Custom, Excise & Service Tax Tribunal
M/S. Mahindra & Mahindra Ltd vs Commissioner Of Central Excise & ... on 28 January, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. E/12012-MUM, 262/12-MUM, E/87013-MUM, E/89435/13-MUM, E/87793/94 [Arising out of Order-in- Appeal No. AKP/NSK/190/2011 dtd. 31/10/2011 and No. NSK-EXCUS-000-APP-236-13-14 dtd. 16/8/2013 and No. RPS/NSK/45/2013 dtd. 13/2/2013 and No AKP/NSK/201/2011 dtd. 25/11/2011 and No. NSK-EXCUS-000-APP-11-14-15 dated 30/5/2014 passed by the Commissioner (Appeals) Central Excise & Customs, Nashik] For approval and signature: Honble Mr. P.K. Jain, Member(Technical) Honble Mr Ramesh Nair, Member(Judicial) =======================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
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3. Whether Their Lordships wish to see the fair copy : seen
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authorities?
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M/s. Mahindra & Mahindra Ltd.,
:
Appellants
VS
Commissioner of Central Excise & Customs, Nashik
:
Respondent
Appearance
Shri. Gajendra Jain, Advocate for the Appellants
Shri. Rakesh Goyal, Addl. Commissioner(A.R.) for the Respondent
CORAM:
Honble Mr. P.K. Jain, Member (Technical)
Honble Mr. Ramesh Nair, Member (Judicial)
Date of hearing: 28/1/2015
Date of decision: /3/2015
ORDER NO.
Per : Ramesh Nair
These five appeals are against five Orders-in- Appeal Nos. AKP/NSK/190/2011 dtd. 31/10/2011, No. NSK-EXCUS-000-APP-236-13-14 dtd. 16/8/2013, No. RPS/NSK/45/2013 dtd. 13/2/2013, No. AKP/NSK/201/2011 dtd. 25/11/2011, No. NSK-EXCUS-000-APP-11-14-15 dated 30/5/2014 passed by the Commissioner (Appeals) Central Excise & Customs, Nashik. The details of the impugned orders are extracted below:
Sr. No. Appeal No. Period Duty proposed in the show cause notice (in Rs.).
Duty demand confirmed in the impugned order(in Rs.).
Penalty (in Rs.).
Impugned order-in-appeal date
(a)
(b)
(c)
(d)
(e)
(f)
(g) 1 E/120/12 July 2000 to Mar 2010 2,39,39,010 1,33,69,135 1,33,69,135 31.10.2011 2 E/262/12 April 2010 to Sep 2010 2,24,467 20,588 20,588 25.11.2011
3. E/89435/13 Oct 2010 to Aug 2011 4,98,764 1,45,202 1,45,202 13.2.2013 4 E/87013/13 Sep 2011 to Aug 2012 2,53,258 1,41,997 1,41,997 16.8.2013
5. E/87793/14 Sep 2012 to Aug 2013 1,00,227 70,777 70,777 30.5.2014 The fact of the case is that the appellant is engaged in the manufacture of motor vehicle and they are clearing motor vehicle through various depots, which are regional sales office. Some of the vehicles are sold from the depot but in certain circumstances some of the vehicles are transferred from one RSO to another RSO and goods sold from the later RSO. The appellant are discharging the excise duty at the time of clearance of the vehicle from the factory at the price prevailing at the RSO where the vehicles are initially cleared. However, subsequently some of the vehicles are transferred to another RSO, where the prevailing price of the vehicle is higher and vehicle is sold at that higher price. Various show cause notices came to be issued wherein the differential excise duty was proposed to be demanded on the prevailing price of the vehicle at the depot(RSO) from where the actual sale of the vehicle took place and price at which excise duty was discharged at the time of clearance of the vehicle from the manufacturing unit. In the adjudication Ld. Adjudicating authority after some adjustment, on quantification confirmed the demand holding that under Rule 7 of Central Excise Valuation Rules, 2000, price prevailing at the depot from where the goods is actually sold at the time of clearance of the goods from the factory shall apply and not price, which is prevailing at the depot where the goods initially cleared. Aggrieved by the said order-in-original the appellant filed appeal before the Commissioner(Appeals), who has upheld the order-in-original of the adjudicating authority.
2. Shri. Gajendra Jain, Ld. Counsel for the appellant submits that in terms of Rule 7, the price prevailing at the place from where the goods are to be sold shall be the correct assessable value. It is his submission that when the motor vehicle is cleared from the factory first time to a particular depot the goods are supposed to be sold from the said first depot and therefore price prevailing at first depot shall be correct transaction value in terms of Rule 7. He submits that though the motor vehicle were transferred from first depot to another depot, since motor vehicle while clearing the goods from the factory was meant for sale from the first depot the price prevailing at the first depot shall apply and the price prevailing another depot, from where the motor vehicle is sold will be irrelevant. Therefore the appellant has discharged the excise duty on the correct transaction value. He placed reliance on following judgments.
(a) [2010(255) ELT 568(Tri-Kolkata)] CCE Vs. Bharat Petroleum Corporation Ltd.
(b) [2008(224) ELT 290(Tri- Bang.) CCE Vs. Carborandum Universal Ltd.
(c) [2005(181)ELT 27(Tri Del)] E.I. Du Pont India Pvt Ltd. Vs. CCE He submits that in many cases, the motor vehicle transferred from one depot to another depot were sold at higher price then the price prevailing at the said depot, at the time of clearance of the motor vehicle from the factory and in such cases the appellant have paid excess duty. He submits that for this reason also the confirmation of demand is not correct. Learned Counsel also submit that first show cause notice dated 19.7.2005 was issued for the period July, 2000 to Sep, 2004 by invoking extended period of limitation as provided under proviso to section 11 A of the Central Excise Act, 1944. He submits that there is no suppression of fact on the part of the appellant for the reason that the issue involved was raised by the audit party and in response, the appellant clarified the query vide their letter dated 15.2.2001, whereas the show cause notice was issued almost after 4 years from the query raised and answered. Therefore the appellant have not suppressed any fact from the Department. Hence the show cause notice dated 19.7.2005 is clearly time-barred. He further submits that in all the subsequent show cause notices, by invoking proviso to section 11 A, penalty under section 11 AC of the Central Excise Act, 1944 was imposed. It is his submission that in all the show cause notices issued subsequent to first show cause notice, there is absolutely no suppression is involved. Therefore penalty under section 11 AC was wrongly imposed.
3. On the other hand, Shri. Rakesh Goyal, Ld. Addl. Commissioner(A.R.) appearing for the Revenue reiterates the findings of the impugned orders. He further submits that appellants interpretation of Rule 7 is mis-leading and is not correct. He submits that in terms of Rule 7 the price prevailing at the place from where the good sold is to be considered as correct assessable value. In the present case though the motor vehicle were initially cleared to particular depot but subsequently transferred to another depot and actual sale has taken place from the subsequent depot, therefore price prevailing at such subsequent depot at the time of clearance of the motor vehicle from the factory should be treated as correct assessable value and the demand of duty was correctly confirmed. He placed reliance on the judgment of this Tribunal in the case of Brakes India Ltd. Vs. CCE, Chennai [2005(184) ELT 179(Tri- Chennai)] . He further submits that CBEC Circular No. 251/85/96CX dated 14/10/1996 on point of doubt, clarifies that if the goods are sold from different depot, at different normal price, each such normal price shall be assessable value for the goods sold from each such depot. It also clarifies that in case of inter depot transfer of goods, duty may be initially charged with reference to place of removal from where the goods are actually removed/intended to be sold and by charging differential duty, if any, on the basis of assessable value prevalent at the actual place of removal i.e. storage depot etc. from which the goods are finally sold. It is his submission that even as per above clarification price prevailing at the time of clearance of the goods at the depot from where the goods actually sold, shall be the correct assessable value.
4. I have carefully considered the submissions made by both the sides and perused the record.
5. The fact is not under dispute that motor vehicle in question is first cleared from the factory to a depot of the appellant and subsequently it is transferred to another depot from where the motor vehicle is sold. Now issue to be decided is the price prevailing at first depot or price prevailing at subsequent depot from where the goods is sold shall apply or otherwise. In the context of this issue the relevant Rule 7 of Central Excise valuation Rule, 2000 is reproduced below:
RULE 7. Where the excisable goods are not sold by the assessee at the time and place of removal but are transferred to a depot, premises of a consignment agent or any other place or premises (hereinafter referred to as such other place) from where the excisable goods are to be sold after their clearance from the place of removal and where the assessee and the buyer of the said goods are not related and the price is the sole consideration for the sale, the value shall be the normal transaction value of such goods sold from such other place at or about the same time and, where such goods are not sold at or about the same time, at the time nearest to the time of removal of goods under assessment.
It is not under dispute by rivals that valuation in case of goods sold at depot, shall be governed by the provision of above Rule 7. On careful reading of the said rule we are of the view that price prevailing at that depot from where the goods is sold shall apply. Contention of the appellant is not acceptable that at the time of initial clearance of motor vehicle to first depot, goods are intended to be sold from the first depot irrespective whether the motor vehicle first cleared to particular depot and subsequent transferred to another depot. The fact remains that the goods are sold from the subsequent depot, and not from first depot therefore in terms of Rule 7 a depot from where the goods is actually sold, the price prevailing at that depot at the time of clearance of the goods from factory shall be the correct transaction value for charging the excise duty. We are also of the view that after enactment of amended Section 4 of Central Excise Act, 1944 w.e.f. 1/7/2000 and Central Excise Valuation (determination of price of excisable goods) Rules, 2000 there is no room for concept notional value or for normal sale price. Accordingly, in terms of Rule 7, in case goods not sold from the factory but transferred to the depot the price prevailing at depot at the time of removal of the goods from the factory shall apply as transaction value. Where the goods is cleared to first depot and thereafter transferred to second depot or in the case directly supplied to second depot in both the cases since goods is sold from second depot in terms of Rule 7 i.e. goods are to be sold after there first clearance from the place of removal shall mean that only that depot or a place from where the goods is sold shall be considered as place of sale. In this scenario, price prevailing at the first depot has no relevance for the purpose of valuation of the excisable goods in terms of Rule 7. As regard reliance placed by the Ld. Counsel, the fact of the case are not same as is in the present case therefore reliance on those judgment is of no any help for the appellant. The reliance of Ld. A.R. on the Board Circular dated 14/8/1996 and judgment of Brakes India Ltd(Supra), since this circular and the judgment are in the context with the old Section 4 and Rule made therein i.e. before 1/7/2000 the are considered only as a persuasive. From Rule 7 it is very clear that price prevailing at the place of sale of goods shall be transaction value in respect of goods cleared from factory to depot. As regard the submission of Ld. Counsel that in some of the cases the motor vehicle were sold at higher price then the price prevailing at the depot of sale and therefore the demand is not sustainable. We do not agree with the contention of the Ld. Counsel due to the reason that those clearances of vehicles are not subject matter of the present case. On consideration of submission on limitation and invocation of proviso to section 11 A, we find that as regard first show cause notice dated 19.7.2005, the fact regarding moment of their vehicle, that is removal from factory to to their one depot and from their transfer to 2nd depot and sale of vehicle from 2nd depot was not disclosed to the Department. This fact was detected by the audit officers, therefore it is clear that there is suppression of fact on the part of the appellant. Once the fact during a period was suppressed, demand of that period can be raised up till 5 years. In the present case, the demand for the period prior to audit observation raised on January 2001 can be raised up to 5 years as there was clear suppression during that period. Hence, the demand of duty for the period up to January 2001 is correct and legal. In the show cause notice dated 19.7.2005, the demand was raised for the period from 1.7.2000 to 30.9.2004. In this regard, we observe that when the fact of the issue came to the notice of the Department in January 2001, subsequent to that it cannot be said that there was suppression on the part of the appellant. It is admitted in the impugned order that the fact of moment of vehicles from factory to 1st depot and from there to 2nd depot and sale there from was revealed from audit of the appellants record in January 2001. Therefore it cannot be said that subsequent to that period there was suppression of fact on the part of appellant. Therefore in our considered view the demand for the period February 2001 to June 2004 becomes time-barred, hence the same is dropped. As regards the submissions of the learned Counsel that penalty under Section 11 AC cannot be imposed in respect of normal period of 1st SCN and in all subsequent show cause notices issued covering the period July, 2004 to March, 2013 as the same were issued within normal period of one year. The fact of the modus operandi of the appellant came to the notice of the Department in January 2001 from the audit of the appellants record, thereafter there was no suppression of fact on the part of the appellant. In this factual matrix, we are of the considered view that proviso to section 11 A is not invokable in respect of the demand raised during the period July 2004 to March 2013. Consequently, penalty imposed under section 11 AC for the said period is not correct and legal. Therefore the penalty imposed under section 11 AC commensurate to the demand of duty for the period July,2004 to March,2013 is hereby dropped.
5.1 In view of our above discussions, we are of the considered view that though demand of duty for period involved in these appeals (except for the period February,2001 to June,2004) is sustainable on merit, however demand of duty pertaining to the period February 2001 to June 2004 is hereby dropped being time bar. Penalty imposed under Section 11AC commensurate to duty demand for the period July, 2004 to March,2013 is hereby dropped. Needless to say that the Ld. Adjudicating Authority shall re-quantify the duty, interest and penalty in terms of our above order and recover the same from the Appellant, in accordance with law. The Appeals are disposed of in the above terms (Operative part pronounced in court on __/3/2015) P.K. Jain Member (Technical) Ramesh Nair Member (Judicial) sk 2