Custom, Excise & Service Tax Tribunal
Titan Industries Ltd vs Commissioner Of Gst&Amp;Cce(Chennai ... on 30 July, 2019
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIEBUNAL
sSOUTH ZONAL BENCH AT CHENNAT
[COURT : Division Bench B1
Appeal Nos.: $#/410, 411, 412/2011
SL No.: Appeal No. Appellant. . Respondent
1.
E/410/2011 M/as. Titan Industries Ltd., The Commissioner of
(Watch Diviston), CS.T. & Central Excise,
Na.3, S[PCOT Industrial Chennali North
Complex, Hosur-- 635 176 Commissiongrate
Arising out of Qrdér-im-@riginal No. 4372011 dated 21042011 passed by the
Commissioner of Central Excise, Chennai--IH Commissionarate
s
EAH/ZOTT Mys. Titan Industries Lt., The Commissioner of
(Jewellery Dévision}, GR&T. & Central Excise,
No. 29,SIFCOT Indastrial Chenngali North
Complex, Hosur -- 685 126 Commissionerate
Arising out of Order--in--Original No. 14/2011 dated 21.04.3011 passed by the
Commissianer of Central Excise, Chennuai--IfI Cm;xmissignerate
E/4123%/3011 M/s. Titan Industries Ltd., The Commissioner af
(Precision Enginesering CST. & Ceontral Exeise,
Evision}, Chennal North
No. 28, MFCOT Industrial | | Commissicnerate
Complex, Hosur-- 635 126
Arising out of Order--in--Original No. 15/2011 dated 21.04.2011 passed hy the
Commissioner of Central Excise, Chennai--II] Commissionerate
Appearance:--
Ms. Radhika Chandrasekhar, Advocate
for the Appellant
Shri. B. Balamurugan, AC (AR)
for the Respondent
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CORAM:
Hon'ble Shri Madhu Mohan Damodhar, Member {TechnicaD
Hon'ble Shri P. Dinesha, Member (Judicial)
Date of Hearing: 08.01.3019
Date of Pronouncefment: M;"mm AAAA
Final Order Nos. f;{}*f}'é}v}fgifi?{}/ 2019
Per Madhu Mohan Damodhar :
The facts of the case are that the appellants are engaged in the
manufacture of Quartz Analog Watches and parts thereof, M/s.
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Titsn Industries Hc} Watch Division (WD) is stock transferring
watch parts and components manufactured by them to their units at
Dehradun, Baddi and Roorkes, who assemble watches Eiif\ifl clear the
same at nil rate of duty in terms of Notiffication No. 50/2003--CE
dated 10.06.2003 as they enjoy special area exemption status. M/s.
Titan Industries Ltd,, Jewellery Division (JD) is stock transferring
Watch parts and case assembly manufactured by them to M/s. Titan
Industries, WD, Hosur. M/s. Titan Industries Ltd., Precision
Engineering Division (PED) is stock transferring Watch Parts and
Bracelets manufactured by them to M/s. Titan Industries Ltd., WD,
Hosur.
21 -- During verification of records of the appellant, it appeared
that they were not following correct valuation for the said
clearances in terms of Rule 8 of the Central Excise Valuation
(Determination of Price of Excisable Goods) Rules, 2000. It further
appeared that appellants had not included certain cost components
fto arrive at the cost of production, as specified in the Cost
Accounting Standard -- 4 (CAS--4). The Department took the view
that appeliants are indulged in a deliberate attempt to evade
payment of excise duty by undervaluing the said goods; that duty is
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required to be levied at relevant rate on the assessable value to be
artrived at after including all cost components under CAS--4.
2.2 Accordingly, proceedings were initiated by way of the
following Show Cause Notices for the peri@d from 01.04.2005 to
31,03.2010 :
S1, Proposed
No. | Appellaat | SCN No. & Dt. demand Ground alleged
; in Rs.)
4. M/s, Titan | SCN No.3F7/3010 | 3.6,73%9073/-- | Clearance of watch parts and
Industries | dt, 05,05.2010 components manufactiured by
Ltd., read with them o fo o their ounlfs at
Watch corrigendum dt. Defhradun, Baddi and Roorkes |
Civiston | | 28.03.2011 for -- capfive | consumption;|
under Rule 8 of the Centfral
Excise Valuation Rules, 3000.
2. Mys. Titan | SCN No, 38/3010 | 78M43M6/-- | Clearance of watch parts and
Industries | dt20,05,2010 case assombly manufactured
Ltc., read with by them fo O Mj/s. Titan
Jewellery || corrigendum dt. Industrtes Ltd., WLD3, Hosur for
Divisson | | 28.03.20011 captive. consumpforny aunder
BRule 8 of the Central Exdise
_ Valuation Rules, 2000.
3. M/s, Titan || SCN No. 39/2010 | 37,92,563/-- | Clearance of watch part» and
Industries | dt20.05.3010 bracelets manufactared | by
Ltd., read with them fto M/s. Titan Industries
Precision --| corrigendum dt. Ltd., WD, Hosur for captive
Engineering | 28.03.2011 consumption; under Ruls 8 of
Civision the Ceontral Excise Valuation
Rautles, 2000.
2.3 -- The above Show Cause Notices culminated in the issuance of
the following Orders--in--Original :
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SL | _ Appeal O--I--O No. & dt. Demand --| -- Penalty imposed
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~ EMA1GZOTL | O4FONo. 133420H 3,53,73,973/-- | Under Section {LAC of
gt. 21.04.3011 the Central Excise Act.
%. 0| FMAHMJ/POU |O4TONo. 14/201H 7843,016/-- | Under Section HAC of
sdt. 21.04,2011 the Central Excise Act.
E/AA12/3011 | (QIA4A3} No. 15/32011 37,92,563/-- | Under Section 114C of
dt. 21.04.2011 3 the Central Excise Act.
24 -- Aggrieved by the Orders--in--Original No. 13/3011, 14/2011 and
15/2011 all dt 21.04.32011, the appellant has filed Appeal Nos.
E/A410/2011, E/A11/2011 and E/A2/2011 respectively before this
forum.
3. _ Today when the matter came up for hearing, Ld. Advocate
Ms, Radhika Chandrasekhar appearing on behalf of the appellant
made oral and written submissions which can be broadly
summarfized as under :
{?) Appellant had applied for provisional assessment of the goods
manufactured by them and the same had been sanctioned by
the Department;
(i{)None of the ingredients set out in proviso to Section 11¥(1)
have been made to justify invocation of extended period of
limitation. In any case, the Department could have raised the
demand at the fime of finalization of assessment:
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(1) The Department had conducted audit for the disputed
wunits (for all the three units of the appellant) and therefore,
there is no question of suppression. HMence, the extended
period of limitation cannot be invoaked.
(iv) She also submitted that the question of suppression of
facts does not arise for the following reasons :
(a) For the period from 01.02.2005 to 31.01.2006, audit of the
appeliant's entire books and records were done between
22.02.2006 and 25.02,2006;
(b)For the period from 01.02.2006 to 28.02.2007, the
appeliant's records were also audited;
(c) For the period from 11.035.3007 to 31.01,3008, audif had
been done between 12.02.2008 and 13.02.2008;
(d)For the period from 01.02.2008 to 28.02.2009, audit was
conducted on 20.03.2009.
(v) So also, office of the Accountant General (CERA) pursuant to
their letter dated 10.11.2006, conducted audit for the period
2002+04, 200405 and 2005--06. Pursuant to letter dated
17.09.2009, CERA conducted audit of the appellant for the
period 2004--05, 2005065 and 2006--07. Pursuant to letter dated
18.01.3010, CERA conducted audit for the period 2006--07,
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2007--08 and 200808,. For all thesse reasons, the entite
proceedings are hit by limitation,
41 _ On the other hand, Ld. AR Shrt. B. Balamurugan appearing on
behalf of the respondent supported the findings in the impugned
Orders, He submitted that as per Rule 8 of the Central Excise
Valuation Rules, 2000 read with CAS--4 norms, the appellants should
have adopted the actual cost data relating to the production of the
said watch parts and components meant for captive use by their
own units at Dehradun, Baddi and Roorkee and added 10%
towards profit and paid duty on such value, as prescribed.
However, the appellants have followed some arbitrary means of
costing. The appellants have left out certain elements of cost which
are required to be included in the assessable value as per CAS--4
ROrmsSs,
42 Ld. AB also submitted that appellants have adopted estimates
instead of actuals and failed to adequately provide for unseen
vanations of cost so as to avert any possible undervaluation. Hence,
there is clear suppression of facts with intent to evade payment of
appropriate duty liability.
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5. _ Heard both sides and have gone through the facts of the case.
6. _ We first intend to take up the plea of limitation, Ld. Advocate
has contended that a number of audits have been conducted at their
units. We find that this contention has been made before all the
three adjudicating authorities herein right from their reply to the
Show Cause Notices In fact, the said contenfion has even been
found recorded in paragraph 24 of the Order--in--OQriginal No.
13/2011 dated 21.04.2011 {impugned Order with regard to Appeal
No. E/A10/2011}), paragraph 18 of the Order--in--Original No. 14/2011
dated 21.04.2011 (impugned Order with regard to Appeal No.
E/AA11/2011) and paragraph 20 of the Order--in--Original No. 15/2011
dated 21.04.2011 (impugned Order with regard to Appeal No.
E/412/2011).
7. _ It has been submiited by the Ld. Advocate along with
arguments that they have been filing their monthly refurns in which
the value of duty has been reflected, These contentions are more or
less the same in all the three adjudication proceedings. For example,
in paragraphs 24 and 25 of the Order--in--Original No. 1372011 dated
21,04.3011, it has been contentled as under :
"24. That the question of suppression of fact does not arise at all for the following
TEARSUONH
{i} They are registered under Central Exciss Lais duly filing their monthly
returns uf rohich the value as toell as dirly is reflected.
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(i} An audif was conducied by the Centrel E
February 3006 completely examining all their records and accounts
including their rempooals for the period of three years prior to the aud?it.
(lii}An audit was conducted duri q Eebruary 2007 wm;-v'.e?;"ex'.y exarutmg all
their records and accounts zndz&diflg all our rentovals for the period of three
xeise Department during
years prior to the nudit.
(n CERA Aadit toas condaucted and «lt the revermue particulars for 2002--2003;
2003--200 and 2004--2005 arid all relevant records toere examined by the
Audit Teom from 12.06.20086 to 16.06.2006. The andit took place --and ali
records were verified including their costing staftemerts, caleuletion of
Pitlne, é"::.-aricui;:;fz{.:.n of daty and no adver
raised.
(y) CERA Audit was conducted and all the revenue particatlars for 2004--2005;
70052006 and 2006--2007 and all releoont records wwere examined b y the
Audit Team from 04.05.2007 to 08.06.2007. The augdit took place and all
records were verified Including their costing Statémients, ufzs,m:mi'mz of
se cbjections or comments were
valte, calsulation of duty and no adverse objections or comments were
raised.
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25. They refied on the following decisions of the How'"ble Supreme CourVCESTAT
in support of theivr defertce, that the dergand is barred by limitation:
a) Jaiprakash Industrics Ltd. Vs. Commussioner of Central Exeise -- {2002)
146 EL.T 481.
b} Mis. Continental Fowndation Joint Venture V¥s. CXLLE.--{2007} P16 EL.T
177.
oo Pushpan Pbormaceuticals Company Vs. Collector of CEz., Bombay --
@4985 78 E.L.T. 401. |
dJ C.CE.Vs. Ballargur Industries--(3007) & §5.C.C. 89.
& 4; find Niskikaiwsa Co. Lid. Vs. Commissioner of Cevitral Exeiss --{2005]
188 E.L.T.--/149,
f) --Nesfle India Ltd. Vs. CCE. --(2008) TIOL 26
¢) Patmiini Products Vs. Collector of Central f,xmt -- (2002) TIOGL 289.
h) Collector of Ceniral Excise Vs. Chemphar 4 Drugs and Linnments --{2002]
TIDL 266.
i) -- Collector of Central Exgcise ¥s. HMM. I4d. --(1995} 76 ELT. 497.
J)-- CCE Vs. Wockkardt Ltd.--(2009) 248 EL.T 517.
k ;%.ssocmise(i Drug Ca. Vs. CC E (2009} 245 ELT. 353.
1 Sands Hotel Pot. Ltd. ¥s. C.S&T. ~(2000} 16 §.T.R.329 ®
8.1 _ We find, from the appeals filed by them before this forum,
that the following additional audits have also been conducted :
(i) For the period from 11.03.2007 to 31.01.2008 -- Department
audit between 12.02.3008 ared 13.02.2008;
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{iiP}For the period from 01.02.2008 to 28.02.2009 -- Department
audit conducted on EQ.(ES-.E(H}E}.
82 -- The appeliants have also provided the details of CERA audit
pursuant to letfers dated 10.11.2006, 17.09.2009 and 18.01.2010
respectively.
9. _ Discernibly, it can be seen that the appellants have been
subjected to a spate of audits both by the Department and by CERA
all throughout the period of dispute and it is inconcetvable that the
matter of stock transfers effected by the appellant whether to
Dehradun, Baddi and Roorkes or to its Hosur unit would not have
come to the afttention of the audit officers. After all, these are very
'standout' clearances that would be effected by any manufacturing
umnit.
10. _ This being so, we are of the considered opinion that all these
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audits should have brought, enough procedural and valuation
discrepancies to light, which could have been brought to the notice
of the appellants as and when the audits were done. If this had been
done, it may well have been possible that the appellants would have
accepted any differential duty lHabilities as pointed out by the
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Department and also corrected their valuation methodology.
Certainly, this was not done.
I1T.1L Op the other hand, Show Cause Noticves have been issued as late as May, 2010 and to enable coverage of the disputed period from 01.94.2005 to 31,08.2010, the extended period of limitation has been invoked. The rgison d'fire given in all these Show Cause Notices for invocation of such extended period of limitation is that "they have wilfully suppressed the fact from the Department that they were clearing the goods at a lower value from their unit at Hosur" to other units. Surely, this could and should not have escaped attention in the plethora of audits that had been conducted of the appellant.
11.2 We further note that even the Show Cause Notices themselves did not quantify the amounts involved, which was eventually done only by the issue of corrigenda in March 2011, quantifying the amounts, The quantification of the amounts has thus happened almost around tfen months after the dssuance of the Show Cause Notices,
12. . Ta view of the discussions and conclustons hereinabove, we hald that the proceedings in all these appeals are hit by limitation yz M since there is no jusfification for invocation of extended period in all these cases. This being so, the impugned Orders in all these appeals cannot be sustained and will require to be set aside, which we hereby da.
CB.
13. Appeal Nos E/A1I0/2011, E/AAMI1/2011 and E/M2/2011 are therefore allowed, with consequential benefits, if any, as per law.
(Pronounced in open court on usds rypiun 222782500 L/ 22 7 Ki ced o (P %fig'fiha) (Madihu NivKs Menmpber ffudicial) Member (Technical) E. I s & es . K §$0 +T T t { é'}fi»'"'\ »{'*{"_} $ .%\@*WM y on . {; 4 i& } ks 13 3»% Ey Y3 £oo} (Reeprtp C igthGess i4 i{Fe0le;
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"$ Te Fovt &3 Ra: «& 12 Per: P. Cinpesha, Member (Gudiciat { do not agree with the finding of Hon'ble Member (Technical) that there was no justification for Invoking the larger peried of fimitation, for the following reasons:--
1.
The SCN though issued by invoking farger period, alleges incorrect valuation, by nof adopting Rule § of CEvV. Further, during investigation, one of the queries was, whether sppellant was following CAS--4 and certificates issued in terms thereto. Staterment of the concerned Manager recorded, which is also in the negative when he says that he is just a graduate and that he was issuing such certificates (CAS--4) for several years.
ft boils down to fact that the certificate CAS--4 was issued ty irrelevant/incompetent person and this fact has remained unchallenged by the appeliant. The issue has now travelled up to this stage with the appellant very conveniently not questioning the correctness of SCN on this. With this tacuna on record, it is difficult to say that the revenue was wrong. It only exonerates the mis--deeds of the appellant and the sppelfant would get away despite being on the wrong side of the faw. It is the setftied positfon that the Law would come to the rescue of a bona fide litigant, but here, I do not see anywhere the appellant acting in good faith and even on being pointed out, it has only very conveniently ignored the same by not even responding to any of these specific allegations of technical breach.
3.
4. 13 Circular Issued in 2003 is very much on board. Still, from 2005, the appeitant happily/blissfully and conveniently continued with its ofd practice, not because of ignorance or innocenece, since undoubtedly, it had a team oof very able and well qualifiedfspecialised -- hands for -- assistance | and _ legal compliances. It is not oa one man company hbut a reputed/frespected one. It is important to note here that, the SCN points out to not only the non--compliance with the conditions of Notification/Circular & statutory requirements, but atso the technical breach in the certificate {(CAS--4)} which was prepared/fissued NOT by a qualified person, but by an employes who was admittedly, just a qraduate.
The non--compliance with conditions of Notifleation,, non-- furnishing of proper CAS--4 certificate, but an obviously interested employes preparing CAS--4 certificate and furnishing the. same as compliance, that too incomplete, clearly amounts to {c) wilful misststement & (d) suppression of facts & (e) contravention of any--of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax.
. When the Law prescribes the format ofca certificate of CAS--4, It recognises «certificate issued by a qualified person and none else. It is not certainly something unknown to a Company, of the Stature/reputationyBrand of the assesséee herein. Going by . &fi% & " & *X 3. j ©<s & & *% % s not doubt the the brand name perhaps the revenue did 44 E2t 43 gee Tak h alvee m J«3 h f1} 2L {f+ suing SCN.
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1 MX gae £. : J $ LJ L.J 14 *L 3es &2 AQ * s oour Slerstsmrcb s was an qwineNtt C hi flmsaito rtertroasnt tea hae rwtecrvlarsne wiuth tmaily proved to be mics--plecea.
. Obviouslty the revenue's sudit went by the camouflaged certificate on record, signed and sealed, without realising the faulty aspect that the same was invalld/improper; it is only thereafter, during follow up action, that the same was realised and thus was raised in the SCN. Thus, when a statutory requirement is to be complied with, it is only as per the procedures laid down or known to law and not in short cuts, camouflaged manner, by hood--winking the revéenue. The action clearly tantamount to taking advantage of a trust placed ty the revenug--on the bradd name, which is difficult to pardon.
. For the above reasons therefore, Lam of the view that the SCHN is proper and the larger period is rightly invoked. The appealt will have'to be --decided only on merits.
In view of the above, the following difference of opinion is proposed:--
{(1} Even though a SCHN is issued by invoking larger period of limitation with an accusation of not feflowing a certain mandatory legal procedure which impacts the valuation, whether the burden is on the assesses to -- rebut/ discharge/justify its adherence or otherwise, to the mandatory legal procedure, but also to at least reply on its stand to such legal points and onfnly thereafter does the onus shifts to the Revenue to justify Invoking larger pertod?
q , L SMYSE® Tay 2 0 a8 & aJt * "'%fig} ¢ Q:'E;%jw"'* 35 ,% §Aw._ \':,:?\ 33 en x * m $ s < wag Sn > "Sive \'\.'2&{\:
RS y\ $ (i}) Whether the CESTAT can ignore the allegations of non-- compliante with legal procedures that has a difect impsct on the valuation of a product and in turn, its taxablity, and whether such allegation which has never been rebutted by the sssesses, elther In Its reply to SCN or during adjudication proceedings, for the reasoms best known to the appelfiant, tantamount to: {c) wilful mis--statement; (d) suppression of facts; and (#) contravention of any of the provisions of this Chapter or of the Rules made thereunder with an Iintent to evade payment of service tax, of Section 73{i) Q{ the Finance Act, 1994, and saccordingly justify is*x\mking the farger perfiod of limitation ?
x'"\i@é (P. bsr'fisfla) i\'ie\fflwr},'iudma f Damodhar) Member {Technical) (Madhu MoNEHYT gemk § . § ¢, e } § $ ¢ .B ':'j ;@?\;'*""fif 'i'.;sq*'i fii'wikg'w'%fi"m{" m \N% m\"fi & daad efud §] 9 i'f%&«@ %} & "'{'% +f faf émfl $ P esdA o 2 :t% hR 'g'%@"& O f\: i&sg 1 § ; xfi;x .
{:v'?}"" § my?" & % % © f & N x §\ «5* i&@\h 42.{" g\(\g; $# & '"g v\"w $ 400 Pegtit ow # 3 {\ $ %fiofi § f"*@"l &3""'"' {} w \{\" \}'\ ,,,.a'{" %'}5}' kvé'\.o\, ° ' & #8 f .
j $ ¢y--g ié af'i{.,«i{s*}wyé'*'t 2.
wgy fFregs yo€ _ | 17 PER SHULEKHA BEEVI The above matter has come up for hesring as per the order of reference by the Hon'ble President dated 02.05.20189.
2. The facts of the case having been narrated in detail in the interim arder, I do not think it necessary to repsat the sasme. The issue is with regard to the question whether the demands raised in the show cause notice are barred by limitation.
3. Member (Technical) has held that the demand is time--barred for the reason that series of audits were conducted in the premises of the appellants and the department was well aware of all facts relating to valuation adopted by appellants. Member {Judictal)y has taken the view that the demand raised invoking the extended pertod is legal and proper and there was deliberate suppression of fai::ts on the part of assesses. The questions -- formulated by th-e*i--f'Me-mt;«ers' on the difference of opinion are as under :
"{) _ fEven though a SCN is fssued by invoking larger perfed of limitation with an accusation of not following a certain mandatory legal procedurs which Impacts the valuation, whether the burden is on the assesse to rebutdischargeffustify its adherence or atharwise, to the mandastory legal procedure, but also to at least reply on its stand to such legal points and only thereafter does the anus shifts fto the Revenue to justify invoking larger period?
(H) _ Whether the CESTAT can ignore the allegations of fon--
compliance with legal procedures that has a direct impact on the valuation of a product and in turn, its taxability, and whether such allegation which has never been rebutted by the assesses, elther in its refply to SCN or during adjudication procesdings, for the reasons best known to the appellant, tantamount to : (c} wilful miss=statement; (d) suppression of facts; and (e} contravention of any of the provistans of 369 us
4. aplgremee L 18 this CShapter or of the Rulgs made thereunder with an Intent to cvade payment of service tax, of Section 73 (1) of the Finance Act, 1994, and accordingly justify invoking the larger period of limitation'?®
4. in the second question framed as above, there is an error in indicating the provision of law since in the present case, the Issue is with regard to demand of short payment of duty under Central Excise Act, 1944 whereas in the issue framed by the Member it is noted as Section 73 {(1} of Finance Act, 1994,. This being only an error can be ignored. Although the questions formulated above sare lengthy and appear less easy to comprehend, the crux of the difference of opinion as reflected from the interim order passed by both the Members is that Member (Technical) placed reliance on series of audits conducted to hold that there is no evidence of suppression of facts with intent to evade payment of duty. Member (Judicial}) has placed much relfance on the costing certificate issued by the Manager of the company to hold that such issuance of certificate was Itself a misstatement and suppression of facts with intend to evade payment of duty.
5. Today when the maz':tes" came up for hearing before me, Ld. Counsel Ms. Radhika Chandrasekar appeared and argued the matter. She submitted that the diearances of goods by these appeliants were mainly to their sister units from where such goods were captively consumed for further manufacture. The clearances can he diagrammatically repressnted as under :
M/s.TIL {(JD) --M/s.TIL [E/411972011] _ Dehradun \\""\ * M/s.TIL (WD) M/S.TIL * [E/AMAIO/2011] C~CCCC*| Badlies M/s.TIHL (PED) _ [E/412/23011] M/s.TIL ~fourkee 19
6. Thus clearances were on stock transfer basis and Rule 8 of the Central Excise Valuation Rules 2000 would apply. The appeliants have filed reqularly perfodical returns and also paid the Central Excise duty. This was on the basis of costing arrived by the Senior Manager (Costing) of the appeltant units. The department later entertained a view that certain costs have not been included in the costing to arrive at the assessahle vailue. Since continuous audits were conducted, the appellants belfieved that the valuation done by them and duty discharged was correct. She adverted to the various audit Infimations received by the appellants. Several notices dated 28.11.2005, 31.07.2006, 19.10.2006, 18.12.2007, 24.07.3008, 03.02.2009, 065.07.2009 and 28.01.3010 were issued to the appellant's PED unit. For all these audit intimations, the appellants had furnished necessary documents as required by the department. After completion of the audit, Department has not raised any objections. An audit notice dt. 10.11.20086 was issued to appellant's watch division for conduct of CERA audit. A further audit notice for conduct of CERA audit was issued on 28.12.3007 also. Thus two CERA audits were done in Watch Division. The Jewellery Division of the appeliant's unit received audit motice for CERA audit on 29.05.2006 and further notices on 07.05.2007 and 19.10.2006. Thus several audits were conducted in all three appellant units. | There is no case for the department that during the audit the appellants did not produce the doecuments/records as requested. During the relevant period of dispute (1.4.2005 to 31,3.2010}, the department had not requested the appellant to furnish any cost accountant certificate as per CAS--4. Only on 11.02.2010, the Bange officer vide their letter specifically asked clarification from the appeltants whether they were following CAS--~4 norms and adopting valuation on the basis of costing certificate issued by Cost Accountant. Appellant had given statement that the Senfor Manager (Costing) was issuing certificates for the past seven years and on such basis they were doing the costing for arrving at the assessable value. This fact that appellant was arriving the assessable value on the basis of certificates issued by the Senfor Manager and discharging duty on this method of costing was very much in the knowledge of the department as there were series of audits conducted by them. It ts also stated by her that when department pointed out in 2010 that the costing has to be done as per the certificate of a Cost Accountant, appelfants themselves appointed Cost Accountant and did the costing. These details were furnished to the department. On the basis of such costing done by the Cost Accountant appointed by the appellant, department quantified the duty and raised demand in respect of present SCNs. ft is stressed by her that since there were no objections raised pursuant to audits the appeliants were under bonafide belief that costing done by the Senlor Manager was sufficient compllance. Moreover another SECN was issued to the appellant's Watch Division for the year 2003--04 invoking extended period alleging wrong availment of credit. The Tribunal vide Final order No10600/2018 dt, 09.03.2018 had set aside this demand on the ground of limitation observing that series of audits were conducted and there was mo suppression on the part of the appefiant.
7. Ld. Counset refied upon the decision of the Hon'ble High Court of Allahabad in the case of CCF Noids Vs Accurate Chemical Industries -- 2014 {(310) ELT 441 (All) to argue that when the assessee has filed ER--1 returns on monthly basis, the Rangse Officer is required to carry 21 out a detailed scrutiny of ER--1 returns. The decision in the case of CCE ¥s Mahindra and Mahindra Ltd. = 2018 (11} G.S.TAL 126 (Bom.) was relied by Ld. counsel to submit that if all facts were within the knowledge of the department after the conduct of audit, allegation of suppression cannot sustain. In CCE Bengalore Vs MTR Foods Ltd. -- 2012 (282) ELT 196 (Kar.), the Mon'ble High Court of Karnataka held that when the materials reflected in the accounts [ records were accepted by the first audit party proceedings Inif€lated after second audit, invoking extended perfod alleging suppression of facts cannot sustain.
8. Ld. Counsel emphasized that though the SCN was issued on 05.05.232010 to Watch Division and on 30.05.2010 to the Jewellery Division -- and -- Precision -- Engingering -- Division respectively, the quantification of demand was done by issuing a corrigendum to the SCN only in March 2011. That major portion of the demand is hit by timitation. That findings of the Member {(Technical)} on the ground of limitation is legal and proper.
9. Ld. AR Shri B. Balamurugan -- appeared and argued for the Revenue. He submitted that tilf 2010, the appellants were arriving the assessable value of goods cleared by them on the basis of Costing certificate issued by the Senior Manager {Costing) of the appellants. As per the Board's circular No.692/8/2003 dt. 12.02.3003% it is necessary that cost of production is to be done strictly in accordance with CAS~4. Thus appeliants have to obtain costing certificate from a qualified Cost Accountant. The argument of the appellants that since audits were conducted, the department was aware that costing was done on the basis of certificate by the Senior Manger {(Costing) cannot be accepted i f 'é se «<B. F2 EuJ since these documents may have been accepted by the department on the face value at the time of audit. The department had no occasion to understand that these are not certificates issued by a qualified Cost Accountant, He adverted to the discussion made by Member {Judiciaf} that the said certificate has besn used by the appellant to evade payment of duty. The rellance placed by the appellants on such certificate which is not in accordance with law, itself amounts to suppression and misstatement of facts Later in 2010, it came to the knowledge of the department that appellants were not complying with the requirement of CAS~--4 certificate and were discharging duty on the basis of costing done by their own Manager. In the statement of the Senior Manager he. has categorically deposed that he is not a qualified Cost Accountant. These facts indicate suppression of facts with intention to evade payment of duty. Therefore, the demand raised invoking extended period is correct and proper and has been rightly concluded so by the Member Qudicial)y,
18. _ Heard both sides.
11. From the submissions made as well as the questions referred, the duty cast upon me is to decide whether the invocation of extended perlod is sustainable. It is not disputed that the valuation should be under Rule & of Central Valuation (Determination of Price of Excisable Goods) Rules 2000. As per Bule 8, "wfiere the excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufacture of other articles, the value shall be one hundred and ten percent of the cost of production or manufacture of such goods."
F3 {ab
12. The ashove Rule merely says that the value shall be 110% of the cost of production. It does mention the method of arriving at the cost of production. When different methods were adopted, the Board vide Circular 692/8/2003 clarified that the cost of production of captively consumed goods has to be henceforth done strictly in accordance with CAS--4. _ Thus in order to achieve uniformity in arriving at cost of production Board mandated compliance of CAS--4.) From the date of the circular the costing is to be done as per the certificate in CAS--4 issued by a Cost Accountant.
13. In the present case, the appelfiants for many years have been following the costing done by their Senior Manager. Though several audits were conducted, Including CERA, the department has not raised any objection with regard to the method of costing adopted by them. Undisputedly a series of audits have been conducted during the disputed period by the department.. As per Rule 22 of Central Excise Rules, 2002, the department has powers to conduct audit. The relevant provision of law as it stood at the relevant pertod is reproduced as undepr :
"RULE 22. Access to a registered premises. -- {1} An officer empowered by the Principat Commissianer or Commissioner, as the case may be in this behalf shail have access to any premises registered under these fules for the purpose of carrying out any scrutiny, verification and checks as mmay be necessary to safeguard the interest of FEevenge., (3) Every assessee, an importer who fsues an involce on which CENVAT credit tan be taken and first stage and second stage dealor shall furnish to the afficer empowered under submrule {1}, a list in duplicate, of --
0} -- all the records prepared and maintained for accounting of transaction in regard io receipt, purchase, manufacture, storage, sales or delivery of the goods including inputs and capital goods, as the case may be;
{(§} all the records prepared and maintained for accounting of transaction in regard to paymentfor input gervices and their feceipt or procurement: and {if) all the financial records and <statements {including: trial bailsnce or its equivsient) (3} Every asgessee, an Importer who issues an involte an which CENVYAT credit can be takem and first stage and second stage dester shall, on demand make avaifable to the officer aempowered under sub--rule (1) of the sudit party deputed by the i-\,\.,w""- e [Principal Commissioner or Commissianer, as the case may be} or the Comptrolier and Auditorm=Gsneral of Indis, or a cosf accountant 6t chartefed accountant nominated under section 114A or section 144A of the Act. --
{1} the records maintained or prepared by hirs in terms of sub--rule (2};
{H} the coat audit reports, f--any, under section 27438 af the Companies Act, 1956 {1 of 1956); and {iff} the income--tax sudit report, 1f any, under section 4448 af the Income--tsx Act, 1961 (4% of 1961}"
for the serutiny of the officer or the audit party or the cost accountart or chartered acconntant, within the time limit specified by the said officer or the audit party or the cost accountant or chartered accountgnt, as the rase may be."
14. The intention and object of such audit is for verification of the accounts and also to ensure that mandatory compliances under law have heen satisfied. The audit officers while conducting such agudit, ifdeed mainly look Into quantum of goods cleared as well as the Central Excise duty paid. During the scrutiny of accounts / documents 7 records, the audit party would certainly have occasion to look into the cofgting certificate furnished By the appellants. Needliese to say that the Central Excise duty is paid by sppellants on the basis of the valuation done as per this costing defails. -- In a series of notices for conduct of audit, the appeliant has been required to furnish various documents. -- For better appreciation, some sample of the notices issued by the department are reproduced as under :
"No.AG(CRRAY/CERA/Proqg/?006--0772397 Date:29--5--30086 To Titan industries (Jaweflory} HOSUR ~§35 128 Sir, Sub: Central Exciss Revenue Audit -- Intimation -- Heg.
Please refer to Rule 32 (3) of Central Excise Rules, 2002.
1. The audit of the accounts of the Central Excize Receipts and Remittaence in respect of your concern/company is programmed to canducted by the Central Excise Revenus Audit Party of this office from 12--6--06 to 16--6--06,
2. The assessoe may see the identity cards of the party members and authority tetter issued by CERA Headquarters and in case of any probtem{difficulties with CERA Party, the assessee may contact the unidersigned / the Deputy Accountant Geners} personally or by telephone.25
3. Necessary facifities may please be afforded to them for conducting the audit. in Addition If the Cenvat and Sales invofces are kept in computerized form in your unit, then, the vital details may be produced to Audit Party in soft forms on the final day of Audit, Also one corpputer may be made available to the audit party for their exclusive use
4. -- Revenue particulars of PLA and CENYAT for the perind of last 3 years Viz., 3002-- 03, 260304 and 2004--05 sepgrately roay plesss be forwarded along with acknowledgement.
5.. Request for postponement will not be sntertained.
6. The receipt of this letter may please be acknowledged immediately. Yours faithfully, For Senfor Audit Officer / CERA®"
"No.AG {C&RAYCERA--Special Party 1 £2006--07/ 1115 Sate:10--11--2006 [f€ Titan Industries {Watch} Heosur Sif, Sub : Central Excise Revenue Audit~ Intimation -- feg.
Please refer to Rule 22 (3] of Central Excige frufes, 3002
1. _ The audit of the accounts of the Central Excise Receipts and Remittance in respect of your concéern/company is programmed to conducted by the Central Excise Revenue Audit Party of this office fram 27--11--3006 to 1--12--3006.
2. The assessee may see the identity cards of the party mermbers and suthority letter Issued by CFRA Headquarters and in case of any problem/difficulties with CEXA Party, the assesses may contact the undersigned / the Beputy Accountant General personally or by telephone.
3. Necessary faciiities may please be afforded to them for conducting the sudit. in Addition if the Cenvat and Sales invoices are kept in computerized form in your unit, then, the vital datails may be produced to Audit Party imsoft forms on the final day of Audit. Also omne computer may be made available to the audit party for their exclusiye use,
4. IMPORTANT ;Derails safled for in the annexure may be sent urgently.
5. Request for postponement will not be entertained sxcept for resasons of strike and fockaout.
L0 u2k
6. Revenue particulars of PLA and CENYAT for the period of last 3 years Viz., 2003-- 04, 2004--05 and 2005--06 sepsrately may plesse bhs forwarded along with acknowledgement.
¥ours faithfully, For Senior Audit Officer f CERA® "C.No.lH/10/911 / 2008--{4A Dated ©~03.02.2009 To 2: NAMF : TITAL INDUSTRIES BRACELET & CLOCK GGoR NOo:2B, SPCOT INDUSTRIAL STREET : HOSuR LQCALITY: HOSUR AREA : ROSUR INBDUSTRIAL COMPLEX OESTRICT : DHARMAPUR PINCODE : 635126 Gentierasn, Sub : _ Central Excise-- Information relevant for the New Audit Systern in respect of your usit--called for-- Regarding Helteth ol e okt ob sh ol she oi seb Since it is proposed to conduct Audit of accounts of your factory under New Audit System, you are requested to furnish the following information which is Felevant for the Audit within ten days from the date of receipt of this letteor to this office to enable us to condiuct Audit during tho period from
4. Nature of business of the unit
2. Details of the goods manufactured {excisable and non--excisable}
4. Details regarding the process of manutacture and a flow chart of the process,
4. Details of inteormediate products, by products, foint products, waste and scrap stising during the course of manufacture,
5. Licensed Installed capacity and sctust production during the last financial year with cormmants for decreaseyincrease.
6. Normal Input--OQutput rstion and the main raw material for each product separately.
7. Percentage of wasts and strap and Invisible ioss allowed / actually oceurred during the tast THREE years,
8. Consumption af main / cruciafl raw materisls for the production of each final product during the last THREE years.
BA. Value of Row Matertal purchased --Cenvat Credit availed.
88. Additions of Capital goods.since last audit -- Cenvatavailment.
8C. Other Income--SGales
9. Betails of powser consumption per unit of production.
10, If both excisable goods ] exempted goods are manufsctured using common Inputs, furnish detaits.
11. Declarationmiof marketing pattern
12. Details of vartous abatements claimed and typed and rate of discount allnwed.
13. List of Branches / Depots Consignments Agerits [ Reaters and a copy of the agreernent of consignment Agarts / Degliers
14. Quality and Yalue of production 7 Clearante of each excissble goods separately for the tast THREE years along with the details of duty payment in PLA and through CENVAT credlit with reasons for decrease / increase
15. List of reports--and raturns filed to other departmenits like ingcormme Taxk, Sales Tax, ete.
16. Copy af Arficles of Memorandum / Assoctiation
17. Copy of Batance Sheet, Trial Bafance for the last TWO financial years.
f w\ &*~ § . w esmm
18. informations regarding various procedures followed liks Chaster x progedure. / goods sent to job workers / te--entry of duty paid goods.
19. Details of Captive consumption of any intermediate / final products,
20. Details of trading activity if any taken place.
21. FErergy Audit Report it is once again impressed upon you that the Information eatled for may be furnished completely and in time to enable the visiting audit party to prepare an Aodit Plan to cooduct a qualitative audift. Any request for postponement /--canicellation received within a waeeks time prior to the date of the sudit shall not be entertained.
Receilpt of this detter may be acknowfedged. Yours faithfully, For JGINT COMMISSIONER (AUpiTy"
"No.AG (CR&RAY/TERAJFPARY X £2008--10/?777 Date:6--7--2008 18 M/s.Titan Industries (Bracelet Division] 28, Sipcot Industrial Street : Hosur HOSUR-- 6512E Sir, Sub s Central Excise Revenue Audit --Intimation -- Reg.
Please refer to Rule F2 4(3) af Central Excise Raules, 20GO2
1. The audit of the accounts of the Central Excise Reteipts and Remifftance in respect uf your concern/company is programmed to conducted by the Céantral Excise Revenue Audit Party of this affice from 20--7--09 to 24--7--09.
2. The assessee may see the identity cards of the party merobers and authorfty letter issued by CERA Meadquarters and th case of any proablemfdifficultes with CERA Party, the assessee may contact the undersigned / the Deputy Accountant General personalily or--by telephane,.
3. Necessary facitities may please be afforded to them for conducting the audit. In Addition If the Cenvat and Sales invoices are kept in computerized form in your unit, then, the vital detafle may be produced to Audit Party in soft forms on the final day of Audit. Also one computer may be made available to the sudit party for their exclusiveuse,
4. -- Request for postponement will hot be entertained except for reasons of--strike and fockeut.
5. Revenue particulars of PLA and CENYAT for the period of last 3 years viz., 3006--07, 2007--08 and 200808 separately may please he forwarded slong with acknowledgement.
Yours faithfully, Assistant Audit Officer Programme"28
"C.No.NMI/AIOVSO 7 2004A Oated : 28.01.3010 To (Speed Post] Mfs. Tital industries Ltd.
{Precision Engg.Oin} Boor No:28, STPCOT industrial Complex, Heosur PINX : 6351765 SGerftlemen, Subs: -- Central Excise-- information felévant for the New Audit System in respect of your unit-- called for-- Regarding Since it is proposed to conduct Audit of acrounts of your factory under New Audit Systeim, you are requested to furnish the following information which is relevant for the Audit within ten days fromt the date of receipt of this letter to this office to enable us to conduct Audit daring the partod from;
1. Nature of business of the unit
2. Details of the goods manufactured {excisable and nom--excisable}
3. Details regarding the process of manufacture and a flow chart of the process.
4. Ortails of intermediate products, by products, foint products, wasts and scrap arising during the course of manufacture.
3. Licensed installed capacity and actual produarction during the last financial yesr with comments for decrease/fincrease.
6. Notmal Input--Qutput rstion and the maln raw material for each product separately.
7. Percentage of waste and scrap and Invisible loss silowed f actually eccurred during the fast THMREE years.
8. Consumption of main / cructal raw matenals for the production of each final product durting the last THREF years.
8A. Value of Raw Material purchased --Cenvat Credit availed.
88. Additions of Capital goods since last andit --Convat availment.
8C. Other Income --Sales
1. DOetails of gower consumption per unit of production.
10. If both excilsable goods f skzempted goods are manufactured vsing common inputs, furnish details, PL, Declaration of marketing pattern
12. Details of vartous sbatements claimed and typed and rate of discount allowed.
13. list of Branches / Depots Consignments Agents / Dealers and a topy af the agreement of consignment Agents / Dealers
14. Quality and Value of groduction / Clearsnce of sach excisable goods separately for the last THREE yegars along with the details of duty payment in PLA and through CENVAT credit with reasons for decrease Fincréase
15. List of reports and returns filed to other departments like Income Tax, Sales Tax, etc.
16. Copy of Articiesiof Memorandum / Association
17. Copy of Balance Sheet, Trial Balance for the last TWC financial years.
18. Information regarding various procedures tollowed like Chapter X procedure f goods sent'to jJob workers / re--entry of duty paid goods,
19. Details of Captive consumption aof any Intermediate / final products.
20. Details of trading activity if any taken place,
21. Energy Audit Report i is once again impressed upon you that the information called for may &e furnished cornpletely and in timg to enable the vistting audit party to prepare an Audit Plan to ¢ «§ Knd m C 29 conduct a qualitative audft. Any request for postponement / cancellation received within a weeks time prior to the date of the audit shall not be entertained.
Receipt of this letter may be acknowledged.
¥Yours faithfully, Asst. Cormmissioner (Audit], Chennal--{fl Commisstonserate"
"No.AG (CRRAY/CERA-- Party--xI| #2008--10/298 Date:18--01--2010 To Titan Industries Lirnited Watch diviston Hosur--~535 138 Sit, Sub : Central Excise Revenge Audit -- intimation -- Reg, Please refer to Rule 22 (3) of Contral Excise Rules, 2007
1. _ The gudit of the accounts of the Central Excise Receipt and Remittance in respéct of your concern/company is programmed to conducted by the Central Exciss Revenue Audit Party of this office frorn 08--037--3010 to 12402--2010,
2. The assesse may see the identity cards of the party members and authority letter issued by CERA Headquarters and in case of any problem/difficutties with CERA Party, the assessese may contact the undersigned / the Deputy Accountant General persognallyor by tetephone.
3. -- Necessary factlitiss may please be afforded to them far conducting the sudit. in Addition If the Cenvat and Sailes involces gre kept in computerized form in your unit, then, the vitaf details may be produced to Audit Party in soft forms on the final day of Audit. Also one computer may be made svailable to the sedit party for their exclusive use.
4. Request for postponement will not be entertained except for reasons of strike and fockeut.
5. ~Revenue particulars of PLA and CENVAT for the poried of ftast 3 years Viz., 7006--
67. 2007--°08 and 200809 separately may plesss be forwarded stong with acknowledgement.
Yours faithfully, Assistant Audit Officer / Programme"
15. . From the above audit notices, it can hbe seen that the appelfants have been asked to produce all documents with regard to manufacture of goods as well as discharge of sxcise duty. There is no allegation that appeliants did not produce the documents as required by the department. So also, CERA Audit has been conductsd which is by Office of the Accountant General (C & RA) and the officers of AG takes part in such conduct of audit. In spite of these repeated audits, the department did not raise any objection or query to the appeliant as to why they have adopted cost of production on the baesis of cost details given by their Senlor Manager. Only in 2010, the department has raised this query. Immediately on being pointed out, sppeltants appointed a Cost Accountant and the costing details of accountant was furnished to the department. The demand in these cases have been raised on the basits of such costing details furnished by Cost Accountant appointed by appellant. From these facts, it is very clear that the department was fully aware that appellant was discharging duty on the basis of cost of production as per the details of the Senijor Manager (Costing). When all the documents were put forward before the department, it cannot be said that the costing certificate Issued by the Senior Manager (Costing) of the appellant was an act of suppression or misstatement on the part of appellant with an intention to evade psyment of duty. Further when the department made enquiries in 2010, the appellant has sufficiently cooperated and appointed a Cost Accountant on their side and obtained a cost certificate which was furnished to the department. | Thus, if the appelfant had any intention to evade payment of duty, they would not have taken initfiative to sppoint a Cost Accountant. Head the department raised this query in any of the audits during the disputed period, the appellant would have done this exercise of appointing a Cost Accountant then Itself, It is well settled law that when the facts were within the knowledge of the department, the allegation that appellants suppressed facts cannot sustain. . For the omission on the 1 31 part of the audit officers to find out the mistakse in the method of valuation adopted by appellant cannoft be a reason to saddlie the appellant with intention to evade payment of duty.
16. The decisions relied by the Ld. Counsel for appeliant have held that when the department was aware of facts the extended period cannot be invoked. Similar view was taken in Visen Industries Ltd. Vs CCE Vapi -- 20098 {(235) FELT 280 (Tri.--Ahmd.).
17. From the above discussions, I agree with the view taken by Member {Technical) that the demand is barred by fimitation. Registry is directed to place the matter before the Division Bench for recording majority / final orders accordingly.
fourder dictated and pronounced in caurt on 26.196.20189] F. L \3»»5232@5;{ Lo. é"'?f fast] (Sulekha Saevs, c. §) Member (Judicial] gS «32 FINAL OROER In view of the order of the Third Member, Hon'ble Smt. Stekha Beevi C.S., Member (Judicts!), agreeing with the view taken by the Hon'ble Member (Technical), the demand is held to be barred by limftation and sceaordingly set aside.
(Order pronounced in the operm court on 30.097.232018) (P. MNES%%A) MEMBER (GUDICICAL) Sdd