Custom, Excise & Service Tax Tribunal
M/S Mechanical Constructors vs C.C.E., Bhopal on 5 August, 2009
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No.2, R.K.Puram, New Delhi COURT-I Date of hearing/decision: 5.8.2009 Central Excise Appeal No.5357 of 2004 Arising out of the order in appeal No.237/CE/BPL/04 dated 29.7.04 passed by the Commissioner (Appeals I), Customs & Central Excise, Bhopal. For Approval and Signature: Honble Shri Justice R.M.S. Khandeparkar, President Honble Shri M. Veeraiyan, Member (Technical) 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3 Whether their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes M/s Mechanical Constructors . Appellant Vs. C.C.E., Bhopal . Respondent
Appearance:
Shri Z.U Alvi, Advocate for the appellants Shri B.K. Singh, Authorized Departmental Representative (Jt.CDR) for the Revenue Coram: Honble Shri Justice R.M.S. Khandeparkar, President Honble Shri M. Veeraiyan, Member (Technical) Oral Order No.___________________ Per Shri Justice R.M.S. Khandeparkar:
Heard the learned Advocate for the appellants and the learned Jt. CDR for the respondent.
2. The present appeal arises from the order dated 29th July, 2004 passed by the Commissioner (Appeals), Bhopal. By the said order, the Commissioner (Appeals) had dismissed the appeal filed by the appellants against the order dated 16th December 2003 of the Additional Commissioner, Bhopal. By the said order, the Additional Commissioner had confirmed the demand of excise duty amounting to Rs.3,88,641/- under Section 11A of the Central Excise Act, 1944 and has also ordered payment of interest under Section 11AB of the said Act. A penalty of equal amount of the duty was also imposed under Section 11AC of the said Act. During the pendency of this appeal in the stay application filed by the appellants, the Tribunal had allowed the appellant to contest the proceedings on deposit of Rs.1 lakh vide its order dated 6th December 2004. In the meanwhile, however, the appellants paid the entire duty amount on 31st January 2006. The duty amount relates to the period from October 1998 to March, 2002.
3. The appellants are SSI unit and availed exemption in relation to the payment of duty while availing the Cenvat credit on their inputs. M/s Indian Oil Corporation had placed work order for fabrication of storage tank for their retail outlet and they were accordingly manufactured by the appellants from October, 1998 to March, 2002. There is no dispute that the transformation of MS plates which were supplied by the IOCL to the appellants for the purpose of fabrication thereof to the storage tanks amounted to manufacture and it attracted the duty liability , though it is the case of the appellants that at the relevant time, they honestly and sincerely believed that the duty liability was upon M/s IOCL as the primary manufacturer and the appellants were merely providing skilled labour service. It is therefore, their case that by bona fide and genuine belief the appellants were not liable to pay duty for the manufacture of such tanks supplied to M/s IOCL and they even did not avail the Cenvat credit on the inputs utilised for the manufacture of those tanks.
4. It is the case of the respondent however, that IOCL had floated tenders for fabricating , assembling and welding of storage tanks and the appellants got the order after successfully competing the tender process and in that regard , the appellants entered into work contract for manufacture and supply of such tanks to ICOL. The contract was not the labour contract and therefore, the manufacture clearly attracted the duty liability which was required to be cleared by the appellants. However, the appellants neither paid duty nor disclosed the fact of manufacture of such tanks for their supply thereof to IOCL in the regular returns filed by the appellants. It was only pursuant to the intelligence gathered by the Department and from the letter dated 4.6.2002 that the fact of manufacture of such storage tanks by the appellants for the supply thereof to the IOCL was revealed to the Department. It is therefore, their case that pursuant to the disclosure by the appellants on 23rd and 20th December, 2002 of all the facts regarding manufacture of such storage tanks by the appellants for supply thereof to IOCL were revealed to the Department and consequently, a show cause notice came to be issued on 2nd April, 2003 after completing the investigation.
5. After hearing the parties, the adjudication order was passed on 16th December, 2003. The contention of the appellants that they were under a bona fide belief that they were not liable to pay duty and they were merely provider of skilled labour is disputed and denied by the respondent. Learned Advocate appearing for the appellants however fairly submitted that the claim regarding the duty liability on the manufacture of storage tanks supplied to IOCL by the appellants could not be disputed and in fact, on his advice, the appellants have already cleared the duty liability in that regard on 31st January 2006. He further submits that in the facts and circumstances of the case, it is revealed that the appellants were under bona fide belief that the nature of the work which was rendered by the appellants to the IOCL was in the nature of provider of skilled labour and the principal manufacturer of the storage tanks were IOCL and that therefore, the appellants were not liable to pay duty. It is, further their submission that the very fact that the appellants did not avail Cenvat credit in relation to the inputs utilised for manufacture of storage tanks which were supplied to IOCL disclosed that there was no intention to evade duty. He further submitted that the conduct of the appellants in clearing of the dues moment it was made clear to them that the duty liability cannot be upon IOCL in relation to the manufacture of storage tanks by them and supplied to IOCL. They have cleared all the duty liability on 31st January 2006. This conduct, according to the learned Advocate, discloses that there was no intention to evade duty as such. Further, regarding the nature of the work contract between the appellants and the IOCL, the learned Advocate submitted that the same disclosed complete supervision of IOCL in relation to manufacture apart from supply of the basic raw materials by IOCL to the appellants. He also submitted that though the appellants were manufacturing similar storage tanks for other parties in respect of which the appellants had paid duty, they had no reason to evade duty in relation to storage tanks in question apart from that they were under bona fide belief in respect thereof that they had no duty liability.
6. Learned Jt.CDR on the other hand submitted that the authorities below after taking into consideration the contentions on behalf of the appellants have rightly arrived at finding about the intentional evasion of payment of duty by the appellants and therefore, there is no scope for interference in the impugned order. As regards the nature of the work, it is his contention on behalf of the respondent that the work contract which was preceded by the tender issued by M/s IOCL in that respect clearly revealed the nature of agreement and therefore, merely because there was supervision or supply of basic raw materials by the IOCL to the appellants that itself would not be sufficient to construe that the contract was merely of the nature of labour supply. He further submitted that the very fact that the appellants had not disclosed the fact of manufacture of storage tanks for supply thereof to IOCL in their regular returns though the manufacture of storage tanks supplied to other parties was disclosed by the appellants, it revealed the intention on the part of the appellants to avoid payment of duty in relation to storage tanks manufactured for IOCL.
7. The contentions sought to be canvassed on behalf of the appellants are essentially restricted to the case of the appellants regarding alleged bona fide and genuine belief about the absence of liability of excise duty in relation to storage tanks manufactured by the appellants for supply thereof to M/s IOCL during the period from October, 1998 to March, 2002. It is a matter of record that the appellants though had manufactured similar tanks for other parties, the appellants did not entertain any such belief about absence of duty liability in relation to the manufacture of those tanks and indeed paid duty in respect thereof. In other words, in relation to the storage tanks of the nature which were supplied to IOCL, the appellants were fully aware that they were subject to duty liability and also about the fact that the manufacture thereof was by the appellants . Obviously, therefore, it was within the knowledge of the appellants that before clearing such manufactured goods, it was necessary for the appellants to pay excise duty thereof, but in fact, they cleared the products without paying duty as well as without disclosing the said fact to the Department in their regular returns. Records nowhere disclose that the contracts between the appellants and other parties were different from the one with IOCL. To a specific query in that regard, it has been clearly stated that records nowhere reveal of having led any evidence to the contrary by the appellants in that regard. In the background of these facts merely because there was supervision by IOCL in relation to manufacture of storage tanks for IOCL or that the basic raw material was supplied by IOCL for the manufacture of such storage tanks, that by itself cannot lead to the conclusion that it was mere labour contract. It is not the case of the appellants that the tenders were issued for labour contract. Being so, neither documentary evidence nor any other evidence was placed by the appellants on record to disclose that the nature of the contract between the appellant and the IOCL was essentially of the nature of the labour supply. In fact, once it is admitted by the appellants that the process of transformation of MS plates to storage tanks amounts to manufacture and attracts duty liability, the appellants could not have avoided the payment of duty on assumption that they were merely providing labour service to IOCL in relation to manufacture of such tanks. It is the not the case of the appellants that on manufacture of tanks, the entire expenditure thereof was financed by IOCL or has been directly spent by IOCL. Similarly, merely because there was income tax clearance certificate or any registration certificate that itself would not be sufficient to construe the nature of work carried out by the appellants in relation to manufacture of storage tanks to be in the nature of supply of labour services. Being so, as rightly pointed out on behalf of the respondent on finding about the manufacture of storage tanks by the appellants for IOCL failure to clear the duty liability in that regard cannot be held to be bona fide.
8. The contention that non-availment of Cenvat credit would disclose absence of mala fide or intention to evade the payment of the duty is without any substance. Merely because the assessee does not avail concession which was otherwise available, that itself would not lead to the conclusion that there was intention to pay duty. If we take into consideration all the facts on record in totality the non-availment of Cenvat credit in the case in hand cannot lead to the conclusion that the appellants had no intention to evade payment of duty. It could be even a calculated move to evade payment of duty that Cenvat credit was not availed of.
9. The law on the point as to whether in such circumstances, the assessee would be liable to pay penalty or not is well settled by the decision of the Apex Court in Union of India vs. Dharmendra Textile Processors reported in 2008 (231) ELT 3 (SC). Once we disbelieve the contention that there was no intention to evade payment of duty, the invocation of extended period of limitation cannot be found fault with. For the same reason, the liability to penalty also cannot be waived and it has to be in terms of the provisions of law as has been held by the Apex Court in Dharmendra Textile Processors.
10. It is pertinent to note that during the pendency of this appeal, the appellant has already paid the entire duty amount on 31st January 2006. It is sought to be contended that such payment was on legal advice to the appellants. Further, it is also disclosed that the appellants had not sought proper advice prior to 31.1.2006 and were under the impression that they would not be subjected to the above liability and under that genuine belief did not bother to seek or obtain any legal advice till then. The party did not make any attempt to appraise itself of the correct situation of law cannot be a ground to say that they did not know that they were liable to pay the duty or to contend that the belief was genuine and bona fide. It was necessary for the appellants to appraise themselves of the correct position in law in relation to their duty liability. Merely on fanciful imagination the assessee was not entitled to assume that he had no liability to pay the duty. In the matter in hand, admittedly, the appellants were paying duty in relation to similar storage tanks manufactured for other parties. In this background, it was necessary for the assessee to disclose the ground for distinguishing the work of manufacture of the storage tanks for IOCL from others. Undisputedly, there is no material placed on record in that regard.
11. As no other ground is canvassed for challenging the impugned order, we find no case made out to interfere with the impugned order and therefore, the appeal fails and is dismissed.
12. Before we part with the appeal, we however, need to observe that in order to enable the appellants clear their dues within the period of next three months, the respondent shall refrain themselves from taking any coercive action till the expiry of the said period.
(Justice R.M.S. Khandeparkar) President (M. Veeraiyan) Member (Technical) scd/ 9