Custom, Excise & Service Tax Tribunal
M/S Emi Transmission Ltd vs Commissioner Of Central Excise & ... on 4 August, 2011
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
Appeal No. E/2143-2144/03, E/3812 & 3813/05 &
E/CO-178/06
(Arising out Order-in-Original No. COMM/9CEX/2003 dated 25.4.2003 passed by the Commissioner of Central Excise & Customs, Nashik)
For approval and signature:
Honble Mr. Ashok Jindal, Member (Judicial)
Honble Mr. P.R. Chandrasekharan, Member (Technical)
1. Whether Press Reporters may be allowed to see No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the Yes CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy Yes
of the Order?
4. Whether Order is to be circulated to the Departmental Yes
authorities?
M/s EMI Transmission Ltd.
Shri S.K. Shetty
Appellant
Vs.
Commissioner of Central Excise & Customs, Nashik
Respondent
Appearance:
Shri M.H. Patil, Advocate for the appellant Shri V.K. Singh, SDR for the respondent CORAM:
Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.R. Chandrasekharan, Member (Technical) Date of hearing : 21.06.2011 Date of decision : 04.08.2011 O R D E R No:..
Per: Mr. Ashok Jindal, Member (Judicial) Appeal E/2143/03 & E/2144/03 are filed by the assessee firm and its executive Shri S.K. Sadanand Reddy and appeal no. E/3812/05 and E/3813/05 are filed by CCE, Thane against the said assessee firm and its executive Shri S.K.S Reddy. The assessee has also filed cross objection in the revenue appeal vide E/CO-178/06.
2. The facts of the case are that the assessee is having two factories one at Nashik and another at Thane where they are engaged in the manufacture of hardware and accessories for transmission line. The assessee were awarded the contract for supply of hardware and accessories for transmission line by Transmission Corporation of Andhra Pradesh Ltd. (APTRANSCO) as well as main contract like M/s RPG Transmission, Jyoti Structure, Kalpataru etc. The assessee before clearance of the goods filed CL declarations under Notification 108/95-CE from their Nashik factory along with certificate from project implementing authority and also excise duty exemption certificate duly countersigned by Secretary to Government of Andhra Pradesh (Budget) FAC and also Purchase orders placed upon them. Similar declarations were also filed by the assessee for their Thane factory. To claim exemption under Notification 108/95, the assessee has to file CL declaration along with certificate issued by project implementing authority and excise duty exemption certificate countersigned by Secretary to the government of Andhra Pradesh and purchase orders. It is no dispute that the assessee has filed the documents as required under Notification 108/95. The said declarations were accepted by the department after due verification. Thereafter, the clearances were permitted to be affected by availing the exemption under Notification 108/95. The assessee had also filed the requisite returns which were accepted by the department. Thereafter, proceedings were initiated by DGCEI against the assessee for their supplies to project finance by Japan Bank of International Corporation (JBIC) on the ground that JBIC was not an international organisation notified under United Nations (Privilege & Immunities) Act, 1947. Against DGCEIs letter dated 23.11.2001, Government of India, MOF (DR), vide letter dated 7.12.2001 clarified that JBIC is not notified as an International Organisation. In consequence thereof, the certificate issued by APTRANSCO were cancelled pertaining to the supply to Nashik vide letter dated 4.1.2002 and Thane factory on 28.1.2002. Based on the investigations, the show-cause notices were issued to their Nashik factory and the Thane factory. In the show-cause notices it was proposed to deny the exemption under Notification 108/95 on the ground that JBIC was not notified as an International Organisation. Therefore, extended period was invoked and penal provisions were also invoked alleging that the assessee has suppressed the fact that JBIC was not a notified International Organisation for claiming exemption under Notification 108/95-CE. A show-cause notice issued on 3.10.2002 involving the period 7.7.2001 to 30.9.2001 and show-cause notice dated 31.10.2002 was issued for the period 17.10.2001 to 19.12.2001. The said show-cause notice were replied by the assessee but Commissioner of Central Excise Nashik vide Order in Original no. 9/2003 dated 25.4.2003 has held that exemption under Notification no. 108/95 is not available since JBIC was not an International Organisation by invoking extended period and penalty equal to duty was also confirmed under Section 11AC on the ground that the assessee did not declare the fact that JBIC was not notified International Organisation. In order to avail benefit under the said Notification, a penalty of Rs.10000/- was also imposed on Shri S.K.S Shetty, the General Manager of the assessee firm. The duty already paid was appropriated. The assessee firm and the GM are in appeal against the said order.
3. CCE, Thane vide OIO 29/SK/29/2004-Th dated 31.12.2004 has dropped the proceedings against the assessee as well as the General Manger, Shri S.K.S. Shetty holding that there was no suppression on the part of the assessee in view of the filing of CL declaration along with purchase orders and required certificate by the project implementing authority duly counter signed by the Principal Secretary of Andhra Pradesh and accordingly, entire demands since was beyond the period of one year was dropped as time barred. As show-cause notice was issued on 31.8.2004 for the period from 23.10.2000 to 21.3.2001 it is beyond the normal period of limitation. Revenue has filed appeal against the said order against the assessee firm and its general Manager. In the appeals of Revenue, the assessee has also filed a cross objection.
4. After going through the facts, as we observe that the common issue involved, therefore we dispose of all the appeals together.
5. The issue involved in these appeals are as under:-
a) Whether exemption under Notification no. 108/95-CE dated 28.8.95 to supply to the goods to Simadhri Vizag transmission System Project, financed by JBIC, is admissible when subsequent to the clearance of goods, CBEC vide its letter dated 7.12.2001, has clarified that JBIC is not notified as an International Organisation under the United Nation (Privilege and Immunities) Act, 1947.
b) Whether demands for the period beyond normal period of one year are sustainable, when clearance were done after filing CL-declaration along with copy of purchase orders and certificate from Project Implementing Authority, Excise Duty exemption certificate issued by head of Project Implementing Authority duly counter signed by the Principal Secretary of State of Andhra Pradesh and c) whether in the facts and circumstances of the case penalties are imposable or not?
6. Shri M.H. Patil, ld. advocate for the assessee submits as under:-
6.1 The assessee is filing of CL-declarations along with Purchase Orders, Excise Duty Exemption Certificates and Project Authority Certificate issued by Head of Project Implementing Authority, duly counter-signed by Principal Secretary, before the clearance of goods, by availing exemption under Notn.No.108/95-CE, to the Dept. is not in dispute.
6.2 Such CL Declarations were filed on receipt of orders either from APTRANSCO or other main contractors (supra), separately. The CL Declarations were approved by Asst./Deputy Commissioner of Central Excise.
6.3 The clearances were effected under due approval/acceptance of the Central Excise Authorities and, accordingly, monthly returns were filed, wherein the clearances at Nil rate of duty, under the said Notification 108/95-CE, were shown.
6.4 The certificates issued by the Authorities, designated in Notification, stated that the supplies made to the said Project funded by JBIC were entitled to exemption under Notn. 108/95-CE, as they clearly mentioned that they were being issued in pursuance of requirement under Govt. of India Notn. No. 108/95-CE dated 28.8.1995 for exemption for said supplies. The said Certificates issued, made the assessee to believe that JBIC is notified International Organisations for availing exemption under Notn.108/95-CE and they are entitled for exemption. Under the said circumstances, invoking the extended period or, for that matter, penal provisions is absolutely incorrect, as both, the designated Authorities as well as the assessee believed that supplies to the Project financed by JBIC, were exempt under Notn.No.108/95-CE.
6.5 It was further submitted that such belief that JBIC was a notified International Organization and exemption to projects financed by JBIC was available under Notn.108/95-CE was carried not only by the Assessees, in the present case, but also various other assesses situated in different parts of the country, who also had supplied the goods to the projects financed by JBIC under the said Notification, as evidenced by the reported judgments.
6.6 It was also submitted that the demand for normal period is also not sustainable, as all the requisite documents/Certificates were submitted and assessed to by the Departmental Authorities and all the clearances were made under Certificates issued by Designated Authorities, which were valid until cancelled and cancellation was done subsequent to clearances; inasmuch as from the Nashik factory, clearances were effected during the period from 17.10.2001 to 19.12.2001, while Certificates dated 18.03.2001, 8.3.2001, 26.08.2000 and 3.8.2001 were cancelled/withdrawn by letter dtd. 4.1.2002, based on CBEC clarification, at the behest of DGCEI on 7.12.2001.
6.7 Likewise, the certificates pertaining to Thane Factory, for clearances effected during the period from 23.10.2000 to 31.03.2001, were cancelled on 28.01.2002.
In view of the above factual position, based on judgments on the issue, exemption for the clearances effected under Certificates, till their cancellation, is valid.
6.8 On the issue as to whether suppression can be alleged and extended period and penal provisions can be invoked, in cases where exemption is claimed for supplies to Projects financed by an Organization, which was declared as not notified subsequent to clearances, consistent view has been taken by the Honble Tribunal (some cases upheld by Supreme Court and High Court) that in such cases, extended period is not invocable and penalties are not imposable. In support, reliance was placed on the following judgments:
(1a) PolyCab Wires Pvt. Ltd. - 2009 (90) RLT 161 (T) (1b) Upheld by Gujarat High Court (2) Bharat Heavy Electricals Ltd. 2006 (205) ELT 564 (T) (3) Spic Organics Ltd. 2006 (199) ELT 73 (T) (4) Bhanu IVRCL Associates 2006 (194) ELT 460 (T) (5) Hivoltrans Electricals Pvt. Ltd. 2004 (175) ELT 739 (T) (6) Jyoti Structures Ltd. 2004 (167) ELT 226 (T) (7) Danke Electricals Ltd. 2003 (160) ELT 414 (T) (8) Siemens Ltd. 2008 (226) ELT 406 (T) (9) Northern Plastic Ltd. 1998 (101) ELT 549 (SC) (10) K.Ram Kumar - 2006 (193) ELT 504 (T) (11) Kiswok Industries - 2007 (220) ELT 331 (T) (12) Viswanadha Institute - 2008 (231) ELT 654 (T).
6.9 A particular reference was made to Honble Tribunal judgment in Poly Cab Wire, wherein the issue pertained not only to Notn.No.108/95-CE, but also to supplies made to project which was financed by JBIC. In the said case, because of difference of opinion on applicability of extended period and penal provisions, matter was referred to Third Member and by Majority it was held that extended time limit was not invocable, as assessee bonafidely believed that they were entitled to exemption under Notification No.108/95-CE dtd. 28.08.1995, in view of Certificates issued by Project Implementing Authority and countersigned by Principal Secretary to State Government. It was also held by Majority that in such cases none of the documents on which the assessee lay hands or were accessible to the assessee showed or gave indication that JBIC was not notified. This judgment of Tribunal has been upheld by Honble Gujarat High Court and the Dept.s SLP against the said Gujarat High Court judgment also has been dismissed by Honble Supreme Court, vide its judgment and Order dated 15.09.2010. The judgments in the cases of Bharat Heavy Electricals Ltd. 2006 (205) ELT 564 (T), Spic Organics Ltd. 2006 (199) ELT 73 (T) & Bhanu IVRCL Associates 2006 (194) ELT 460 (T) also related to the projects financed by JBIC, under Notn. No. 108/95 and, in similar set of facts and circumstances, held that extended period and penal provisions are not invocable. The ratio of the said judgments squarely applies to the present case and has become final as he same have not been disturbed.
7. On the other hand, Shri V.K. Singh, SDR supported the order passed by the Commissioner of Central Excise, Nashik and submitted that the purchase orders placed upon the assessee clearly indicates that excise duty was not payable by project implementing authority but has to be claimed by the assessee as supplementary cash assistance or deemed export benefit directly from the Government. He further submitted that in the case of CCE, Nashik the Superintendent vide letter dated 22.2.2002 has informed to the assessee that exemption under Notification no. 108/95 was not available as JBIC was not notified as an international organisation and had directed to pay the amount along with interest within a weeks time. As the letter dated 22.2.2002 was issued within one year from the date of clearance therefore the department has taken action within the normal period of limitation. Therefore the plea of the assessee that extended period is not invocable is not sustainable as the duty has been demanded within normal period. He further submitted that vide letter dated 26.2.2002, the Superintendent once again requested to the assessee to pay specified dues along with interest within five days from the date of the receipt of letter. He also relied on the case law M/s Sterlite Industries (I) Ltd. vs. CCE reported in 2005 (189) ELT 266 (AP) and Exide Industries Ltd. 2009 (240) ELT 22 (Cal). He also submitted that when the purchase order does not indicate any exemption under Notification no. 108/95-CE claiming exemption by the assessee is incorrect.
8. In reply to the arguments advanced by the ld. SDR Shri M.H. Patil, Advocate further submitted that the purchase orders clearly indicates that excise duty is not payable by APTRANSCO but it does not indicate that exemption under Notification 108/95 is not available. Rather APTRANSCO, itself has issued certificate stating that such certificate was issued in pursuance to requirement of Government of India, department of Revenues Notification 108/95 for claiming exemption of Central Excise duty on goods covered by the above referred contract.
9. In reply to the letters of Superintendent dated 22.2.2002 and 26.2.2002, he submitted that these letters cannot be considered as show-cause notice because in those letters Superintendent has asked to pay the duty without giving any opportunity of being heard. Moreover, the adjudication authority has also not treated these letters as show-cause notice, as the show-cause notices dated 3.10.2002 and 31.2.2002 were issued to their Nashik factory. The Commissioner has invoked the extended period of limitation only on the ground that the assessee did not disclose the status of JBIC and that the said letters of Superintendent were made aware to the assessee of non-availability of exemption under 108/95. To support this contention, he relied on
a) Merchant Impex 2007 (219) ELT 508 (T)
b) Rama Vilas Service Ltd. 2007 (212) ELT 95 (T).
He also submitted that the decision in the case of Sterlite Industries (supra) is not applicable to the present case, as in that case validity of post facto cancellation of the Certificates by APTRANSCO, on the ground of promissory estoppel, and there was no issue before the High Court that whether the extended period is invocable or not. He also submitted that the decision of the High Court in Exide Inds. (supra) will also not apply as in that case the appellant tried to mislead the department that goods supplied to the project of State Government were funded by an International Organisation. Therefore, there was a clear case of suppression. He further submitted that after considering the judgment of Sterlite Inds. (supra) this Tribunal in the case of IMP Power Ltd. vide Order No. M/225/WZB/AHD/2001 dated 18.12.2008 has held that duty demand for the period beyond one year from the date of show-cause notice and penalty imposed under Section 11AC is not sustainable. Therefore he prayed that the assessees appeals be allowed and the revenues appeals be dismissed.
10. Heard both sides.
11. After hearing both sides, we find that from the argument of the ld. SDR (apart from the issue framed by the Tribunal in this case) another issue has also come up:-
Whether the letters dated 22.2.2002 and 26.6.2002 issued by the Superintendent directing to pay duty amount as the exemption under Notification 108/95 was not available can be treated as show-cause notice or not.
12. To answer this question, we have gone through the decision of the Tribunal in Merchant Impex (supra) wherein this Tribunal has held as under:-
We have carefully considered the submissions and perused the records. The apex court in the case of Metal Forgings (supra) have clearly held that issue of show-cause notice is a mandatory requirement for raising demands. It is further observed that communications, orders, suggestions or advices from the department cannot be deemed to be a show-cause notice. It is held that a specific show-cause notice indicating the amounts demanded and calling upon the appellant to show-cause is necessary. The above noted letter cannot be treated as a show-cause notice in terms of this judgment. Furthermore, the appellants were not served with show-cause notice but the above letter was served on the CHA. In terms of the above noted judgments, the proceedings are bad in law, as the CHA has not been authorised to receive the show-cause notice on the appellants behalf. On both points, the appellant succeed. Appeal is allowed with consequential relief, if any.
13. In the case of Ram Vilas Services Ltd. (supra), this Tribunal has again held that the Superintendents letter is an administrative order and directing party to follow instruction in the letter not justified. Proper officer shall issue requisite SCN to the party and proceed in accordance with law and principles of natural justice. Therefore, we hold that in this case the letters issued by Superintendent dated 22.2.2006, 26.2.2006 cannot be treated as show-cause notice although the Commissioner has also not considered these letters as show-cause notice. Therefore, the argument advanced by the ld. SDR that these letters of Superintendent may be treated as show-cause notice is not sustainable.
14. Now we come to the main issue involved in this case. In the case of Polycab Wires (supra) where the issue, was similar to the facts of this case, was considered and in that case it was held that the extended period of limitation is not invocable as assessee was under bonafide belief that they were entitled to Notification 108/95 in view of the certificate issued by Project implementing authority. It was also held that in such cases, none of the documents on which the assessee relies was indicates that JBIC was not notified as an International Organisation. The decision of this Tribunal was upheld by the Hon'ble High Court of Gujarat and again confirmed by the apex court vide order dated 15.9.2010. In the case of Bharat Heavy Electricals (supra) and Bhanu IVRCL Associates, Spic Organics Ltd. (supra) also having the similar facts where the projects were financed by JBIC under Notification 108/95, it was held that the extended period and penal provisions are not invocable. We do agree with the contention of the ld. advocate that in the case of Sterlite Inds. (supra) the issue before the Hon'ble High Court of Andhra Pradesh was of cancellation of certificate of APTRANSCO on the ground of promissory estoppel and there was no issue with regard to whether in such facts and circumstances the extended period of limitation is invocable or not? In the case of Exide Inds. (supra) the Hon'ble High Court of Calcutta has clearly held that the assessee has tried to mislead the department by stating that the project of state government are funded by an international organisation. Therefore, these decisions are not applicable to the facts of this case.
15. We have examined the case in IMP power Ltd. (supra) wherein both the Members of this Tribunal held that duty demand beyond the period of one year from the date of show-cause notice is not sustainable and penalties imposed under Section 11AC are also not imposable, after considering the decision of Sterlite Inds. (supra).
16. From the above discussion, we hold that in this case although the exemption under Notification 108/95 is not available to the project financed by JBIC but demand beyond the period of one year from the date of show-cause notice are not sustainable and penalties under Section 11AC on the assessee firm and penalty on GM of the assessee firm is also not sustainable. In view of the above discussion, the appeals filed by the revenue are dismissed. The appeal filed by S.K. Sadanand is allowed. Appeal E/2143/03 is allowed by way of remand by setting aside the order of the impugned order to quantify the demand within one year from the date of show-cause notice. Cross objection are also disposed of in the above manner.
(Pronounced in Court on .) (P.R. Chandrasekharan) (Ashok Jindal) Member (Technical) Member (Judicial) SR 2