Customs, Excise and Gold Tribunal - Bangalore
Monarch Pipes Limited vs The Commissioner Of Customs And Central ... on 27 June, 2006
Equivalent citations: 2006(113)ECC182, 2006ECR182(TRI.-BANGALORE), 2007(208)ELT470(TRI-BANG)
ORDER T.K. Jayaraman, Member (T)
1. This appeal has been filed against Order-in-original No. 15/2004 dated 30.11.2004 passed by the Commissioner of Customs and Central Excise, Tirupati. The appellants are manufacturers of PVC pipes falling under Chapter Heading 39 of the Central Excise Tariff Act 1985. The Central Excise officers carried out investigations after visiting the premises of the appellants. The officers carried out the verification of the physical stock of the finished goods lying in the factory premises. There was a shortage of 5569 Nos. of various sizes of PVC pipes and there was also excess of 5115 Nos. of certain other varieties of PVC pipes. Statements of Shri L. Ramesh Kumar, Plant Manager and T.R. Maruti Prasad, Despatch Assistant had been taken. A show cause notice dated 13.2.2003 was issued proposing confiscation of excess stock. Further investigations were carried out and statements of Shri P. Ramesh, Transport Manager, T.R. Maruti Prasad, Despatch Assistant and Rajendra Prasad, Accounts Manager were recorded. Follow-up action was taken by searching the premises of the depots of the appellant unit at various places in the country. It was seen that the freight charges were collected separately from the buyers. The amount so collected was in excess. The investigations prima facie revealed under valuation and clandestine manufacture and clearance of goods with intention to evade Central Excise duty. Therefore, show cause notice was issued to the appellant for demand of differential duty on account of clandestine clearances and under-valuation. Proposals for penalties under various provisions of Central Excise Act/Rules were also made in the show cause notice. In the impugned order, the Adjudicating Authority confirmed the following demands.
(i) Duty of Rs. 3,76,994/-
(ii) Duty of Rs. 2,67,479/- under Section 11A(2) of CE Act, 1944
(iii) Rs. 19,33,239/- differential duty amount on freight/transportation charges.
(iv) Interest under Section 11AB was demanded.
(v) Penalty of Rs. 25,77,712/- under Section 11AC was imposed on the appellant unit.
The PVC pipes valued at Rs. 9,93,946/- were confiscated under Rule 25 of Central Excise Rules 2001. However, the redemption fine of Rs. 1 lakh was imposed. The appellants are aggrieved over the impugned order, therefore, they have come before this Tribunal for relief.
2. Shri V.J. Sankaram, learned advocate appeared for the appellants and Shri R.K. Singla, learned JCDR appeared for the Revenue.
3. The learned advocate pointed out that the amount of Rs. 19,33,239/- has been demanded on account of the freight charges received from the customers over and above the value at which they have sold pipes at the depots. The appellants transport the final products to the customers. In the case of gate sales and sales effected from depots, there are many decisions of the Tribunal holding that transportation charges are not includable in the assessable value. The Adjudicating Authority failed to notice that the cost of transportation is a cost relating to post removal activity and since, the appellants have paid the duty on actual cost of transportation, the question of paying duty on excess collection of rate does not arise. The following case laws were relied on.
(i) CCE, Meerut v. Prabhat Zarda Factory 2000 (119) LT 191.
(ii) Associated Strips v. CCE, New Delhi As regards the duty on the alleged clearance of goods found short, the appellants had already paid duty of Rs. 3,76,994/- and Rs. 2,67,479/-. Further the Commissioner without appreciating the decision of the Larger Bench in the case of CCE, New Delhi v. Machino Montell Limited imposed mandatory penalty under Section 11AC. The duty was paid before the issue of show cause notice and hence, the penalty is not justified.
4. The learned JCDR reiterated the Order-in-Original.
5. We have gone through the records of the case carefully. During the investigation of the appellants unit certain shortages were noticed. Duty was confirmed on the ground that clandestine clearances had taken place. The appellants had already discharged the duty liability of Rs. 3,76,994/- and Rs. 2,67,479/- before the issue of Show Cause Notice. They have pleaded that in view of this effect, no penalty is leviable. As regards the demand of Rs. 19,33,239/-being duty on the freight charges, it has been submitted that on the request of the customers, the appellants provided transportation facility to them. Only in respect of such despatches, transportation charges are collected, which covered transport of goods from the premises of the dealer of the appellant's unit to its customers. Shri Rajendra Prasad, Manager Accounts has filed an affidavit on this point. It was further submitted that the charges collected by the appellants towards the transportation are not retained by them. They have filed an affidavit along with the actual depot invoices. The accounts for the relevant period has been scrutinized by the a Chartered Accountant and he has given a certificate to the effect that the transportation charges cover the expenditure incurred for transport from the premises of dealers to their customers. This payment has been paid to M/s. Nandi Transports. These facts were not before the Original Authority. In the interest of justice, we remand the entire matter to the Original Adjudicating Authority for verification of the documents produced by the appellants. We do not interfere with the order of confirmation of duty on the shortages noticed. Only the penalty under Section 11AC and demand of interest under Section 11AB are set aside. However, the matter is remanded only for the limited purpose of examining the documents relating to freight charges, for decision within three months from the date of this order. In view of the various decisions of the Tribunal, the freight charges collected are not includible in the assessable value. This should be borne in mind by the Adjudicating Authority while taking a decision on the demand of duty on account of transportation charges. Thus, the appeal is allowed by way of remand.
(Operative portion of this Order was pronounced in open court on conclusion of hearing)