Customs, Excise and Gold Tribunal - Mumbai
Shri Anil Hitkari And Hitkari Fires Ltd. vs Commissioner Of Central Excise on 8 April, 2005
Equivalent citations: 2005(186)ELT97(TRI-MUMBAI)
ORDER S.S. Sekhon, Member (T)
1. In appeal No. 1940/41, the appellant is a company engaged in the manufacture of inter alia carpets / floor coverings and the assessee dispatching duty on such goods cleared by them including to M/s. Maruti Udyog Ltd. The appellant in appeal No. 1941/04 is the Director of the assessee company herein. They were issued show cause notice dated 4.01.2002 and alleged that Maruti Udyog Ltd., vide letter dated 24.12.01 has informed the department about the price increase given to the appellant who had supplied by OE equipment during the period. Proceeding to recover the Central Excise Duty of Rs. 13,73,048/- from the assessee under Section 11A(c) of the Central Excise Act by invoking the extended period were initiated. Penalty was proposed under 11AC and Rule 173Q, interest was also to be demanded under Section 11AB and penal action proposed on the Director under Section 173Q and 209A of the Central Excise Rules, 1944 vide order dated 10.04.2003, Additional Commissioner confirmed the duty demand of Rs. 13,73,048/- with the interest as proposed in the notice and imposed an penalty of Rs. 13,73,048/- under 11AC on the assessee and penalty of Rs. 3 Lakhs on the director under 209A of the Central Excise Rules.
2. Commissioner (Appeals) vide order impugned found -
"6.1 I have considered the matter. The preliminary objection regarding non-receipt of show cause notice by the appellants has been withdrawn by the Ld. Counsel of the appellants at the time of personal hearing on 26.02.2004. Therefore, the impugned order cannot be said to have been passed in violation of the principles of natural justice as had earlier been submitted by the appellants in their grounds of appeal. As regards merits, there is no denial of the fact that appellant No. 1 had received an amount of Rs. 55,48,971.75 from the purchaser i.e. M/s. MUL on different dates between the years 1996-97 to 2000-01 on account of escalation charges because of price increases given on O.E. supplies. The appellants contention that they had a bonafide belief that no duty is payable on escalation prices is without any basis. The assessable value is to be calculated asa per Section 4 of the Act and the duty is required to be paid on the assessable value which includes all amounts received as a consideration for the sale of the goods. On merits, the impugned order demanding Central Excise duty on the amount received by the appellants by way of price increase has been correctly passed by the original authority. The appellants plea that they had not suppressed anything from the Department is not supported by any evidence. It is clear from the facts that the amount of price escalation was never disclosed by the appellants to the Department. In fact, they had not only received this amount from M/s. MUL but had issued supplementary invoices also. But for the investigation by the department officers, these facts could have never come to the knowledge of the department. Thus, the extended period has been correctly invoked in the impugned order. Since it is a clear case of suppression and evasion of duty, the penalty under Section 11 AC as imposed by the original authority is also correct in law.
6.2 The appellant No. 1 has further submitted that in any case the amount received on account of price escalation should be treated as cum-duty price in view of the decision of the Hon'ble Supreme Court in CCE Delhi v. MUL reported at 2002 (141) ELT 3(SC).From the perusal of the judgment of the Hon'ble Supreme Court cited above, I find that the facts of that case before the Hon'ble Supreme Court were entirely different. In that case, the sale of scrap had been done by M/s. MUL at NIL rate of duty although the duty was leviable. It was not a case of escalation in the basic price and assessable value and hence it was held by the Hon'ble Supreme Court that in view of Section 4(4)(d)(ii) of the Act, the sale price realized by the assessee should be regarded as entire price inclusive of Excise duty and the purchaser has no obligation to pay any amount in excess of what had already been paid as the price of scrap. The case before me is different. In this case, the amount paid by way of escalation was the differential basic amount as is clear from the letter dated 24th December, 2001 of M/s. MUL and thus is not inclusive of any Central Excise duty. Thus, the appellants are liable to pay duty on the entire amount received due to escalation and the same cannot be treated as cum-duty price. The appellants contention is, therefore, not acceptable.
6.3 As regards penalty of Rs. 3,00,000/- imposed on appellant No. 2 under Rule 209A, I find from the records that he has not been co-operating in investigation of the case and has also not provided any data. This is a dear case of suppression and evasion of duty. Being a Director incharge, he is obviously responsible for evasion of duty. The penalty imposed upon him in the impugned order under Rule 209A, is therefore, justified."
Hence these appeals.
3. When the matter was called today, the Ld. Advocate for the appellant in appeal No. 1941/04 submitted that the appellant i.e. the Director had since expired and the Death Certificate issued under regulation 12/17 of the Registration of Births and Deaths Act, 1969 in the name of Shri. Anil Kewal Hitkari issued by Municipal Corporation of Greater Mumbai was produced which certified that appellant died on 22/12/2004. Appeal No. E/1491/04 therefore abates and is disposed off as such.
4. Considering the matter in the appeal filed by the assessee, it is found that the appellant case is that there was no escalation clause in the purchase order and Ld. DR appearing for Revenue does not contest that position. Therefore, plea made that the sale price at which goods sold to Maruti Udyog Ltd. was a normal price which should not be rejected has to be upheld. The reliance, in this connection was placed on the decision of Supreme Court in the MRF Ltd v. CCE, Madras [1997 (92) ELT 309 SC] specifically on the following finding therein -
"2... ...We have heard the learned counsel for the assessee. Once the assessee has cleared the goods on the classification and price indicated by him at the time of the removal of the goods from the factory gate, the assessee becomes liable to payment of duty on that date and time and subsequent reduction in pries for whatever reason cannot be a matter of concern to the Central Excise department insofar as the liability to payment of excise duty was concerned....."
It was further pleaded that the price at which the sale was effected when at the factory gate and subsequently if it was reduced, such reduction for whatever reasons, was not permissible, then subsequent increases also should not be cause to call for any enhancement for the assessable value under Section 4 which has been arrived at as per Section 4 (1)(a). In this connection reliance was also placed on the Tribunal decision in the case of Shri. Bhagwati SSK Ltd. [2005 (115)ELT 120 Tribunal] and Indo Hacks Ltd. [1926 (25) ELT 69 Tribunal] has force. The plea of the Ld. DR that the appellants did not cooperate to the enquiry being conducted will not alter the law as settled i.e. the price at which the goods were sold to the buyer and there was no consideration for such a sale price other than the price at the time of delivery, then such price would be value. We would therefore, not find any reasons to enhance the valuation to recover of duty especially when the admitted position is that there was no value of escalation clause in the purchase order placed on the assessee. Monetary, a bounty from the buyer and monetary value there of can be added to the price as a consideration, but not the bounty as consideration which flows much after sales have been affected when no such situation receipt was ever contemplated prior to such sale or during the course of delivery. In absence of any material, that there was such a consideration of receipt of the bounty and at the time of delivery or and antecedent there to, a proposal made to levy duty on such bounty if and when received cannot be upheld, even if the same is within the period of the demand to be made under Section 11AC.
4. There is a force also in the judgment relied upon by the Ld. Advocate for the appellant and nothing contrary has been shown to us. We would therefore, find no merits in the orders impugned or to held, in the fact of this case, a cause for alteration of the valuation of the goods already finally assessed and cleared, by a show cause notice as issued in this case.
5. Since the payment of the bounty or the escalation of the sale price was not contemplated and anticipated in the facts, at the time of sale contract / agreement nor is evidence to come to a conclusion that the appellant, assessee deliberately suppressed the facts of the receipt of such receipts / bounty when the goods were under clearance on duty determination made by him. Such bounty / escalation to cause alteration in value in this matter, cannot be upheld. We find no reason to invoke the larger period under proviso to Section 11 A (1) as no ingredients of that proviso on part of the assessee have not been brought out in the show cause notice and the orders impugned. The demands are also required to be not upheld as being barred by limitation.
6. When the ingredients of Section 11 A(1) are not being upheld there is no question or clause to upheld the penalty under Section 11AC as arrived at by the lower authorities. When the demand of duty and penalty on the assessee has not been upheld there is no question of upholding the orders on interest under Section 11AB as arrived at. The order impugned as regards the assessee is set aside and the appeal is allowed. Appeal Nos. E/1940/1941/00 are disposed off as per the finding arrived at herein above Ordered accordingly.