Customs, Excise and Gold Tribunal - Delhi
M/S. Hindustan Wires Ltd. vs Commissioner Of Central Excise, Delhi on 11 April, 2001
Equivalent citations: 2001(75)ECC626
ORDER
Jyoti Balasundaram
1. On 26.6.98 Central Excise officers of Preventive Division, Faridabad visited the manufacturing premises of M/s. Hindustan Wires Ltd., who are engaged in the manufacture of steel wire, LPG cylinders, SC valves and regulators and came across agreements between the assessee and various Oil Companies viz. M/s. IOC, M/s. BPCC Ltd. and HPC for supply of LPG cylinders with valves and regulators. According to the agreement the goods were to be despatched preferably by rail "freight prepaid". The Oil Companies had the right to require the assessee to despatch the goods by road and in such cases, Oil Companies were to pay the actual freight charges incurred by the assessees. Insurance policies showed that the goods sold were insured by the assessees till the goods reached the buyers premises so the value of the goods at the place of sale was held to be the basis for assessment to duty under the Central Excise Act. Freight and insurance charges were held to be includible in the assessable value upto the place of delivery i.e. buyers premises, by holding that the buyers premises where excisable goods were sold/delivered was the place of removal as per Sub-clause (iii) of Clause (SIC) of Sub-section (4) of Section 4 of the Central Excise Act as amended w.e.f. 28.9.96. Thus a show cause notice dated 7.8.98 was issued to M/s. Hindustan Wires Ltd. for recovery of duty of Rs.10,18,192/- for the period 28.9.96 to 31.3.98 as a result of inclusion of freight and insurance charges in the assessable value of the goods manufactured and cleared to oil companies, and proposing imposition of penalty under Rule 173Q and Section 11AC and proposing levy of interest. The notice invoked the extended period of limitation under the proviso to Section 11A of the Central Excise Act on the ground of suppression of the fact that the place of removal was buyers premises, (sale took place at the destination) instead of at the factory gate. The Assistant Commissioner confirmed the duty demand with interest @ 20% per annum and penalty of amount equal to duty was imposed under the provisions of Section 11AC of the Act read with Rule 173Q of the Rules. The Commissioner (Appeals) upheld the demand but reduced the penalty to Rs.305 lakhs. The assessee has filed an appeal against confirmation of duty demand and imposition of penalty, while the Revenue has come up in appeal against the reduction of penalty.
2. We have heard Shri Y.K. Kumar, learned Advocate and Shri S.K. Das, learned DR.
3. We find that in identical circumstances, the Tribunal has upheld the duty demand in the case of Escorts JCB Ltd. vs. Commissioner of Central Excise, New Delhi reported in 2000 (118) ELT 650, holding as under:
4. Section 4(4)(b) of the Central Excise Act, 1944 defines "place of removal". Sub-clause (iii) of Section 4(b) is the one with which we are concerned in this appeal. It states "place of removal" means -
"a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory."
Place where excisable goods are sold can be a place of removal. A place where the goods are sold can be place where the property in the goods sold passes from seller to the buyer. The property in the goods passed from the seller to the buyer at the factory gate as contended by the Representative of the appellant. Then the value of the goods at factory gate must be the basis for assessment to duty. So, the question that arises for consideration is whether property in the goods sold did, in fact, pass from the appellant firm to the buyer when the goods left the factory gate. It is an admitted case that the appellant got the goods insured when it was sent to the purchaser. Policy was taken in the name of the appellant. In the course of transit if the goods are lost, it is conceded before us, insurance company was to reimburse the appellant. Insurance company was reimbursing the appellant only because the appellant continued to have the property in the goods which were in transit. In this view of the matter it can be said that though the goods were in transit, the appellant continued to be the owner of the goods. In other words, no sale took place till it reached the buyers destination. Only when the goods reached buyers destination, the sale takes place. In such a situation, the goods belonging to the appellants were sold at the premises of the buyer. As per definition of place of removal referred to earlier, that place is the relevant place with reference to which value of the goods is to be assessed. In these circumstances, we do not find any infirmity in the conclusion reached by the Commissioner in the impugned order in imposing duty amounting to Rs.29,65,532 under Rule 9(2) of the Central Excise Rules, 1944 red with Section 11A of the Central Excise Act. Following the ratio of the above order which had the approval of the Larger Bench of the Tribunal in the case of M/s. Prabhat Zarda Factory reported in 2000 (38) RCT 641 and which is on all fours with the facts of the present appeals, we hold that the duty demand is sustainable.
4. The next plea of assessees is that the demand is partly barred by limitation as the assessees did not conceal any material facts in order to evade payment of duty. However, we see no force in this submission. The appellants have not been able to establish that they had disclosed to the Department that the sale of the goods in question would take place only at the destination viz. the premises of the buyers. Further, no documents showing the insurance taken out by them while the goods were sent to the purchasers premises were made available to the Department. Under these circumstances, we uphold the action of the authorities in taking recourse to the extended period of limitation under the proviso to Section 11A. We, therefore, hold that the duty demand and penalty are sustainable and accordingly uphold the impugned order and reject the appeal of the assessees.
5. Coming to the appeal of the Revenue, we see no substance in the contention raised therein. Section 11AC of the Central Excise Act fixes a mandatory penalty. The limit fixed therein is the maximum limit and the authority has a discretion to impose a lesser penalty. This is also the view expressed by the Tribunal in the case of Escorts JCB Ltd. cited supra. We, therefore, reject the appeal of the Revenue.
[Dictated in open court]