Custom, Excise & Service Tax Tribunal
M/S. Visteon Automotive Systems India ... vs Cce, Chennai on 15 October, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
E/236/2012
(Arising out of Order-in-Original No. 9/2004 dated 21.12.2004 passed by the Commissioner of Central Excise (Appeals) Chennai).
M/s. Visteon Automotive Systems India (P) Ltd.: Appellant
Vs.
CCE, Chennai : Respondent
Appearance Shri V. Panchanathan, Adv., for the Appellant Shri R. Subramanian, AC (AR) for the Respondent CORAM Honble Shri R. Periasami, Technical Member Honble Shri P. K. Choudhary, Judicial Member Date of Hearing: 15.10.2015 Date of Pronouncement:
FINAL ORDER No. 40049 / 2016 Per P. K. Choudhary The brief facts of the case are that the appellants are manufacturers of automobile components and air conditioner assembly and parts of air conditioners. There was a visit by the officers of the divisional preventive group on 09.03.2000 and 30.06.2000 and during the investigation it was ascertained that the appellant had received a sum of Rs. 43.35 crores from M/s Ford India Ltd towards tool cost for the procurement of specified tools intended exclusively for the manufacture and supply of auto components to M/s Ford India Ltd. The appellants had however while determining the assessable value of the goods manufactured and supplied to M/s Ford India Ltd had failed to include the amortised tooling cost to arrive at the assessable value for discharging the appropriate duty liability. The appellant had accepted their liability for duty and had made good the payments as per the chart below during the period of dispute from July 1999 to November 2000.
Sl.No. Date Payment Ref.
Amt. Paid 1 9.3.2000 RG 23A P II Sl. No. 13760 5,00,000 2 4.8.2000 PLA Sl.no. 89 32,80,000 3 3.11.2000 RG 23A P II Sl. No. 14382 27,93,135 4 8.12.2000 RG 23A P II Sl. No. 15684 9,20,013 Total Duty paid 74,93,148 The appellants were issued with a show cause notice No. 40/2004 dated 29.07.2004 wherein there was a demand for a sum of Rs. 74,79,864/- for the goods cleared to M/s Ford India Ltd from July 1999 to November 2000 besides seeking to appropriate the amount of duty already paid by them. The show cause also proposed a penalty U/s 11AC, Rule 173Q and proposed to levy interest U/s 11AB of the Central Excise Act, 1944. The appellant had filed the reply dated 28.10.2004 to the show cause notice explaining their stand as to why the demand was unsustainable and most importantly contended that it was a normal practice in the trade where the customers advanced money to vendors for initiating development of tooling. And the information on the pricing and tooling in the instant case was finalized only in September 2000 and hence the differential duty was payable only thereafter: that the entire facts where made known to the department during discussions and therefore, there is no suppression of facts and the extended period of demand is unsustainable.
2. The learned Counsel Shri V Panchanathan, Advocate appearing on behalf of the appellant company reiterated their grounds of appeal and had filed a synopsis along with case laws wherein it was contended that,
a) The issue of inclusion of amortization cost was decided by the Larger Bench of the tribunal. It is a settled law when the matter is referred to Larger Bench, no suppression can be alleged.
b) The show cause notice is badly delayed. Therefore, the demand is incorrect.
c) Without prejudice, any demand beyond 09.03.2000 is barred by limitation.
d) There was no suppression on the part of the Appellant.
e) The intention to evade cannot be alleged when the buyer is eligible for Cenvat credit.
3. The LD. A.R. Shri R Subramanian, AC appearing on behalf of the Revenue reiterated the findings in the impugned order and relied upon the following case laws:
a) Engineering Innovative Ltd v/s CCE Chandigarh 2004 (170) ELT 174
b) SURIE Engineering Works v/s CCE Delhi 2004 (167) ELT 195 (Tri - Delhi) The Ld A.R. prayed for upholding the Order In Original and dismissing the appeal.
4. We have heard both sides. The issue to be decided in this case is whether the appellants having paid their duty in full, are liable to pay the interest and penalty as confirmed and imposed in the subject order. The appellants in their written submissions had also mentioned that the issue is confined to interest and penalty only. The Central Excise (Valuation) Rules, 1975 were in existence till they were superseded by Central Excise (Valuation) Rules, 2000 by notification No. 45/2000-CE(N.T.) dated 30.06.2000. Prior to that Valuation Rules of 2000, Rule 5 of Valuation Rule 1975, though contemplated money value of any additional consideration flowing directly or indirectly from the buyer to the assessee to be added to the assessable value, it appears that there were doubts among the assesses and the officers as to whether the cost of tools, moulds and other materials supplied free of cost by the customers, to the assessee, should be included in the assessable value. Clarity was achieved only after introduction of Valuation Rules 2000, wherein under Rule 6 an explanation was introduced clearly stating:-
Explanation 1 - For removal of doubts, it is hereby clarified that the value, apportioned as appropriate, of the following goods and services, whether supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale of such goods, to the extent that such value has not been included in the price actually paid or payable, shall be treated to be the amount of money value of additional consideration flowing directly or indirectly from the buyer to the assessee in relation to sale of the goods being valued and aggregated accordingly, namely:
(i) value of materials, components, parts and similar items relatable to such goods;
(ii) value of tools, dies, moulds, drawings, blue prints, technical maps and charts and similar items used in the production of such goods;
(iii) value of material consumed, including packaging materials, in the production of such goods;
(iv) value of engineering, development, art work, design work and plans and sketches undertaken elsewhere than in the factory of production and necessary for the production of such goods.
From the above, it is clear that in the instant case the period involved being between 1999 to Nov 2000, the issue in question relating to addition of value of tools/moulds supplied free of cost was not free from doubt. There is scope to contend that there was a bonafide belief on the part of the assessee that such cost of tools/moulds did not have to be added to the value of goods cleared. It is also noticed that the appellants paid the entire differential duty as soon as the officers of the department visited the factory on 09.03.2000, much before the valuation rules 2000 mentioned above were introduced. The appellants appear to have paid the differential duty totalling Rs. 74,93,148/- between March 2000 to December 2000. Taking the above legal and factual position into consideration, we hold that the penalty in question is not sustainable as there cannot be any allegation that the appellants had deliberately avoided or evaded payment of the differential duty in question. We have also taken into consideration the legal position which was laid down by the Honble Supreme Court in 2007 (216) ELT 177 (SC), where the Supreme Court had occasioned to examine the invoking of extended period of time in relation to recovery of duty which was not paid in full, the Honble court held that if there were doubts during the period because of various circulars operating at different points in time, it could be concluded that there was scope for entertaining doubt as to the exact payment of duty and the court accordingly held that there is no warrant to conclude that there was suppression of fact with the intention to evade duty.
5. We also find in the case of CCE Hyderabad v/s ITW SIGNODE (INDIA) LTD. (179) ELT 120 (Tri. Bangalore), wherein the Honble tribunal held that when conflicting judgements were there on issue of includability of value of moulds in assessable value of finished product, extended period of limitation is not invokable. The reliance by the Ld. A.R. on the judgements of the tribunal in the cases of Engineering Innovative Ltd v/s CCE Chandigarh (supra), which was a case wherein the duty paying documents did not disclose the fact of separate recoveries towards tooling charges. In the instant case, such a factual situation does not arise and therefore, the said judgment would not apply. The next case law relied upon by the A.R. is that of SURIE Engineering Works v/s CCE Delhi (supra). This was a case pertaining to clandestine removal of goods and there was an admission by the proprietor. It was further held that the payment of duty before issue of show cause notice but after being caught by the department cannot be said to be voluntary. In the instant case, the issue is purely interpretative in nature and therefore, this case law is also of no help to the department.
6. Therefore, we reiterate that in the facts and circumstances of this case, the imposition of penalty is not warranted. However, we hold that since the duty had been admittedly paid and it was required to be paid, the recovery of interest is automatic as the differential duty must have been paid at the relevant time. Therefore, we hold that interest in question is required to be paid. The order is accordingly passed as per the above terms.
(Pronounced in open court on )
(P.K. CHOUDHARY) (R. PERIASAMI)
Judicial Member Tehnical Member
BB
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