Custom, Excise & Service Tax Tribunal
M/S. Lanco Industries Ltd vs Cce, Tirupathi on 18 January, 2010
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Bench Division Bench
Court I
Date of Hearing: 25/11/2009
Date of decision:..
Appeal No.E/274/06
(Arising out of Order-in-Original No.3/2006(C.Ex.)(Commr.) dt. 25/1/2006 passed by CC&CE, Tirupati )
For approval and signature:
Honble Mr. M.V.Ravindran, Member(Judicial)
Honble Mr. P.Karthikeyan, Member(Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2.
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3.
Whether their Lordship wish to see the fair copy of the Order?
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
Yes
M/s. Lanco Industries Ltd.
..Appellant(s)
Vs.
CCE, Tirupathi
..Respondent(s)
Appearance Dr.Samir Chakravarthy, Sr.Advocate and Mr.G.P.Sastry, Advocate for the appellant.
Ms.Sudha Koka, SDR for the Revenue.
Coram:
Honble Mr. M.V.Ravindran, Member(Judicial) Honble Mr. P.Karthikeyan, Member(Technical) FINAL ORDER No._______________________2009 Per M.V.Ravindran This appeal is listed for disposal in de-novo proceedings.
2. Appeal No.E/274/06 was disposed by this Bench vide Stay Order No.922/06 & Final Order No.1486/06 dt. 5/9/2006 holding that the appellant having deposited the entire amount of duty before issuance of show cause notice, is not liable for interest and penalty. Revenue filed Civil Appeal before the Honble Supreme Court against the said order in Civil Appeal No.3525 of 2009. By a judgment and order dt. 12/5/2009, the Honble Supreme Court set aside the Final Order and Stay Order dt. 5/9/2006 passed by this Tribunal, and remanded the matter to this Tribunal for fresh consideration in accordance with law and in light of the judgment of the Honble Supreme Court. Hence these de-novo proceedings.
3. The facts in brief, is that the instant appeal has been filed by the appellant aggrieved by the order of the Commissioner dt. 25/1/2006 vide which duty demand was confirmed along with interest and imposed penalty on the appellant. The appellant herein, inter-alia, manufactures Pig Iron and Molten metal( herein referred to as the said goods) in its factory situated at Rachagunneri(V), Srikalahasti(M), District Chitpur, Andhra Pradesh. The appellant sold the said goods to its group company situated in adjacent premises viz. M/s. Lanco Kalahasti Castings Ltd. (LKCL in short) during the period July, 2000 to 31/3/2004. The said LKCL and the appellant were amalgamated w.e.f. 8/4/2004. The appellants sold the said goods on payment of Central Excise duty, on transaction value i.e. the price actually charged by them from LKCL during the relevant period. However, Revenue felt that LKCL being associate company were falling within the ambit of related persons within the meaning of Section 4(3)(b)(ii) of the Central Excise Act, 1944 and as such, the value of the said goods needs to be determined in terms of Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, i.e. at the rate of 115% or 110% of the cost of production. Show Cause notice was issued on 27/7/2005 raising a demand of differential duty of Rs.1,26,09,437/- along with interest and proposing imposition of penalty. The show cause notice also invoked extended period by alleging that the appellant had willfully suppressed the relevant facts from the Department with aim to evade payment of duty. The said show cause notice was adjudicated and the adjudicating authority vide Order-in-Original No.3/2006(C.Ex.) (Commr.) dt. 25/1/2006, which is in challenge.
4. Ld. Counsel appearing on behalf of the appellant submits that the remand of the Honble Supreme Court in their case is a open remand. He would read the entire judgment of the Honble Supreme Court in their case and more specifically read para No.25. It is his submission that being a open remand, the appellants are liable to take all the submissions made on all the issues involved in appeal filed by the appellant. He would rely upon the judgment of the Honble Supreme Court in the case of Orient Papers & Inds. Ltd. Vs. Tahsildar-Cum-Irrgation officer [(1988) 7 SCC 303]. He also submitted the following:-
a. It is now settled by decisions of the Supreme Court as well as this Honble Tribunal that in a case like the instant case where differential duty demanded from an assessee is available as credit in another unit belonging to the same company or sister company and duty paid at one unit is available as credit in another unit, the situation is revenue neutral and, hence, there can be no demand of differential duty, interest and penalty upon / against the assessee. In this respect reliance is placed upon, inter alia, the following decisions:
(i) Super Forgings & Steels Ltd. vs. Commissioner of Central Excise, 2007 (208) ELT 153 (T)
- This decision was affirmed by the Supreme Court in Commissioner vs.Super Forpinps & Steels Ltd., 2007 (212) ELT A151 (SC)
(ii) Sundaram Fasteners Ltd. vs. Commissioner of Customs & Central Excise, 2009 (237) ELT 55 (T)
(iii) Atul Ltd. vs. Commissioner of Central Excise, 2009 (237) ELT 287 (T)
(iv) Mafatlal Industries Ltd. vs. Commissioner of Central Excise, 2009 (241) ELT 153 (T)
(v) Commissioner of C.Ex. vs. Crystal Quinone (P) Ltd., 2009 (233) ELT 499 (T)
(vi) Kores (India) Ltd vs Commissioner of C.Ex., 2004(178) ELT 901(T) In this respect reliance is also placed upon the following decisions of the Supreme Court, the principles laid down wherein, it is submitted hopefully apply to the instant case also:
(i ) Commissioner of Central Excise vs. Coca Cola India Pvt. Ltd., 2007 (213) ELT 490 (SC)
(ii) Commissioner of Customs & Central Excise vs. Textile Corporation Marathwada Ltd., 2008 (231) ELT 195 (SC)
(iii) Commissioner of Central Excise & Customs vs. Narmada Chematur Pharmaceuticals Ltd., 2005 (179) ELT 276 (SC) b. It is submitted that in such a case as aforesaid, it is also settled law that there cannot be any motivation on the part of the assessee to undervalue its clearances and, hence, there cannot be any allegation of suppression of facts with intent to evade duty and, hence, the extepded period of limitation contained in the Proviso to Section I1A(1) of the Act cannot be invoked. In this regard reliance is placed upon the following decisions:
(i ) Aurobindo Pharma Ltd. vs. Commissioner of Central Excise, 2007 (216) ELT 389 (T)
(ii) MRF Ltd. vs. Commissioner of Central Excise, 2004 (169) ELT 125 (T) c. It is submitted that, in the premises, the impugned demand is also barred by limitation, the Show Cause Notice having been issued beyond the prescribed period of one year as contained in Section 1 1A(l) of the Act (the Show Cause Notice having been issued on July 27, 2005 in respect of clearances effected during the period July 1, 2000 to March 31, 2004).
d. It is submitted that, therefore, on both the aforesaid grounds, the purported duty demand and, consequently, the demand of interest and imposition of penalty upon appellant is contrary to law, untenable and unsustainable.
e. Without prejudice to the aforesaid and fully relying on the same, further and in any event, from the Show Cause Notice, the impugned order as well as from the judgment and order of the Honble Supreme Court it would be seen that out of the total purported differential duty demand of Rs.l,26,09,437/-, a sum of Rs.70,06,163/- relates to molten metal, which was cleared by the appellant to LKCL. It is submitted that such molten metal, as has been confirmed by the Supreme Court, is not an excisable commodity and, hence, the excise duty paid thereon, even initially by the appellant, was on a mistaken premises of fact and law. In such a case there cannot be, in any event, an allegation of undervaluation and consequent demand of differential duty. As such, the purported duty demand of R.s.70,05,163/- confirmed by the impugned order is, therefore, in any event invalid, bad, untenable and unsustainable, no duty being payable on molten metal. In this respect reliance is placed upon, inter alia, the following decisions:
(1 ) DRM Steel Industries (P1 Ltd. vs. Commissioner - 2002 (147) ELT 1189 (T)
- This decision was affinned by the Supreme Court Steel Industries (P1 Ltd., 2003 (151) ELT A95 (SC)
(ii) TISCO vs. Collector of Central Excise, 1995 (76) ELT 602 (T)
- This decision was affirmed by the Supreme Court Collector vs. TISCO, 2000 (117) ELT A24 (SC) f. It is submitted that form the aforesaid it is clear and evident there has been no contravention by the appellant of any provision of the Central Excise Act, 1944 or the rules framed thereunder. The allegation and consequent purported finding of suppression of facts by the appellant with intent to evade payment of duty is erroneous and without any merit or substance whatsoever. As such, the imposition of penalty upon the appellant by the said order is erroneous, untenable and bad.
g. Further, as held by the Supreme Court the conditions for applicability of the Proviso to Section 1 1A(1) of the Act and Section 11AC thereof are the same. Hence, since there can be no invocation of the Proviso to Section 11A(1) of the Act in the instant case, the condition precedent for imposition of penalty under Section 11AC of the Act is also not satisfied. The imposition of penalty under Section 11AC of the Act upon the appellant is, for this reason also, contrary to law, untenable and unsustainable.
5.1. Ld. SDR on the other hand would submit that the appellant today cannot raise all the issues in the appeal as the appellant had already conceded the point of liability to pay the duty. It is her submission that at the time of hearing the stay petition in the first round of litigation, the appellants had clearly conceded the duty liability and have also considered in their grounds of appeal, the valuation has to be done as per Rule 8 of the Central Excise Valuation Rules. She would submit that the appeal filed by the Revenue against the order of the Tribunal was specifically only on two grounds i.e. penalty and interest having been set aside. It is her submission that the appellant having not challenged the decision of the Tribunal on merits cannot now open the issue in remand proceedings having conceded the said point and more so when the matter is remanded on the appeal of the Department. She would rely upon the following decision:-
i. ITI Ltd. Vs. CC, Bangalore [2006(204) ELT 605(Tri. Bang.)] ii. CCE(Appeals) Vs. Narayan Poly Plast [2005(179) ELT 20(SC)] iii. CCE, Kanpur Vs. Flock India (P) Ltd. [2000(120) ELT 285(SC)].
iv. Priya Blue Inds. Ltd. Vs. CC [2004(172) ELT 145(SC)] 5.2. It is her submission that the appellant is liable to pay the interest and penalty as there is a suppression of fact. It is her submission that the fact that the appellant and LKCL were related persons was suppressed from the Revenue. It is her submission that the provisions of Section 11AB will squarely apply even when the duty is paid before the issuance of show cause notice. For this proposition she would rely upon the following decisions:-
i. CCE&C, Aurangabad Vs. Padmashri V.V.Patil SSK Ltd. [2007(215) ELT 23(Bom.)] ii. K.Ram Kumar Vs. CCE, Nagpur [2006(193) ELT 504(Tri. Mum.)] iii. Com. Of Trade Tax, Lucknow Vs. Kanhai Ram Thekedar [2005(185) ELT 3(SC)] iv. Haji Lal Mohd. Biri Works Vs. State of UP [(1974) 3 SCC 137]
6. Ld. Counsel in his rejoinder would submit that the Honble Supreme Court has very clearly held in series of judgment that once there is a revenue neutrality aspect, the question of suppression of fact does not arise. It is his submission that the fact that the appellant was clearing the goods on payment of duty on the transaction value is not disputed by the Revenue. It is his submission that there is no reason for the appellant to suppress the value of the goods as there wont be any gain to the appellant as the purchaser of the appellant i.e. LKCL was always availing benefit of modvat credit.
7. We have considered the submissions made at length by both sides and perused the records.
8. We find when the matter was heard by the Honble Supreme Court on an appeal filed by the Revenue, the appellants herein were represented by Senior Advocate, who made submissions before the Honble Supreme Court, which is recorded by the Apex Court in para -10, which we may reproduce:-
10. Mr. Ashok Desai, learned Senior Advocate appearing for the assessee in the appeal arising from SLP(C ) No.4078/2008 submitted that the view taken by the Revenue that the assessee and LKCL, with respect to each other, were related person was quite unsound. Neverthless, the assessee paid the entire demand of Rs.1,26,09,437.00 first, in order to avoid litigation and secondly because the payment did not result in any actual monetary outflow for the assessee; whatever payment was made by the assessee, LKCL took CENVAT credit for it and reimbursed the full amount of duty to the assessee. He further submitted there was no question of suppression of any material fact by the assessee since all the information on which the show cause notice and the adjudication order were based were admittedly taken from the assessees annual report which was a material in public domain. He also submitted that there could not be possible any intent to evade any excise duty as the whole exercise was revenue neutral in as much as whatever sum the assessee paid as excise duty on transaction with LKCL is got back as reimbursement from the transferee. There being no element of fraud or suppression of facts etc. with intent to evade payment of duty any imposition of penalty was illegal and unauthorized.
9. The first and foremost to be decided in this case is to consider the preliminary objection of the ld. SDR as to whether we should go into the entire grounds of appeal, when the appeal filed before Apex court by the Revenue, is only against the setting aside of penalty and interest by the Tribunals order and also assessee having not challenged the said order. On this issue, we find that it is very important to reproduce the direction of the Honble Supreme Court while remanding the matter back to the Tribunal after considering the submissions made by the Counsels for both sides. The said findings are indicated at para 25 of the judgment of the Honble Supreme Court, which is as under:-
25. In light of the discussion made above it is evident that in both the appeals, orders were passed by the Tribunal on a wrong premise. In both the appeals, therefore, the impugned orders passed by the Tribunal are set aside and the matters are remitted to the respective Tribunals for fresh consideration, in accordance with law, and in light of this judgment. As the matters are quite old it is hoped and expected that the Tribunal would pass the final order within four months from the date of the receipt of this order. (emphasis supplied) It can be seen from the above reproduced order of remand, that the appellant, in their submissions before the Honble Supreme Court, did take up the point of there being no suppression of material fact and there was no intention to evade any excise duty and the entire exercise was revenue neutral and the amount so paid was available as credit to their own sister concern. It can also be seen that in para 25, the Honble Supreme Court has categorically set aside our order and remanded the matter back for fresh consideration. This would mean that there is a clear direction to hear the appeal in its entirety, as per the appeal filed by the appellant herein. We are also fortified in above views, by judgment of the Honble Supreme Court in the case of Orient Papers & Inds. Ltd. Vs. Tahsildar-Cum-Irrgation officer (supra) wherein, their lordships has settled the law, which we may respectfully reproduce:-
9. Though the various points on which the order made by the Irrigation Officer were challenged in the appeal on the basis of non-consideration of the question whether the point at which the water was lifted by the appellant was within the reservoir, entire order made by the Irrigation Officer was set aside and there was an open remand. When the scope of enquiry after remand was not restricted by the appellant authority, it was certainly permissible by the Irrigation Officer to examine all questions arising thereto. Therefore, we find absolutely no merit in the first contention urged on behalf of the appellant and it is accordingly rejected.
10. In view of the law so settled and in view of the direction given by the Apex Court, in this case as reproduced herein above, we hold that the appellant is entitled to urge all grounds of appeal in order to challenge non-leviability of the duty, non-imposition of penalty and interest. Hence, the objection raised by the ld. SDR on this point is without any basis and is liable to the rejected and we do so.
11. Another point raised by the ld. SDR is that during the earlier proceedings the appellants had not challenged the duty liability and in their submissions before the Tribunal, they had clearly indicated that they are not challenging the duty liability. She relies upon the submissions made by the appellant. We reproduce the said submissions in its entirety, as under:-
1. The petitioners are the Appellants in the above cited Stay Appln.No.E/187/2006 in Appeal No. E/2741 2006 filed against the Order in Original No.03/2006 dated 25-01-2006 passed by the Commissioner of Central Excise, Tirupathi Commissionerate, Tirupathi. The submissions already made in the appeal memorandum are reiterated and the same may be taken as part of the present proceedings also.
2. The issue involved in the instant case is duty demand of Rs.1,26,09,437/- for the period July 2000 to March, 2004 which is not disputed by the appellants. It is submitted that the appellants have not paid the said amount on the bonaflde belief that in respect of the unit belonging to the same company; the clearances can be made without payment of duty. There is no undue advantage derived by the appellants by not paying the duty involved, as the entire duty paid in one unit is available as Cenvat Credit at the other end. Hence, the demand is revenue neutral in effect.
3. It is further submitted that the appellants have paid the entire duty involved in the Show Cause Notice on 27 July 2005 itself whereas, the Show Cause Notice proposing duty demand was served on the appellants on 2gth July, 2005. Thus, the entire duty was paid prior to the issue of Show Cause Notice and as such, the proceedings of penalty and interest as confirmed by the Commissioner of Customs & Central Excise (Appeals), Guntur may be set aside in terms of the following settled case law on the subject
1) RINL Vs. CCE, Visakhapatnam {2004 (163) ELT-A53 (SC)} (Copy enclosed).
2) M/s. R.N.LL, Visakhapatnam Vs. CCEX, Visakhapatnam {2003 (161) ELT 285 (Tri-Bang)} (copy enclosed).
3) CCEx, Delhi-Ill, Gurgaon Vs. Machino Montell (I) Ltd {2004 (168) ELT466 (Tri-LB) (Copy enclosed).
4. Since the issue is settled in favour of the appellants, it is requested that the orders of the Commissioner of Customs & Central Excise (Appeals), Guntur in so far as the demand of interest and penalty on the duties already paid by the appellants may be set aside or stayed unconditionally, with consequential relief in favour of the appellants.
It can be seen from the above reproduced submissions that the appellant had not conceded the case. The only took the alternative plea, in order to end the litigation and once and for all settle the issue. We find that the identical submissions were made by the appellants counsel before the Honble Supreme Court.
12. It is an admitted fact that in this case the appellant had cleared the said goods on payment of central excise duty during the period July, 2000 to 31st March, 2004. It is also an admitted fact that the appellant had discharged the central excise duty on the transaction value on the price actually charged by them from their purchaser i.e. LKCL. We find from the show cause notice that there is no dispute during the relevant period when the said goods were cleared on payment of duty, they were regularly filing of returns to the authorities. The show cause notice issued to the appellant for demand of the differential duty is based upon the scrutiny of the annual reports for the relevant period. The entire exercise was under taken by the authorities on the scrutiny of the annual reports during the period, somewhere after the clearances took place during the relevant period. In the entire show cause notice, we do not find that the authorities had raised the issue of related persons on the scrutiny of monthly returns, which were undisputedly filed by the appellant during the relevant period. We also notice that the entire show cause notice proceeds only on the ground that the appellant and the purchaser i.e. LKCL were related persons, there being common directors in both the concerns.
13. We also find that there is a strong force in the contention of the ld. Counsel that if the purchaser LKCL is considered as a related person, there could not be any intention to evade payment of duty, that too adopting transaction value for the clearances made during the said period, as LKCL was eligible to avail and did avail the cenvat credit of the duty paid by the appellant. We find strong force in the contention raised by the ld. Counsel that the issue is now squarely decided by the following decisions:-
i. Super Forgings & Steel Ltd. Vs. CCE [2007(208) ELT 153(T)]
- This decision was affirmed by the Supreme Court in Comm. Vs. Super Forgings & Steel Ltd. [2007(212) ELT A151(SC)] ii. Sundaram Fasteners Ltd. Vs. CC&CE [2009(237) ELT 559(T)] iii. Atul Ltd. Vs. CCE [2009(237) ELT 287(T)] iv. Mafatlal Inds. Ltd. Vs. CCE [2009(241) ELT 153(T)] v. CCE Vs. Crystal Quinone (P) Ltd. [2009(233) ELT 499(T)] vi. Kores (India) Ltd. Vs. CCE [2004(178) ELT 901(T)]
14. It is seen that the appellant were filing regular monthly returns with the authorities during the relevant period and no objections were raised on the value adopted by the appellants, hence allegation of intention to evade duty cannot be sustained for the reason, that the recipient of the goods being held as a related person. There is absolute revenue neutrality, due to eligibility of cenvat credit. It is also seen that there are no allegations that the transaction value adopted by the appellant for clearances to LKCL during the relevant period, were influenced in any manner and there are also no queries raised by the Revenue on such value till issuance of show cause notice. We are of the view that show cause notice dt. 27/7/2005 which raises the demand of the duty for the period July, 2000 to 31st March, 2004 is blatantly time barred and any order which confirms the demand is liable to be set aside on the ground of limitation itself.
15. As regards the liability to penalty under Section 11AC and the interest on the demand confirmed by the adjudicating authority and paid by the appellant, we find that the directions of the Honble Supreme Court in the remand proceedings are very clear, it is directed that the Tribunal has to consider each and every aspect of the provisions of Section 11AC for invoking the same for imposition of penalty. Having already held that there cannot be any intention on the part of the appellant to undervalue the clearances of the said goods during the relevant period, as appellant had adopted transaction value, for the clearances of the said goods to discharge duty liability. There are no findings that this transaction value is incorrect or is influenced, in any manner. In the absence of any mis-statement, suppression or any allegation regarding clandestine removal etc., we are of the considered view that the provisions of Section 11AC cannot be invoked in this case.
16. As regards the liability to interest, since we have held that the entire demand of the duty is itself time barred, though it has been paid by the appellant, the question of payment of interest on the said amount does not arise.
17. In view of this, we hold that the duty liability on the appellant is hit by the period of limitation, consequently there cannot be any penalty or demand of interest on the appellant. Since the appellants purchaser, LKCL, has already taken the cenvat credit of the amount paid by the appellant, the question of refund of the same does not arise.
18. In view of this, the impugned order to the extent it imposes penalty and raises demand for the interest is set aside for the reasoning as herein above indicated.
(Pronounced in court on ..) (P.KARTHIKEYAN) Member (Technical) (M.V. RAVINDRAN) Member (Judicial) Nr 16