Custom, Excise & Service Tax Tribunal
M/S Cipla Ltd vs Cce, Mumbai-Iii on 10 March, 2015
IN THE CUSTOMS, EXCISE AND SERVECE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT NO. IV APPEAL NO. E/872/12 (Arising out of Order-in-Appeal No. BC/356/MUM-III/2011-12 dated 29.02.2012 passed by the Commissioner of Central Excise (Appeals), Mumbai-III.) For approval and signature: Honble Shri Ramesh Nair, Member (Judicial) ========================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :Yes CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy : Seen
of the order?
4. Whether order is to be circulated to the Departmental :Yes
authorities?
========================================================
M/s Cipla Ltd.
: Appellant
Versus
CCE, Mumbai-III
: Respondent
Appearance
Ms. Anjali Hirawat, Advocate
: For Appellant
Shri Ashutosh Nath, Assistant Commissioner (A.R.)
: For Respondent
CORAM:
Honble Mr. Ramesh Nair, Member (Judicial)
Date of Hearing :
10.03.2015
Date of Decision:
.04.2015
ORDER No. .
Per: Ramesh Nair
The appeal is directed against Order-in-Appeal No. BC/356/MUM-III/2011-12 dated 29.02.2012 passed by the Commissioner of Central Excise (Appeals), Mumbai-III, wherein the learned Commissioner (Appeals) allowed the appeal filed by the Revenue by imposing penalty of equal amount of duty involved. The appellant filed this appeal only for waiver of penalty of equal amount of duty of Rs. 1,11,796/- which was initially waived by the original adjudicating authority and subsequently imposed by the Commissioner (Appeals) in the impugned order.
2. The fact of the case is that the appellant cleared the finished goods in unpacked condition in July, 2007 to their sister unit on which excise duty was paid in terms of Rule 8 of Central Excise Valuation Rules, 2000. During the course of EA-2000 audit conducted during the months of September and October, 2009, it was pointed out by the Audit Team i.e. a short payment of excise duty which the assessee paid the differential duty along with interest on the basis of Chartered Accountant Certificate on 05.10.2009. A show-cause notice dated 17.02.2011 was issued for demanding the differential duty of Rs. 1,11,796/- and also proposed penalty and interest. In the show-cause notice, it was also proposed to appropriate amount of duty involved Rs. 1,11,796/- and interest of Rs. 31,735/- already paid. In the adjudication, the adjudicating authority confirmed the demand, however he has not imposed penalty under Section 11AC. Aggrieved by the said order dated 30.08.2011, the Revenue filed an appeal before the Commissioner (Appeals) who vide impugned order imposed the penalty of equal amount of duty, dissatisfied with the impugned order the appellant is before me.
3. Ms. Anjali Hirawat, learned Counsel for the appellant submits that the appellant calculate the assessable value in terms of Rule 8 on the basis of data available at the time of clearance of the goods. However on the completion of financial year, on the basis of final data, it was found that there is a differential duty short paid. She submits that it was pointed out by the Audit Team but thereafter the appellant has suo motu without disputing liability paid the duty as well as interest before the issue of show-cause notice. It is her submission that since duty and interest was paid admittedly without contesting the issue much prior to issue of show-cause notice, the show-cause notice itself should not have been issued as provided under Section 11A(2B). She also submits that the goods were cleared to their sister unit and the same goods were re-packed and cleared on payment of duty. Since the transactions were between the unit of the same company and the consignee unit was availing the CENVAT credit, it is a clear case of Revenue neutrality therefore, the malafide intention is not established. For this reason also, the penalty under Section 11AC should not be imposed. She further submits that in the show-cause notice, there is no allegation as regard ingredient of proviso to Section 11A such as suppression of fact, mis-declaration, fraud, collusion, etc. with intent to evade payment of duty. Therefore for this reason also the penalty under Section 11AC cannot be imposed. In this support she relied upon a judgement in the case of Amrit Foods Vs. CCE, U.P. 2005 (190) ELT 433 (SC) wherein the Hon'ble Supreme Court held that since neither show-cause notice nor order of Commissioner specified which particular clause of Rule 173Q of erstwhile Central Excise Rules, 1944 had been allegedly contravened by the appellant, penalty can not be imposed. She also placed reliance on the judgements in the case of Akash Optifibre Ltd. Vs. Commissioner of Central Excise, Jaipur 2010 (261) ELT 404 (Tri.-Del.) , Patel Alloys Steel (P) Ltd. Vs. 2013 (293) ELT 264 (Tri.-Ahmd.) wherein it was held that in case of Revenue neutrality penalty under Section 11AC is not sustainable. She also relied upon the judgement of Hon'ble High Court of Gujarat in the case of Commissioner of Central Excise, Customs & Service Tax Vs. Patel Alloys Steel Pvt. Ltd. 2014 (305) ELT 476 (Guj.) wherein it was held that in the fact of transfer of capital goods to their sister unit for undertaking job work penalty not imposable. Following the above Hon'ble Supreme Court, Co-ordinate Bench of this Tribunal in the case of Commissioner of Central Excise, Pune-III Vs. Jamshri Ranjitsinghji SPG. & Weaving Mills Co. Ltd. 2014 (302) ELT 574 (Tri.-Mumbai) also taken the same view that penalty is not imposable in absence of allegation against the appellant for contravention specific provision.
4. On the other hand Shri Ashutosh Nath, learned Assistant Commissioner (A.R.) appearing on behalf of the Revenue, submits that the appellant has not disclosed the fact regarding method of valuation. They have also not resorted to the provisional assessment. Therefore they have suppressed the fact of not disclosing the incorrect valuation of the goods. Therefore the learned Commissioner (Appeals) has rightly imposed the penalty of equal amount of duty invoking under Section 11AC. As regard the submission of the learned Counsel on Section 11A(2B), he submits that the appellant has paid duty and interest only after pointing out by the Audit Team, had the Audit Officer not pointed out the discrepancy the duty differential payment could have been escaped, therefore this is a fit case for invocation of penal provision under Section 11AC. He placed reliance on the following judgements:-
(i) CCE Vs. Jagjeet Food Pvt. Ltd. 2014 (306) ELT 274 (Del.)
(ii) CCE Vs. Bisht Electronics 2014 (300) ELT 336 (Del.)
(iii) Commissioner Vs. Omkar Steel Tubes P. Ltd. 2010 (255) ELT A120 (S.C.)
(iv) CCE & C Vs. R.R. Omerbhay Pvt. Ltd. 2011 (269) ELT 46 (Bom.)
5. I have carefully considered the submission made by both the sides.
6. I find that the goods were cleared by the appellant which was input for the consignee sister concern therefore the valuation was governed by Rule 8 of Central Excise Valuation Rules, 2000 which provides the valuation i.e. 110% of cost of manufacturing. The goods were cleared in July, 2007 and the appellant has calculated the cost of manufacturing on the basis of data for the financial year, 2006-2007 which is the correct procedure. However the appellant was supposed pay the differential duty if it arise due to enhancement of the cost on actual basis which cannot be worked out before completion of the financial year 2007-2008. In such procedure the appellant can pay the differential duty only some- where-in September - October, 2009 when the Balance Sheet is audited and annual report is submitted to the Income Tax department. In the present case the audit was conducted in the months of September October, 2009 and on pointing out the discrepancy of valuation, the appellant suo moto paid the duty along with interest. In view of this fact, I do not find any malafide on the part of the appellant and I am of the view that the case is squarely covered by the provision of Section 11A(2B) which is reproduced below:-
SECTION [11A..................................................................
(2B) Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person, chargeable with the duty, may pay the amount of duty [on the basis of his own ascertainment of such duty or on the basis of duty ascertained by a Central Excise Officer] before service of notice on him under subsection (1) in respect of the duty, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice under subsection (1) in respect of the duty so paid: Provided that the Central Excise Officer may determine the amount of short payment of duty, if any, which in his opinion has not been paid by such person and, then, the Central Excise Officer shall proceed to recover such amount in the manner specified in this section, and the period of "one year " referred to in sub-section (1) shall be counted from the date of receipt of such information of payment. From the above provisions, it is clear that not only the assessee but also if the departmental Officers ascertain the duty which is short paid or short levied and the same is paid by the assessee, show-cause notices should not be served in respect of duty paid. In the present case firstly the appellant while clearing the goods have not intentionally under valued the goods, secondly on pointing out by the Audit Officer, without contesting, they paid the duty and interest. Therefore in my considered view, the case of the appellant is squarely covered by Section 11A(2B), according to which the appellant should not have been issued any show-cause notice, as a result no penalty could have been imposed. I also agree with the learned Counsel of the appellant that show-cause notice has not alleged that the omission and commission of the appellant falls under the 4 corner of the ingredients of provision to Section 11A such as suppression of fact, mis-declaration, fraud, collusion, etc. with intent to evade payment of duty. Ratio of Hon'ble Supreme Court judgment in the case of Commissioner of Central Excise, Pune Vs. SKF India Ltd. 2009 (239) ELT 385 (S.C.) squarely applies in the present case. In the said judgement the Hon'ble Apex Court held-
11.?The payment of differential duty by the assessee at the time of issuance of supplementary invoices to the customers demanding the balance of the revised prices clearly falls under the provision of sub-section (2B) of Section 11A of the Act.
12.?The Bombay High Court, Aurangabad Bench, in its decision in The Commissioner of Central Excise, Aurangabad v. M/s. Rucha Engineering Pvt. Ltd., (First Appeal No. 42 of 2007) that was relied upon by the Tribunal for dismissing the Revenues appeal took the view that there would be no application of Section 11A (2B) or Section 11AB where differential duty was paid by the assessee as soon as it came to learn about the upward revision of prices of goods sold earlier. In M/s. Rucha Engineering the High Court observed as follows:
It is evident that the Section (11AB) comes into play if the duty paid/levied is short. Both, the Commissioner (Appeals) and the CESTAT have observed that the Assessee paid the duty on its own accord immediately when the revised rates became known to them from their customers. The differential duty was due at that time i.e. when the revised rates applicable with retrospective effect were learnt by the Assessee, which was much after the clearance of the goods and therefore, question of payment of interest does not arise as the duty was paid as soon as it was learnt that it was payable. Finding that provisions of Section 11A (2) and 11A (2B) were not applicable as the situation occurred in the instant, case was quite different, Section 11AB (1) was not at all applicable, and therefore, the Assessee was not required to pay interest.
13.?It further held that a case of this nature would not fall in the category where duty of excise was not paid or short-paid.
14.?We are unable to subscribe to the view taken by the High Court. It is to be noted that: the assessee was able to demand from its customers the balance of the higher prices by virtue of retrospective revision of the prices. It, therefore, follows that at the time of sale the goods carried a higher value and those were cleared on short payment of duty. The differential duty was paid only later when the assessee issued supplementary invoices to its customers demanding the balance amounts. Seen thus it was clearly a case of short payment of duty though indeed completely unintended and without any element of deceit etc. The payment of differential duty thus clearly came under sub-section (2B) of Section 11A and attracted levy of interest under Section 11AB of the Act.
15.?for the reasons discussed above we set aside the judgments and orders passed by the Tribunal and the Commissioner (Appeals). We restore the order passed by the Assistant Commissioner in so far as charge of interest is concerned. On the facts of this case there is no question of imposition of any penalty. Hence, that part of the order of the Assistant Commissioner is set aside.
16. In the result the appeals are allowed but with no order as to costs. From the above judgement of Hon'ble Supreme Court, it is found that in case of payment of differential duty due to price revision, penalty under Section 11AC is not imposable by virtue of Section 11A(2B). In view of my above discussion, I am of the considered view that under the fact and circumstances of the case, this is a case of Section 11A(2B) of Central Excise Act, 1944. According to which no show-cause notice should have been issued, hence, the penalty imposed by the Commissioner (Appeals) not legal and correct.
7. Therefore, I set aside the impugned order and allowed the appeal.
(Pronounced in Court on .........04.2015) Ramesh Nair Member (Judicial) Sp/ (1) Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person who is liable to pay duty as determined under sub-section (2), or has paid the duty under sub-section 2(B), of section 11A, shall, in addition to the duty, be liable to pay interest at such rate not below 3[ten per cent.] and not exceeding thirty-six per cent. per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette, from the first date of the month succeeding the month in which the duty ought to have been paid under this Act, or from the date of such erroneous refund, as the case may be, but for the provisions contained in sub-section (2), or sub-section (2B), of section 11A till the date of payment of such duty:
Provided that in such cases where the duty becomes payable consequent to issue of an order, instruction or direction by the Board under section 37B, and such amount of duty payable is voluntarily paid in full, without reserving any right to appeal against such payment at any subsequent stage, within forty-five days from the date of issue of such order, instruction or direction as the case may be, no interest shall be payable and in other cases the interest shall be payable on the whole of the amount, including the amount already paid.] 4[(2) The provisions of sub-section (1) shall not apply to cases where the duty had become payable or ought to have been paid before the date on which the Finance Bill, 2001 receives the assent of the President.] Explanation 1. Where the duty determined to be payable is reduced by the Commissioner (Appeals), the Appellate Tribunal 5[, National Tax Tribunal] or, as the case may be, the Court, the interest shall be payable on such reduced amount of duty.
Explanation 2.Where the duty determined to be payable is increased or further increased by the Commissioner (Appeals), the Appellate Tribunal 5[, National Tax Tribunal] or, as the case may be, the Court, the interest shall be payable on such increased or further increased amount of duty.] 10