Customs, Excise and Gold Tribunal - Bangalore
Mco Hospital Aids Pvt. Ltd vs Commissioner Of Central Excise on 30 August, 2002
Equivalent citations: 2002(84)ECC148
ORDER S.S. Sekhon, Member (T)
1. The appellant is manufacturing surgical sutures. They received orders from Government hospitals. The price approved for such supplies was a cum-duty price. They raised invoices as follows:--
All inclusive price X (omitted Sales
Tax & other local
levies were added)
Less: Discount (arrived at on the formula
rate of duty
X x -----------------------------------------------------------------
100 + rate of duty normally rounded off to a single decimal point) Y
-
Z
Assessable Value
Add: Excise duty at appropriate percentage of Z A
-----
TOTAL Z+A
-----
In all cases, Z + A was equal to X, subject to a marginal difference explained as due to rounding off. The appellant and the department agree that as per the purchase orders, no discount is allowable nor any discount was allowed. The appellant has described in the invoice discount, the figures Y
2. A Show Cause Notice stating that the appellant had collected duty twice; once by including it in the price, and the other, by showing the excise duty amount separately on the invoices. The following demands were made:--
______________________________________________________________________________ SCN No. Date Period Covered Amount ______________________________________________________________________________ V/42/15/03/2000 Adjn 28.6.2000 1994 to 1999 Rs. 1,02,22,507 V/42/15/03/2000 Adjn 27.9.2000 September 1999 Rs. 4,91,979 November 1999 Rs. 1,07,14,486 ______________________________________________________________________________ Invoking the larger period of limitation, seeking to recover the duty alleged to be collected twice under Section 11D of the Act. Another SCN V/52/15/03/2000 dtd. 28.6.2000 was issued alleging that the discount was not passed on to the customer, therefore, a duty of Rs. 17,58,417 is to be paid. It was also proposed to levy penalty under Rule 173Q.
3. The appellant contend--
(a) That the abatement towards excise duty is wrongly described as discount. The appellant is entitled to deduct excise duty payable under Section 4(4)(d)(1) of the Central Excise Act, 1944 (Act).
(b) That Ms. Ratna on behalf of the appellant has clearly stated in her statement that discount is nothing but abatement towards excise duty. The Show Cause Notice refers only partially to her statement and her main point that the so-called discount is nothing but abatement towards excise duty has not been taken note of.
(c) They have received only the total amount payable as per purchase order and nothing more. This proves that the appellant had not collected any excess amount as excise duty over the invoiced amounts.
(d) Section 11D of the Act is subject to Section 11A of the Act. The appellant had furnished copies of invoices. The department is fully aware of the facts and, therefore, the larger period of limitation cannot be invoked. The entire demand is barred by limitation.
(e) Section 11D has been held to be un-enforceable by the Hon'ble Madras High Court.
4. The Ld. Commissioner overruled all the objections and confirmed the demands. The appellant filed an appeal to the Tribunal. The Tribunal was pleased to remand the case back to the files of the Ld. Commissioner. The Commissioner again confirmed the demand. Aggrieved by the aforesaid order, consequent to the remand, the appellant moved this appeal.
5. The Commissioner in the order now impugned determined:--
07. I observe that before proceeding to decide the case, let me peruse the order of Hon'ble CEGAT and its observations to remand back the case for de novo adjudication. I observe that Hon'ble CEGAT vide order, dtd. 15.5.2001 has observed that appellant's advocate submittted that issue relates to valuation. He submitted that appellant have claimed abatement of excise duty by mistake it was shown as discount and in fact it is not a discount but an abatement of excise duty and the department has proceeded to pass an order as if it is only a discount. The Hon'ble Tribunal found that there is a factual discrepancy in arriving at the conclusion with reference to determination of valuation and that the appellants have filed a detailed chart to substantiate their claim that what the appellant have claimed was only abatement of excise duty and not discount. Since the detailed chart was not before the authorities, the matter will have to go back for reconsideration.
08. To appreciate the facts I would like to examine the allegations levelled against the assessee in the impugned show cause notice. I observe that the department has issued two show cause notice, dtd. 23.6.2000 and 27.9.2001. The main allegation in the said show cause notice is that the value adopted and reflected in the invoices for the purpose of duty is the price which is reflected/quoted in the tender/purchase order. The said tender/purchase order price is inclusive of Center Excise duty. I observe that this fact has also been admitted by the assessee vide their various written submissions and at the time of personal hearing also. This fact is also supported by the contentions mentioned in the tender price list. On perusal of the invoices under which the assessee cleared the goods to their customers, it is observed that assessee has again charged Central Excise duty on the cum duty price mentioned in the tender/purchase order price. I observe that the department vide the show cause notice has alleged that in view of Section 11D of the Central Excise Act, 1944, the said excess Central Excise duty collected from the buyer is to be paid to the Government of India. Section 11D of the Central Excise Act, 1944 reads as under:
(1) Notwithstanding anything to the contrary contained in any order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made thereunder, (Every person who is liable to pay duty under this Act or the rules made thereunder, and has collected any amount in excess of the duty assessed or determined and paid on any excisable goods under this Act or the rules made thereunder from the buyer of such goods) in any manner as representing duty of excise, shall forthwith pay the amount so collected to the credit of the Central Government.
0.9. In view of Section 11D mentioned above, I observe that if an assessee collects any amount in excess of duty assessed or determined and paid on any excisable goods under this Act or Rules made thereunder from the buyer of such goods in any manner representing duty of excise, he is under legal obligation to pay that amount so collected to the credit of the Central Government.
10. Before proceeding further I want to analyse the fact and the allegations mads in the show cause notice regarding excess collection of Central Excise duty by the assessee. For the purpose of analysing this fact, I have perused various invoices as well as the tender/purchase orders. Invoice No. 165 dtd. 3.8.99 shows the gross value as Rs. 16,200. This value tallies with the value given in the relevant purchase order which means that this value is cum duty price value since the value reflected in the purchase order are inclusive of excise duties. I observe that the assessee in the said invoices has given a discount at the rate of 13.8%. After giving the said discount, the gross value is mentioned at Rs. 13,964.40. This gross value also includes Central Excise duty of Rs. 1,926 calculate at the rate of 16% which was the applicable rate of Central Excise duty at the relevant time. I further observe that the assessee has collected Central Excise duty on the gross value of Rs. 13,964.40 after giving a discount at the rate of 13.8%. I observe that at the relevant period the Central Excise duty on the goods cleared by the assessee was 16% ad valorem. The gross value of Rs. 16,200 includes duty at the rate of 16% ad velorem that is Rs. 2,234 On perusal of the said invoices it is observed that the assessee has collected total duty of Rs. 4,160 (Rs. 1,926 + Rs. 2,234). However the assessee has paid the duty of Rs. 2,234. Therefore, the assessee has retained a sum of Rs. 1,926 with him which he has not paid to the credit of the Central Government. The details of other invoices which were issued against the purchase orders is given at the Annexure to this order. Based on the above fact, it is pertinent that the assessee has collected Central Excise duty twice from the buyers of the goods which in fact he cannot under the law. However, I observe that in the event of excess collection of Central Excise duty by the assessee from the buyer he is under moral and legal obligation to deposit the said portion of the duty to the credit of the Central Government.
11. I have also gone through the decision of the Hon'ble CEGAT cited supra wherein the Hon'ble CEGAT has remanded the case for de novo adjudication afresh. So far as the question of discount or abatement is concerned, I observe that both have got no bearing in this case. At the first instance, neither any discount or abatement of Central Excise duty is allowed under the law. The assessee is at liberty to give discount or abatement to the buyer of the goods so far as the price of the goods is concerned but under no circumstances he can give any discount or abatement of Central Excise duty payable on the goods cleared by him. I observe that Hon'ble CEGAT has also not given any ruling that discount on Central Excise duty is not allowed whereas abatement is allowable. During personal hearing as well as vide their written submissions, the assessee has harped only on one point that in the invoices they have by mistake mentioned discount which in fact was abatelement. While doing so, they appeared to be under the impression that abatement of Central Excise duty is allowed and. therefore they are giving abatement to the buyers of the goods of that portion of Central Excise duty.
12. I further observe that the assessee vide their written submission and also at the time of personal hearing has contended that the impugned show cause notices are barred by limitation. However, they have not given any cogent reason to support their contention. I observe that the assessee was fully aware of the fact that the value given in the tender/purchase order was inclusive of Central Excise duty. However, they did not inform or mentioned the said fact in the invoices issued under Rule 52A by them to the department. This to me appears a clear case of suppression of facts from the department and I feel that whenever there is an attempt by the assessee to suppress the correct facts from the department, the intention cannot be other than evasion of Central Excise duty. Therefore I am not inclined to accept the contention of the assessee that extended period cannot be invoked and the impugned show cause notice is hit by limitation.
13. I further observe that the noticee has also contended and argued that no penalty can be imposed because they were under a bona fide belief that they were not collecting any excess amount. On this basis they have claimed that no penalty under Rule 173Q can be imposed. However, I observe and as discussed above the party's act of omission and commission disprove their bona fides. Further the defence has not adduced any evidence of having a bona fide belief with regard to points at issue. I observe that Hon'ble Supreme Court in the case of Macro Textile v. UOI has observed that there has to be material on record to show that the assessee had bona fide belief. I further observe that in para 3.4 of in the case of Indian Oxygen v. CCE Bhubaneshwar, Hon'ble CEGAT observed that it was plain and obvious that the party failed to inform the proper officer although they might have had intention to do so. This patent failure on the assessee's part cannot be given the garb of their bona fides. Therefore the defence plea is not acceptable.
14. Based on the above finding, I find that contravention of Rule 173C(3A) of Central Excise Act, 1944, is established against the assessee. Based on the above observations, it is clear that the assessee collected the total sum of amount of Rs. 1,02,22,507 towards the Central Excise duty which was already included in the amount declared by them as assessable value/cum duty price as per details in Annexure I to the show cause notice. The said amount was not paid by them to the Central Government.
15. The finding also holds good in relation to the amount of Rs. 4,91,979 covered by show cause notice C No V/42/15/3/2000 Adjn.dtd. 27.9.2000.
(i) And confirmed an amount of Rs. 1,02,22,507 collected towards Central Excise Duty without paying it to the Central Government which was recoverable from them under Section 11D(3) read with Sub-sections (1) and (2) and ordered the payment thereof.
(ii) In relation to Show Cause Notice dtd. 27.9.2000, he held that the sum of Rs. 4,91,979 was collected towards duty under Section 11 D(3) and found it to be payable and directed that the same should be paid. He imposed a penalty of Rs. 20 lakhs under Rule 173Q(1) of the Central Excise Rules, 1944.
6. We have heard both sides and considered the submissions and find:
(a) A perusal of the invoice which has been considered by the Ld. Commissioner shows the following:
_______________________________________________________________________________________ Code No. Description Qty Unit Unit Amount Price Batch No. _______________________________________________________________________________________ ABSORBABLE SURGIAL SUTURE STERILE RELYONGUT- Standard Sutures 2/0 Chromic 2X 76cm G 06 M2253 60 Doz. 27000 16.200.00 _________ 16,200.00 Add: KST @ 4% 648.00 Add: CESS on KST @ 5% 32.40 _________ Total 16,880.40 _________ (RS. SIXTEEN THOUSAND EIGHT HUNDRED 60 EIGHTY PS. FORTY ONLY) Gross Value 16,200.00 Less: Discount @ 13.8 2,235.60 _________ Assessable Value 13,964.40 Add. Ex. Duty @ 16% 2.234.00 Duty paid under protest _______________________________________________________________________________________ From the same, it is observed that there is no evidence of the payments in excess of Rs. 16,880.40 gross receipts to have been received. There is no dispute that the tender documents for this supply were for cum-duty prices. Therefore, Rs. 16,200 is the cum-duty receipts. Duty had to be worked out from this figure. The appellants have worked out the duty as follows:
__________________________________________________________________ Gross Value 16,200.00 __________________________________________________________________ Less: Discount @13.8% 2,235.60 _________ Assessable Value 13,964.40 Add: Ex.Duty @16% 2,235.60 __________________________________________________________________ and paid an amount of Rs. 2,234.00 as duty at 16% rate as applicable then. The dispute between Revenue and the appellants is regarding the amount of Rs. 2,235.60 shown as discount at 13.8%. Ms. Ratna, a representative of the appellants in her statement has disclosed this discount was being calculated by them as follows:
Q.(4) You are showing the discount in your invoices whether it is as per the contract/purchase order of your customers?. If not what is the type of discount shown in your invoices. Please explain?
(A) The discount shown in the invoice is not discount given to any party or Govt, organization. It is nothing but abatement towards the excise duty. The purchase order from the party does not state that discount is to be given. We are giving one example whereas the rates of excise duty were different from different years. In our invoice No. 541 dtd. 17.3.99 the rate of excise duty is 16% and we have shown discount as 13.8% (which is nothing but abatement towards excise duty) as follows: Rs. 16/100 + 16 In our Invoice No. 171 dtd 29.10.97 the applicable excise duty is 15% and we have shown discount as 13.05% (which is nothing but abatement towards excise duty) as follows: Rs. 15/100+15.
Q.(7) The general trade practice of giving discount is in uniformity in round figures. Whereas you are giving discount rate in decimals. Please explain the reason behind the same.
(A) The discount shown in the invoices is nothing but abatement of Excise duty when we are calculating this it is giving decimals. We are giving examples as follows:
When the duty is 16% the discount is 13.8% (which is abatement of excise duty)Rs. 16/100+16.
Q.(18) While filing the tender application to the various Government agencies have you shown separately the Assessable Value excise duty, discount rate etc. If so produce the same?
(A) We are not showing separately the assessable value and exceis duty in tender application. We are quoting the cum-duty price excluding Local Taxes extra.
She in her statement has also very clearly stated that they are not showing separately the assessable value and the excise duty. The calculations of Assessable Value as worked out on the invoice are being made in compliance Section 12A of the Act.
(b) The Show Cause Notice on the other hand, alleges,- that from the figures shown on the invoice, as extracted hereinabove, the gross value of the goods exclusive of local taxes, would be Rs. 16,200 which after showing the abatement of discount of 13.8% as shown in the invoice, the assessable value is worked out to 13,964.40. The Show Cause Notice however, alleges that duty was included in this gross value of Rs. 16,200 and again the assessee has charged Rs. 2,234.00 as CED on cum-duty value of Rs. 13,964. Thereafter, the Show Cause Notice alleges that assessable value had to be worked out as per the formula prescribed by the Hon'ble Supreme Court's decision in MRF Ltd. case [], from the cum-duty price. Working it in that fashion, there would an assessable value to be arriving at, and excise duty collected from the assessee. Though the notice admits that the amounts of duty which has been paid in the Government treasury is Rs. 2234 as shown in the invoice.
7. The Grounds of appeal are:
(a) That the order of the Ld. Commissioner of Central Excise in so far it is prejudicial to the interests of the appellant is bad and erroneous in law and against the facts and circumstances of the case.
(b) That the Ld. Commissioner of Central Excise erred in law and on facts in holding that the appellant has collected extra excise duty and therefore, is liable to pay the sum u/s. 11D of the Act and such a finding is not based on any acceptable evidence on record.
(c) That the Ld. Commissioner of Central Excise erred in law and on facts in holding that abatement of Central Excise duty is not allowed under law.
(d) That the Ld. Commissioner of Central Excise erred in law and on facts in not considering the description of "discount" in the invoice is nothing but abatement of Excise duty.
(e) That the Ld. Commissioner erred in law and on facts in holding that the demand is not time barred.
(f) That the Ld. Commissioner erred in law and on facts in invoking the provision of Section 11D of the Act, even though the Hon'ble Madras High Court has held it be unenforceable.
(g) That the Ld. Commissioner ought to have appreciated that the amendment to Section 11D of the Act has not cured the defect pointed out by Madras High Court.
(h) That the Ld. Commissioner erred in law and on facts in levying penalty under Rule 173Q of the Act for an alleged violation of Section 11D even though none of the Sub-clause of Rule 173Q are applicable
(i) That the levy of penalty is not warranted on the facts and circumstances of the case.
(j) That in any case, the penalty of Rs. 20 lakhs is excessive and unjustified considering the facts and circumstances of the case.
8. We find no evidence of collection of any amount in excess of the excise duty on the invoice i.e. Rs, 2,234.00, in the sample invoice shown to us and that is the case of the Revenue also. However, Revenue assumes that in the gross net value and cum-excise duty price would include duty and that duty is being collected separately, when the price is collected alongwith the collection of the duty amounts mentioned in compliance to Section 12A. We do not find any evidence to support this allegation in the Show Cause Notice. There is no doubt that there is a cum-duty price shown on the invoices and the excise duty from such cum-duty prices have to be made by the MRF decision. The appellants have used a formula working backwards in order to determine the assessable value and thereafter the duty. The formula adopted by them does not have any approval of law laid down by the Supreme Court. We therefore cannot approve the manner in which the assessable value was worked out and thereafter the duty liability calculated on such assessable values.
9. The appellants had produced and prepared a chart, which shows in the Abstract made, the following particulars for the period 1995-96 to 1999-2000:--
___________________________________________________________________________________ Years Difference between Assessable Differential duty between duty Value in Invoice & Assessable payable & actual shown Value as per MRF case ___________________________________________________________________________________ 1995-96 770.25 112.22 ___________________________________________________________________________________ 1996-97 1619.27 240.29 ___________________________________________________________________________________ 1997-98 735.86 102.40 ___________________________________________________________________________________ 1998-99 1632.31 247.02 ___________________________________________________________________________________ 1999-2000 407.11 65.30 ___________________________________________________________________________________ TOTAL 5164.80 767.23 ___________________________________________________________________________________ A perusal of this chart indicates and the Ld. Chartered Accountant admits that if duty were calculated as per the MRF formula approved by the Supreme Court there would be a demand of Rs. 767.23 as duty to be paid to the Revenue treasury. We had earlier remanded this case to the Commissioner to consider this chart. The Commissioner has not given any clear findings as to why he is not considering these calculations in the charts to be correct nor has any material been submitted to us during the hearing about any inaccuracy in these calculations. Therefore we accept these figures in this chart. By adopting a formula of their own and not relying on a formula prescribed by the Supreme Court there has been a short payment of Rs. 767.23 over a period of 5 years. There is no case for making a demand for any amounts under Section 11D as made out. There is a case for demand of duty of Rs. 767.23. However, no demand has been made under Section 11 A. Therefore, while we find that Rs 767.23 is duty short paid, we cannot direct its payment.
10. Since we do not find any amount to have been collected and required to be deposited under Section 11D, we find no reasons to uphold the penalty under Rule 173Q of the Central Excise Rules, 1944. We find that for contravention of Section 11D, if any, a penalty under Rule 173Q is not called for. Rule 173Q provides that if excisable goods are removed in contravention of the provisions of the Rules, then only penalty could be imposed under the Rule. No penalty under Section 173Q is therefore called for. No calculations for the other Show Cause Notices have been produced before us. We are therefore remanding the matter to the Commissioner to re-determine and work out duty payable, taking into consideration the formula laid down by the Hon'ble Supreme Court in the case of MRF decision (supra). Since no such chart of calculations with reference to other Show Cause Notice was before us, the appellants are directed to produce the same before the adjudicating authority to enable him to detemine the duty, if any, which could be determined under Section 11A by him.
11. This appeal is disposed of in above terms.