Customs, Excise and Gold Tribunal - Bangalore
Sree Sreenivasa Textile Processing ... vs Cce on 27 July, 2006
ORDER T.K. Jayaraman, Member (T)
1. This appeal has been filed against the OIA No. 82/2004, dated 26-7-2004 passed by the Commissioner of Central Excise (Appeals-II), Bangalore.
2. The appellants receives fabrics for processing. Later, they clear the goods on payment of duty. Revenue proceeded against the appellants for the following reasons -
(i) The appellants had not included the Screen Development Charges (SDC).
(ii) Non-inclusion of freight charges in assessable value, (iii) Non-inclusion of packing charges in assessable value.
The lower authority passed an order confirming Rs. 8,28,402/- being the duty short paid. Further, he imposed a penalty of Rs. 8,28,402/- under Section 11 AC of the Central Excise Act, 1944. Interest under Section 11AB was also imposed. An amount of Rs. 42,411/- towards freight and an amount of Rs. 20,424/- towards packing charges had already been paid by the appellants. These amounts were adjusted by the lower authority in his order. The appellants approached the Commissioner (Appeals). The Commissioner (Appeals) upheld the order of the lower authority. Hence, the appellants have come before this Tribunal for relief.
3. Shri H.T. Narayana Jois, the learned Consultant, appeared for the appellants and Shri R.K. Singla, the learned JCDR for the Revenue.
4. The learned Consultant urged the following points:
(i) The appellants raise a debit note for Screen Development Charges whenever they receive an order from their customers. This is a sort of security from the customer so that they can confirm order for printing of designs on the fabric. When the order is confirmed, a credit note is raised to the customer cancelling the debit note. The department has taken the full amount for which the debit note has been raised for the period from 1-7-1998 to 31-3-2003 for the purpose of raising the demand without taking into consideration the credit note raised.
(ii) Whenever the developed designs ultimately ended up in processing/printing design order, the charges for designs are included in the assessable value of the fabric processed by the appellants on job work basis. Hence the differential duty demanded is not sustainable in law.
(iii) The Commissioner (Appeals), without considering the submissions made, has concluded that the debit notes involved have been raised over a period of five years whereas the credit notes have been raised on a single day. Hence, according to him, the raising of credit notes is only an after thought. This is not correct in view of the following factual position.
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Period Debit note amount as verified by Amount for which the credit note
the Department and included in are raised during this period. (As
the Annexure to the SCN per Annexure VIII)
(Rs.) (Rs.)
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1-7-98 to 2,97,068/- 52,500/- 10-12-98
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1-3-2001 to 1500/- - 31-3-2001
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1-4-2001 to 10,44,650/- 21,000/- 31-3-2002
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1-4-2002 to 33,27,157,/- 45,06,020/- 31-3-2003
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TOTAL 46,70,375/- 45,79,520/-
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(iv) The chain of events leading to the raising of debit notes and credit notes is as follows:
The customer will give small piece of cloth containing the design of art work which is required by him for printing. The appellant will develop the design as required for screen printing and send the same to the customer for approval. As the appellant has incurred expenditure in developing the design, they raised the debit note for SDC only so that the customer will confirm the order. Once the design developed by the appellant is accepted, the customer will give a confirmatory order either in writing or orally over phone and also send their representative to the appellant for monitoring and follow up of the quality. In this stage, the customer will give a Purchase Order, mentioning the quality, quantity, and the labour charges for printing the design on the fabrics. If the Customer does not issue a Purchase Order, the appellant will issue a Purchase Order to the customer for order confirmation, besides confirmation of the labour charges indicated in the Purchase order. The appellant will execute the order under supervision by the customer's representatives and despatch the printed cloth under an invoice on payment of appropriate duty.
(v) The Tribunal in the case of Creative Dyeing & Printing Mills v. CCE, New Delhi 2004 (164) E.L.T. 41 (Tri.-Del.) has held that wherever the developed designs ultimately ended in processing/printing order and the charges for the designs had been included in the assessable value of the fabric processed by them on job work basis, the differential duty demanded in the Show Cause Notice is not sustainable.
(vi) The facts were within the knowledge of the department from December, 2001 when the Audit visited the appellants' unit. But the Show Cause Notice has been issued on 6-8-2003 after a lapse of 20 months and, therefore, the demand for the period up to 6-8-2002 is hit by limitation of time. The following case-law was relied on:
Needle Industries (India) Limited 1997 (89) E.L.T. 131 (Tri.)
(vii) Where the demand is barred by limitation, no penalty under Section 11AC can be imposed. The duty on account of freight and packing charges was paid much before the issue of Show Cause Notice. Therefore, no penalty can be levied under Section 11 AC in view of a large number of decisions.
(i) Machino Montell (I) Ltd. 2004 (168) E.L.T. 466 Tri.-Del (LB).
(ii) Shree Krishna Pipe Industries 2004 (165) E.L.T. 508 (Kar.).
(iii) Rashtriya Ispat Nigam Ltd. 2003 (161) E.L.T. 285 (Tri.).
[Affirmed by SC as reported in Commissioner v. Rashtriya Ispat Nigam Ltd. 2004 (163) E.L.T. A53 (S.C.)]
5. The learned JCDR reiterated the OIA.
6. We have gone through the records of the case carefully. The issue to be decided in the present appeal is whether the amount representing debit raised in respect Screen Development Charges by the appellants should be included in the assessable value of the fabrics cleared by them to their customers. It should be borne in mind that the appellants had stated that when the fabrics are cleared after designs/printing, in the invoices raised, they include the charges on account of SDC. In such circumstance, demanding duty on the amount representing the debits would amount to demanding duty twice on the same amount. That apart, the appellants have clearly explained why they raise the debit note in respect of SDC. They have made it clear that in order to develop the design for printing as per the requirement of the customer, they have to incur certain expenditure and it is necessary that a customer has to confirm the purchase order in respect of the fabrics. Therefore, pending confirmation of the purchase order as a sort of security, they raise the debit note. They have also stated that after receiving the confirmation of Purchase Order from their customer, they raise a credit note. We have also seen the copies of the documents produced. The facts of the case are similar to those dealt with in the case of Creative Dyeing & Printing Mills cited by the appellants. In the above - mentioned case, it has been held that when the developed designs ultimately ends in processing/printing order, the differential duty demanded in the Show Cause Notice is not sustainable in law especially when the printing charges have been included in the assessable value. The ratio of the above - mentioned case is clearly applicable to the present case.
6.1 As regards short payment on account of non-inclusion of freight and packing charges in the assessable value, it is seen that the short levy had already been paid much before the issue of Show Cause Notice. Under these circumstances, the differential duty demanded on account of SDC is not sustainable and no penalty under Section 11 AC and interest under 11AB can be demanded.
6.2 In fine, there is no merit in the impugned OIA. Hence, we allow the appeal with consequential relief, by setting aside the OIA.
(Pronounced in open Court on 27-7-2006)