Custom, Excise & Service Tax Tribunal
Sagar Spun Pipes vs Commissioner Of Central Excise on 14 March, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI COURT No. II APPEAL No.E/3769/04 (Arising out of Order-in-Appeal No.BPS(322)72/2004 dated 15/09/2004 passed by Commissioner of Central Excise (Appeals), Aurangabad) For approval and signature: Honble Mr. P.R. Chandrasekharan, Member (Technical) Honble Mr. Anil Choudhary, Member (Judicial) 1. Whether Press Reporters may be allowed to see :No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the :Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether Their Lordships wish to see the fair copy :Seen of the Order? 4. Whether Order is to be circulated to the Departmental :Yes authorities? ========================================
Sagar Spun Pipes Appellant Vs. Commissioner of Central Excise, Respondent Aurangabad Appearance: Shri.M.H.Patil, Advocate for appellant Dr.B.S.Meena,Addl. Comm. (AR), for respondent CORAM: Honble Mr. P.R.Chandrasekharan, Member (Technical) Honble Mr.Anil Choudhary, Member (Judicial) Date of Hearing : 14/03/2014 Date of Decision : 14/03/2014 ORDER NO Per: P.R.Chandrasekharan
1. The appeal arises from Order-in-Appeal No.BPS(322)72/2004 dated 15/09/2004 passed by Commissioner of Central Excise (Appeals), Aurangabad.
2. The facts relevant to the case are as follows:
2.1 A case of evasion of excise duty was made against the appellant, M/s.Sagar Spun Pipes, Aurangabad. The charge against the appellant was that during the year 1995-96 and 1996-97, the appellant crossed the small scale exemption limit of Rs.30 lakhs and they did not discharge the excise duty liability. The excess clearances for the year 1995-96 was found to be Rs.35,73,012/- and for the year 1996-97 the same was found to be Rs.43,85,973/-. As per the notification, the full exemption limit is Rs.30 lakhs. Clearances in excess of Rs.30 lakhs and not exceeding Rs.50 lakhs was subject to a concessional rate of duty of normal duty 5% and clearances in excess of Rs.50 lakhs was subject to normal rate . The normal rate of duty was 15% advalorem. Therefore, for the clearances in excess of Rs.30 lakhs but not exceeding Rs.50 lakhs, the applicable rate of duty was 10% advalorem. On this basis a duty demand of Rs.9,89,222/- was confirmed against the appellant by the adjudicating authority vide order dated 04/02/2002 along with interest thereon and also by imposing equivalent amount of penalty under Section 11AC of the Central Excise Ac, 1944. Aggrieved of the same, the appellant preferred an appeal before the lower appellate authority. The appellant contended that the appellant should have been given the benefit of abatement towards sales tax paid on the sale of goods, and the consideration received should be treated as cum tax and the appellant should have been given the benefit of Modvat Credit scheme under which input duty credit was available on the inputs consumed in the manufacture of goods cleared by the appellant. The learned appellate authority, after considering the contentions made by the appellant, held that abatement towards sales tax payable is permissible as deduction and accordingly allowed an abatement of Rs.4,29,891/- being the sales tax amount payable. As regards the claim of the appellant for grant of Modvat Credit, he came to the conclusion that inasmuch as the appellant did not follow the statutory procedures prescribed for availment of Cenvat Credit, the said benefit is not available. Accordingly he dismissed the claim. On the basis of the above, the lower appellate authority held that after allowing the abatement on sales tax, the remaining Central Excise duty is required to be recovered from the appellant and also imposed an equivalent penalty. He also held that on the recomputed duty liability, interest is also liable to be recovered from the appellant. Aggrieved of the same, the appellant is before us.
3. The learned Counsel for the appellant made the following submissions.
3.1 In the present case, the computation of duty demand is erroneous. The appellant had been supplying the goods initially on delivery challans and thereafter they raised commercial invoices for the sale of the goods. The duty demands have been computed taking into account the amounts mentioned both in delivery challans as also in the commercial invoices and thus, there is a duplication of demand. According to the appellant, the duty liability would be only Rs.5,21,149/- which they had paid subsequent to the investigation.
3.2 The second contention of the appellant is that the benefit of cum-duty price has not been extended to the appellant in the instant case and the entire amount received has been treated as taxable. Reliance has been placed on a number of judicial pronouncements, namely, Srichakra Tyres Ltd. Vs. CCE, Madras 1999 (108) ELT 361 (Tri), CCE, Delhi Vs. Maruti Udyog Ltd., - 2002 (141) ELT 3 (SC) and CCE, Chandigarh Vs. Supreme Fabrics Ltd. 2008 (221) ELT 161 (SC), JK Furnishers vide Order No.A/962/13/EB/C-II dated 10/10/2013 and Reliance Industrial Products Vs. CCE, Daman 2010 (260) ELT 312 (Tril-Ahmd) in support of this contention that the appellant is eligible for the cum tax benefit. It has been further contended that the appellant would be eligible for Modvat Credit of the duty paid on inputs which according to the appellant works out to Rs.1,93,550/-. Reliance has been place in respect of the same on the decisions of the Supreme Court in the case of Formica India Division Vs. CCE 1995 (77) ELT 511 (SC) and Camlin Ltd., Vs. CCE, Mumbai 2008 (232) ELT 266 (Tri-Mum). It is contended that if these benefits are granted to the appellants, the duty demand would come down substantially. It is also contended that the imposition of penalty under Section 11AC on the appellant is not sustainable in law, inasmuch as the said provisions came into the statute book only with effect from 28/09/1996, whereas the demand in the present case relates to 1995-96 and 1996-97. Therefore, for the period before 28/09/96, the provisions of Section 11AC would not apply.
4. The learned Additional Commissioner (AR) appearing for the Revenue on the other hand contends that the claim of the appellant towards transportation charges was already allowed by the adjudicating authority wherein he has observed that originally the duty was calculated as Rs.10,74,667/- but after considering the transportation it was reduced to Rs.9,89,222/-. Similarly, the appellate authority has also granted abatement towards the sales tax payable in the impugned order.
4.1 As regards the cum-tax benefit availed by the appellant, the learned Additional Commissioner (AR) relied on the decision of the Apex Court in the case of Amrit Agro Industries Ltd., Vs. CCE, Ghaziabad 2007 (210) ELT 183 (SC) and CCE Vs. Bata India Ltd. 1996 (84) ELT 164 (SC) wherein the Honble Apex Court held that excise duty is excludible under Section 4 (4) (d) (ii) of the Central Excise Act, 1994 only when price of the goods includes the amount of excise duty payable. In the present case there is no evidence on record to show that the prices charged by the appellant from the buyers was inclusive of excise duty and therefore, in the absence of any such evidence, the benefit of cum duty price cannot be extended to the appellant.
4.2 As regards the claim for the benefit of Modvat Credit, the learned Additional Commissioner (AR) reiterates the findings of the lower authorities and contends that inasmuch as the appellant was not registered at the material point of time nor did he follow any of the procedures prescribed, the benefit cannot be granted. Therefore, the rejection of benefit of Modvat Credit by the lower authorities is correct in law and accordingly needs to be upheld.
4.3 As regards the plea that Section 11AC would not apply to the facts of the case, the AR submits that for the period after 28/09/96 the provisions of Section 11AC would apply and therefore, imposition of penalty under Section 11AC for the period after 28/09/96 cannot be faulted.
5. We have carefully considered the submissions made by both the sides.
5.1 As regards the first contention raised by the appellant that there is duplication of demand by computing the value of clearances twice, there is no evidence produced before us in support of this contention. In any case, from the records, the appellant themselves have admitted to a duty liability to Rs.6,27,728/- in their reply dated 26/03/1999 and a reduced liability of Rs.5,21,149.25 in their reply dated 24/09/99. Thus, the appellant have been adopting changing stands in their replies, but the fact remains that the appellant did exceed the exemption limit of Rs.30 lakhs and did not discharge the excise duty liability. In the absence of any evidence to the contrary led by the appellant, the only conclusion that can be reached is that the duty demands computed by the lower authorities are correct. Thus the only question to be decided is whether the appellant is eligible for the cum-duty benefit or not and whether the appellant is liable for the benefit of Modvat Credit or not.
5.2 As regards the cum duty benefit claimed by the appellant, reliance has been placed by the learned Counsel for the appellant in the cases of Camlin Ltd., Formica India , Srichakra Tyres, Maruti Udyog cited (supra). The Maruti Udyog case dealt with a situation where the appellant Maruti Udyog Ltd. did not discharge excise duty on the waste and scrap of aluminium and iron and steel sold by them to various buyers. The appellant had also availed Cenvat Credit of the duty paid on the inputs under Rule 57A of the Central Excise Rules. In that case, the Honble Apex Court held that the facts indicate that after the sale transaction was completed, the purchaser was under no obligation to pay any extra amount to the seller, namely, the respondent. In such a transaction, it is the seller who takes on the obligation of paying all taxes on the goods sold and in such a case, the said taxes on the goods sold are to be deducted under Section 4 (4) (d) (ii) and this is precisely what has been directed by the Tribunal. There is also nothing to show that the sale price was not cum-duty. Similarly, in the case of Supreme Fabrics Ltd., the issue was whether excise duty was payable on loading charges which the appellant had claimed as abatement while computing the taxable value. In that context, the Honble Apex Court held that loading charges form part of assessable value and excise duty would be leviable and the loading charges so collected should be treated as cum-duty tax. In Srichakra Tyres Ltd. case, the facts of the case were that the appellant cleared tyres on the sale price declared by them. Later on price revisions were effected upwards but they did not discharge the additional duty liability on the enhanced prices collected from the customers. In the context of duty demand on the enhanced price, that is, the revised price collected minus the original price on which the duty was raised, the question of cum-duty liability was considered. In that context it was held that the consideration should be treated cum tax. It is worth noting that in all these decisions, the appellants were discharging duty liability on some price and the demand for differential duty arose an account of price revision. It was in that context it was held the consideration received should be treated as cum tax. In the facts of the case before us, the appellant had not discharged any excise duty liability on the clearances effected in excess of Rs.30 lakhs and it is a pure case of tax evasion. Therefore, the facts of the present case are distinguishable from these obtaining in Srichakra Tyres and Maruti Udyog case cited supra. It is a settled position in law facts of a decision relied upon have to be shown to fit the factual situation of a given case. Without such discussion reliance could not be placed on a decision. Circumstantial flexibility one additional or different fact may make a world by difference between conclusions in two cases, as held by the Apex Court in Alnoori Tobacco Products [2004 (170) ELT 135 (SC)] 5.3 Another claim of the appellant is that they are eligible for Modvat Credit of the duty paid on the inputs used in the manufacture of pipes manufactured and sold by them. It is on record that during material period, the appellant was not registered with the department nor were they following any of the statutory procedures prescribed for availing of Modvat Credit. The question is when the assessee does not comply with the statutory provisions for availing of credit, can he claim the benefit? This question has been answered by the Honble Apex Court in a number of decisions. Only two cases are required to be mentioned here. First case is CCE, New Delhi Vs. Harichand Shri Gopal 2010 (260) ELT 3 (SC) and the second Indian Oil Corporation Ltd., Vs. CCE, Vadodara 2012 (276) ELT 145 (SC). In both these cases a question arose whether duty exemption would be available in case the procedure for claiming the exemption was not followed by the assessee. In both these cases, the appellant had substantially complied with the conditions of exemption and the only lapse committed by them was not following the prescribed procedure. The Honble Apex Court held that substantial compliance is not sufficient for claiming a benefit if the procedure prescribed for claiming the benefit is not followed. In the present case, the Modvat scheme as it stood at the relevant time envisaged filing of declaration, maintenance of records showing receipt of the goods, consumption of goods for manufacture, filing of returns indicating the amount of duty paid through the credit account and other statutory requirements. When none of these requirements have been complied with by the appellant, we do not understand how he can claim the benefit of Modvat Credit. In view of the above legal and factual position, we are of the considered view that the appellant is not eligible for the benefit of Modvat Credit on the inputs used in the manufacture of pipes which was manufactured and cleared by them clandestinely, without payment of duty.
5.4 The last question for consideration is whether the appellant is liable to penalty under Section 11AC of the Central Excise Act especially when the said provision came into the statute book only with effect from 28/09/1996. In the show-cause notice the proposal is for imposition of penalties under Section 11AC read with Rule 173Q of the Central Excise Rules, 1944. Rule 173Q as stood at the material point of time provided for imposition of penalty up to five times the value of the goods clandestinely removed. However, in the impugned order penalty has been sought to be imposed only equal to the duty sought tobe evaded. Since penalty has been imposed within the limits prescribed by the law as it stood at the material point of time, the same cannot be faulted. Therefore, imposition of penalty equal to the duty for the period prior to 28/09/96 can be clearly sustained under Rule 173Q and for the period on or after 28/09/96, the same is sustainable under Section 11AC of the Act.
6. In view of the above legal and factual matrix, we do not find any merit in the appeal. Accordingly, the same is dismissed.
(Dictated in Court) (Anil Choudhary) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) pj 1 11