting costs attributable to freight, taxes, cash discount and transit insurance.