Custom, Excise & Service Tax Tribunal
M/S. Indian Oil Corporation Ltd vs Cce, Chennai on 2 November, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH AT CHENNAI E/712/2007 (Arising out of Order-in-Appeal No. 50/2007 (M-I) dated 31.07.2007, passed by the Commissioner of Central Excise (Appeals) Chennai). M/s. Indian Oil Corporation Ltd. : Appellant Vs. CCE, Chennai : Respondent
Appearance Shri S. Muthuvenkataraman, Adv., For the applicant Shri B. Balamurugan, AC (AR) For the respondent CORAM Honble Shri R. PERIASAMI, Technical Member Honble Shri P.K. CHOUDHARY, Judicial Member FINAL ORDER No. 41537 / 2015 Date of Hearing/Decision: 02.11.2015 Per: R. Periasami, The appellant filed appeal against the Commissioner (Appeals) order dated 31.07.2007.
2. The brief facts of the case are that the appellants are a PSU engaged in the manufacture of various lubricating oils falling under chapter 27 and 34 of the CETA, 1985. They have filed classification list in the year 1992 for various products and claimed exemption under Notifications No. 287/1986 as amended by No. 8/1992 dated 01.03.1992 and No. 120/1984 as amended by Notification No. 94/89-CE dated 01.03.1989. On verification of the classification list, it was noticed that the appellants have mis-classified certain lubricating oils and also claimed wrong availment of exemption notification. Accordingly, SCN dated 12/1992 was issued proposing for re-classification and also for denial of exemption notification and demand of duty. The adjudicating authority after several rounds of litigation in his denovo order dated 31.10.2005 re-classified the products under chapter heading 3403 and 2710 99 and denied the exemption notification and also demanded excise duty of Rs. 1,01,63,654/- towards BED and Rs. 15,24,549/- towards SED under Section 11A of CEA, 1944 along with interest. Against the said order both the assessee and the Revenue preferred appeals before the Commissioner (Appeals). The Commissioner (Appeals) in his impugned order dated 31.07.2007 allowed the revenue appeal and rejected the assessees appeal. Consequently, he modified the duty demand to Rs. 1,25,90,015/- as against the original demand of Rs.1,16,88,203/- (BED + SED) along with interest. Hence the present appeal.
3. The Ld. Advocate raised a preliminary objection and submits that there was no show cause notice issued under Section 11 A of CEA, 1944, demanding central excise duty. He drew our attention to the alleged show cause notice (dt. 12/1992) and submits that the said SCN was only a draft SCN and the work draft was deleted and issued as a fair show cause notice. He submits that as per the contents of SCN, it is only proposed re-classification of their products and denial of exemption notification. He submits that the said SCN only alleges why the classification should not be rejected and duty collected as per Rules. He also submits that the said SCN does not even proposes under what heading the goods are to be re-classified and only stated that why it should not be classified under different chapter headings. Whereas, the adjudicating authority in his denovo order not only reclassified and denied the exemption but also confirmed the demand by invoking under Section 11 A of CEA,1944. No SCN was issued for recovery of demand under Section 11A. As per the provision of Section 11 A, a SCN is mandatory and it should be specify exact demand amount, the period involved and the relevant proviso of Section under which the demand is proposed. In the absence of any such SCN, he submits that the adjudicating authority has gone beyond the SCN and confirmed the demand. The word mentioned in the SCN issued for re-classification is duty to be collected as per Rules and this cannot be construed as demand made under Section 11A. He relies on the decision of the Honble Supreme Court in the case of Metal Forgings Vs. UOI 2002 (146) ELT 241 (S.C.) and submits that the Honble Supreme Court clearly laid down the principles and held that SCN is a mandatory requirement for raising any demand. He relied on the following decisions:
1. Balaji Vegetble products Pvt. Ltd. Vs. CCE, Kanpur - 1999 (108) ELT 802 (Tri.)
2. Bharati Shipyard Pvt. Ltd. Vs. CCE, Pune 1998 (101) ELT 33 (Tri.)
3. Total Security System Vs. CCE, Goa 2008 (10) STR 624 (Tri.-Mum)
4. CCE, Pondicherry Vs. J.K. Pharma Chem. Ltd.
2008 (226) ELT 749 (Tri.-Chen.)
5. Jeet Ram Enterprises Vs. CCE, Delhi 2006 (199) ELT 528 (Tri.)
6. Reliance Industries Ltd. Vs. CCE, Mumbai-III 1997 (93) ELT 213 (Tri.)
7. Gujarat Machinery Manufactures Ltd. Vs. CCE, Baroda 1996 (87) ELT 7 (S.C.)
8. CCE, Meerut Vs. Indodan India Ltd.
2004 (172) ELT 313 (Tri. Del.)
9. Aviat Health Care Pvt. Ltd. Vs. CCE, Belapur 2009 (238) ELT 107 (Tri.-Mum.)
4. On the merits of the case, he reiterated the grounds of appeal para -2 (a, b, c, d). He further submitted that the SCN was issued on December, 1992, whereas, the adjudicating authority confirmed the demand for the period upto 1994, which is beyond the scope of the SCN. He submits that they contested before the Commissioner (Appeals) and in their reply to the SCN, but the same was not considered. He pleads to set aside the demands on the ground that no SCN was issued under Section 11A of the CEA, 1944.
5. On the other hand, the Ld. AR reiterated the findings of the adjudicating authority and findings of the Commissioner (Appeals) and countered the points raised by the Ld. Advocate and submits that in the present case there was SCN issued to the appellant for re-classification as well as demanding recovery of duty. All the case laws relied on by the appellants are not applicable to the case on hand. The adjudicating authority correctly re-classified and denied exemption notification and consequently demanded duty from the year 1992-1994 as the classification list was not finalized. He submits that once there is a SCN alleging for denial of exemption, the amount need not be quantified in the SCN, he relies on the following case law:-
1. Bihari Silk & Rayon Processing Mills (P) Ltd.
2000 (121) ELT 617 (Tri.-LB)
2. NGP Industries Ltd. Vs. CCE, JSR 2003 (152) ELT 414 (Tri.-Kol.)
6. We have carefully considered the submissions by both the sides and perused the records. Before going to the merits of the case, the main objection raised by the appellant is that there was no SCN issued for demanding excise duty under Section 11 A of Central Excise Act and contended that the demand confirmed in the OIA is not sustainable. In this regard, it is relevant to see the copy of the SCN enclosed in the appeal memorandum at page 39 of the paper book, which is signed by the Asst. Collector of Madras, Division-I, dated nil. On perusal of the said SCN, it is evident that the adjudicating authority issued the SCN mainly for reclassifying the products ie. Servo 40, Servo RP150, Servo SM85/175/260 under TSH 3403 of CETA, 1985, and also proposed to deny the exemption benefits claimed by the appellants in their classification list filed with the department as per the procedure existed during the relevant period. We find that the adjudicating authority neither brought out any allegation in the said SCN for demanding duty. All that the said notice says is that why the classification of the products claiming nil rate of duty should not be rejected and duty collected as per rules. The said notice is silent on what classification heading the adjudicating authority is proposed to re-classify the products, nor any demand amount is specified. Whereas, in OIO, the adjudicating authority after re-classifying the goods denied exemption and confirmed the excise duty under Section 11 A.
7. In this regard, the Honble Supreme Court laid down the law in the case of Metal Forgings Vs. UOI (supra). The Apex Court had clearly held that SCN is mandatory for recovering the duty not paid/short paid or erroneously refunded. The relevant paragraph of the Apex Court decision is reproduced as under:-
10.?It is an admitted fact that a show cause notice as required in law has not been issued by the Revenue. The first contention of the Revenue in this regard is that since the necessary information required to be given in the show cause notice was made available to the appellants in the form of various letters and orders, issuance of such demand notice in a specified manner is not required in law. We do think that we cannot accede to this argument of the learned Counsel for the Revenue. Herein we may also notice that the learned Technical Member of the Tribunal has rightly come to the conclusion that the various documents and orders which were sought to be treated as show cause notices by the Appellate authority are inadequate to be treated as show cause notices contemplated under Rule 10 of the Rules or Section 11A of the Act. Even the Judicial Member in his order has taken almost a similar view by holding that letters either in the form of suggestion or advice or deemed notice issued prior to the finalisation of the classification cannot be taken note of as show cause notices for the recovery of demand, and we are in agreement with the said findings of the two Members of the Tribunal. This is because of the fact that issuance of a show cause notice in a particular format is a mandatory requirement of law. The law requires the said notice to be issued under a specific provision of law and not as a correspondence or part of an order. The said notice must also indicate the amount demanded and call upon the assessee to show cause if he has any objection for such demand. The said notice also will have to be served on the assessee within the said period which is either 6 months or 5 years as the facts demand. Therefore, it will be futile to contend that each and every communication or order could be construed as a show cause notice. For this reason the above argument of the Revenue must fail. The ratio of the above Apex Court decision is clearly applicable in the present case as no SCN issued for demanding excise duty under Section 11 A. Further, the Honble Supreme Court in the case of Gujarat Machinery Manufactures Ltd. (supra), clearly held that the issue of SCN for recovery of duty short levied is mandatory requirement. The relevant portion of the Honble Supreme Court decision is reproduced as under:-
5.?The relevant provisions of Section 35A read thus :-
S. 35A. - Revision by Board or Collector. -
1.?.........................................
2.?The Collector of Central Excise may, of his own motion or otherwise, call for and examine the record of any proceeding in which any decision or order has been passed under this Act or the rules made thereunder by a Central Excise Officer subordinate to him (not being a decision or order passed on appeal under Section 35) for the purpose of satisfying himself as to the correctness, legality or propriety of such decision or order and may pass such order thereon as he thinks fit.
3(a)?No decision or order under this section shall be varied so as to prejudicially affect any person unless such person is given a reasonable opportunity of making a representation and, if he so desires, of being heard in his defence.
(b)?Where the Board or, as the case may be, the Collector of Central Excise is of opinion that any duty of excise has not been levied or has been short-levied or erroneously refunded, no order levying or enhancing the duty, or no order requiring payment of the duty so refunded, shall be made under this section unless the person affected by the proposed order is given notice to show cause against it within the time-limit specified in Section 11A.
Sub-section (2) of Section 35A empowers a Collector of Central Excise, suo motu or otherwise, to revise any decision or order made by a Central Excise officer subordinate to him. If he is satisfied as to its incorrectness, illegality or impropriety, he may pass such order thereon as he thinks fit. By reason of clause (a) of sub-section (3), no decision or order may be so varied as to prejudicially affect any person unless that person has been given a reasonable opportunity of making a representation and, if so desired, of being heard. Clause (b) of sub-section (3) applies when duty which has not been levied or has been short-levied or has been erroneously refunded is sought to be recovered. In such event, no order in this behalf can be made unless the person who would have to pay is (a) given notice to show cause against it, that is, against being required to pay; and (b) the notice is given within the time limit specified in Section 11A.
6.?The order of the Collector under Section 35A gave to the appellants no notice that he proposed to make an order that would require them to pay the duty which might be found to have been short-levied if the frit was found to be classifiable under Item 23A(4). The orders of the Collector and of the Tribunal, insofar as they required the appellants to pay the short-levied duty, even though limited to the period of six months prior to the date of the notice by the Tribunal, are bad in law.
7.?In the result, the appeal is allowed. The order of the Tribunal is set aside insofar as it directs the Central Excise authorities to recalculate the amount of the short levy in the light of its observation that recovery of the short-levied duty could be made in respect of the period of six months preceding the date of the Collectors order and requires the appellants to pay such sum. In the event that any part of such sum has been recovered, the same shall be returned to the appellants.
Ratio of both the Apex Court judgments squarely applies to the present case. Further, we find that this Tribunal in the case of Aviat Health Care Pvt. Ltd. (supra), on identical issue allowed the appeal and held that SCN is required to be issued bringing out specific allegations, exact amount of duty demand which is proposed to be recovered under Section 11 A. In the present case, we find that the SCN is vague and issued for re-classification of the goods and no demand was raised. Whereas, under Section 11 A, it is mandatory for any recovery of duty not paid or short paid. There shall be a SCN demanding the recovery of duty under Section 11 A. In the present case, under no stretch of imagination, the alleged SCN can be construed as SCN issued under Section 11 A. The said SCN was primarily issued for re-classifying and denying exemption notification as per the classification list filed by the appellant under the erstwhile Rules. The adjudicating authority proposed to change the classification and denying exemption, there should be a clear demand issued under Section 11 A. Whereas, in the present case, neither SCN says so, on the contrary, the adjudicating authority after re-classifying the goods and denying exemption, straightaway confirmed the demand under Section 11 A. Therefore, by respectfully, following the both the Apex Court decisions, we find there is no demand in the SCN issued under Section 11 A for recovery of any short levy of duty on account of re-classification. The citations relied by the Revenue in the case of NGP Industries Ltd. (supra) and Bihari Silk & Rayon Processing Mills (supra) are not applicable to the present case, for the reason that in the above case laws where SCN was issued under Section 11 A but without amount being quantified. Further, the said LB decision is superseded by the Honble Supreme Court decision in the case of Metal Forgings (supra) in the year 2002. Therefore, without going into the merits of the case and by respectfully following the above Apex Court decisions, the demand is not sustainable and liable to be set aside. Accordingly, the impugned order is set aside and the appeal is allowed.
(Order dictated and pronounced in the Open Court)
(P.K. CHOUDHARY) (R. PERIASAMI)
JUDICIAL MEMBER TECHNICAL MEMBER
BB
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