Customs, Excise and Gold Tribunal - Bangalore
Vaspar Concepts (P) Ltd., Shri M.R. ... vs The Commissioner Of Central Excise on 24 February, 2006
ORDER T.K. Jayaraman, Member (T)
1. These appeals have been filed against Order-in-original No. 15/2002 dated 8.5.2002 passed by the Commissioner of Central Excise, Bangalore-I Commissionerate.
2. The first appellant M/s. Vaspar Concepts Pvt. Ltd. (VCPL) manufacture backlit Sign Boards and Signages of different varieties and awnings, which are excisable commodities. The officers of the Director General of Central Excise Intelligence, South Zonal Unit, Chennai conducted a search operation on 1.9.1998 at the premises of VCPL and Swaraj Shade and Designs and recovered several documents under Mahazars. After thorough investigation, it appeared that M/s. VCPL indulged in evasion of Central Excise duty by misclassification of the goods manufactured by them. As a result of the investigation, Show Cause Notices were issued to the appellants for recovery of duty and also imposition of penalty. On conclusion of the adjudication proceedings, the Adjudicating Authority passed the impugned order. In the Show Cause Notice there were eight demands in Annexures D-1 to D-8. The Adjudicating Authority in para 18 of the order held that the demands in Annexure D-1, D-2 and D-3 pertaining to illuminated sign board and CANS are not recoverable under proviso to Section 11A(1) of the CE Act 1944. Hence, he dropped those demands. However, in respect of the demands in Annexure D-4, D-5, D-6, D-7 and D-8, he has held that the facts relating to these demands were suppressed deliberately with an intension to evade payment of duty. Therefore, he has confirmed the demands mentioned in the above Annexures. The duties involved are as follows:
Annexure D-4 - Rs. 53,216/-
Annexure D-5 - Rs. 10,88,602/-
Annexure D-6 - Rs. 2,319/-
Annexure D-7 - Rs. 6,20,268/- & Annexure D-8 - Rs. 5,05,564/-.
The total duty demanded comes to Rs. 22,47,969/-. The Commissioner has limited the penalty under Section 11AC to the quantum of duty liability which has arisen after 28.9.1996. The penalty under Section 11AC comes to Rs. 13,57,667/-. He imposed a penalty of Rs. 1,00,000/-, Rs. 1,00,000/- and Rs. 50,000/- under Rule 209A of the CE Rules respectively on the following persons.
(i) Shri M.R. Parsuram, Managing Director, M/s. VCPL
(ii) Shri M.P. Narendra, Executive Director, M/s. VCPL
(iii) Shri T. Subbaiah, Chief Finance & Admn. Officer, M/s. VCPL Interest under 11AB has also been demanded. The appellants have strongly challenged the findings of the Adjudicating Authority, hence they have come before this Tribunal for relief.
3. Shri S.R. Krishnan, the learned advocate appeared for the appellants and Shri Ganesh Havanur, learned SDR for the Revenue.
4. The learned advocate urged the following submissions.
(i) Inviting the Bench's attention to Para 18 of the findings, the learned advocate said that the demands in Annexures D-1, D-2 and D-3 have already been dropped by the Commissioner on account of time bar. It is the contention of the counsel that the rest of the demands confirmed by the learned Adjudicating Authority are not sustainable for the following reasons. The goods manufacture by the appellants were classified under the heading 63.06 as awnings by the Asst. Commissioner. However, the Director General, Central Excise Intelligence Wing, Chennai felt that the goods are classifiable under Sl No. 94.05. The appellants case is of a bonafide dispute on classification matter and there is no suppression of fact to attract proviso to Section 11A of the Act. Therefore, the entire demand is time barred. When the Asst. Commissioner decided the classification under 63.06, the then Commissioner who reviewed the adjudication order passed by the Asst. Commissioner accepted his decision and no appeal was filed. The Director General, Central Excise Intelligence Wing, Chennai, in these circumstances cannot change the classification arbitrarily.
(ii) The self adhesive vinyl stickers/graphics removed under Debit Notes are rightly classifiable under S.H. No. 49.01.90 as product of printing industry, in that case the duty liability will be nil. The Commissioner has classified the above item under 39.19.00 and has demanded duty of Rs. 53,816/-(Annexure D-4). This demand is not sustainable. While confirming the above demand the Commissioner has invoked the extended period. The extended period is not invokable for the following reason. The debit notes were handed over to the officers after search of the factory premises in response to the summons dated 15.9.1998 issued to the appellants. When all the information wanted by the officers were furnished and enquiries instituted and the statements recorded from the appellants, there can be no question of suppression of facts with the intention to evade payment of duty on the part of the appellants. Therefore, the extended period of limitations under Section 11A(1) is not invokable. In the case of Highland Dye Works Pvt. Ltd. v. CCE, Surat , it was held that when the documents all the available informations were supplied to the department on the date of search of the appellant factory and the department has come to know of the activities of the appellants from various records, the charge of suppression is not sustainable. Moreover, there was a bonafide dispute on classification of adhesive vinyl stickers between the appellants and the Director General of Central excise Intelligence and the Commissioner of Central excise Bangalore-I, each classifying under different tariff entries viz., 94.05, 39.10, 49.01. When such dispute exists the charge of suppression with intend to evade payment of duty will not hold good and hence the extended period of limitation of 5 years cannot be invoked. In view of the above submission there is no duty liability on adhesive vinyl stickers, the duty amount of Rs. 30,000 already paid through PAL is refundable.
(iii) The excess amount of Rs. 2,319/- (Annexure D-6) is legitimately due to government and the same was debited to government through PLA on 31.12.1999.
(iv) As regards the demand of duty of Rs. 6,20,268/- (Annexure D-7) on account of non-inclusion of the value of Fascia manufactured and supplied by Autographics and Visual Display Systems to ITC and HCC at their site, it was submitted that the goods are not marketable, hence they are not excisable. In any case, it was submitted that the demand is time barred. It was submitted that Autographics and Visual Display Systems hold Central Excise registration for the manufacture of Fascia. The buyers are Hindustan Coca Cola and ITC. ITC and HCC invariably place orders for Fascia with the aforesaid two factories with instructions to deliver the Fascia at their site, where awnings are installed and erected by the appellants. The aforesaid two factories raise invoices in respect of their duty paid Fascia directly on ITC and HCC and payments are also received from them. When such is the case, the value of Fascia supplied by the above two factories to ITC and HCC at their sites is not includable in the assessable value of awnings delivered by the appellants at the same site. The manufacture of awnings was completed at the factory of the appellants without the Fascia in unassembled condition. The awnings without Fascia were delivered at the site of ITC and HCC. The awnings erected at the site of ITC and HCC do not conform to the definition of excisable goods, as they do not satisfy the test of marketability in view of the fact that the same cannot be dismantled and sold and cannot be reassembled at any other site. Moreover, the DGCEI officers searched the factory as early as 1.9.1998 and took possession of number of files and records by which they came to know the alleged under valuation of fascia from the records. In such a case, issue of belated Show Cause Notice dated 2.3.2001 after a lapse of 2 1/2 years invoking charge of suppression is bad in law and is time barred. The case law already cited above holds goods. Highland Dye Works Pvt. Ltd. v. CCE, Surat .
(v) A demand of Rs. 5,05,564/- (Annexure D-8) has been confirmed on the alleged removal of awnings by the appellants under the invoices of Vivek Trading Company (VTC). It was submitted that VTC had no sufficient infrastructure for the manufacture of complete awnings and other commodities and they used to get their goods manufactured from other units on job work basis. The raw materials purchased from VTC under purchase invoices were directly sent from the raw material supplier to the appellant (job worker). The raw materials were acknowledged by the appellant job worker at their factory and accounted properly in the Books of accounts. After the job work was completed, the finished goods were dispatched to the buyers of VTC under the Commercial invoice of VTC. Being a SSI unit availing the exemption Notification No. 1/93, the goods were cleared without payment of duty. Since VTC were not conversant with Central Excise matters, they had not followed the proper procedure. This is only a technical error, which can be condoned, as the clearances of VTC were within the exemption limit during the relevant period. Even though the officers of the DGCEI, Chennai visited the appellants factory on 1.9.1998, they issued a belated Show Cause Notice dated 2.3.2001 invoking the extended period. Since the department was in the know of things and there was no suppression of facts extended period cannot be invoked. Moreover, the issue of clearances of awnings and other products under VTC commercial invoice was dealt with by the Asst. Commissioner in his order dated 11.1.1996. On the same set of facts the DGCEI cannot take action on the ground of suppression of facts, when the same issue was earlier taken up by the Department and adjudicated upon. In these circumstances, the demand of Rs. 5,05,564/- is not sustainable.
(vi) In respect of demand of Rs. 10,88,602/- (Annexure D-5), it was submitted that the same relates to Fascia. It was submitted that apart from the question of time bar, the Show Cause Notice proposed the classification of the item under 39.19.00 whereas the Commissioner in the adjudication order has classified the same under S.H. No. 94.05.00 as parts of illuminated lighting. Since the adjudication order traverses beyond the scope of the Show Cause Notice, the demand cannot be sustained. In these circumstances, when the departmental officers themselves hold two different views in respect of classification of the items, the charge of willful mis-declaration with an intention to evade payment of duty invoking the extended period under proviso to Section 11A is not sustainable, hence, this demand is also time barred.
(vii) In view of the above submissions the imposition of penalty of Rs. 13,57,667/- under Section 11AC is not sustainable.
5. The learned SDR pointed out that while dropping certain demands (Annexure D-1, D-2, D-3) the Commissioner has given detailed reasons for sustaining the rest of the demands. He said that the Commissioner has dealt with all the issues in depth and requested the Bench to uphold the order-in-original.
6. We have gone through the records of the case carefully. The main charge against the appellants is that they mis-declared the classification of the goods manufactured by them with an intent to evade duty. On various counts, demands were made in eight annexures to the Show Cause Notice. Out of those demands made in eight annexures, the demands in Annexure D-1, D-2 and D-3 have been held by the Adjudicating Authority to be time barred. He has clearly held that the longer period is not invokable in these cases. Therefore, we are taking up the demands made in the rest of the annexures. Out of the five annexures, the liability of Rs. 2,319/- in Annexure D-6 has already been accepted by the party. Now we are left with the demands in respect of four annexures.
7. The largest amount of demand of Rs. 10,88,602/- is as per annexure D-5. This demand is in respect of Fascia alleged to have been manufactured and cleared by the appellants. It is seen that the Show Cause Notice-proposes classification of the above item under chapter 39. However, the Commissioner in his adjudication order has classified the same under chapter 94. It is very clear that the adjudication has gone beyond the scope of the Show Cause Notice. There are many case laws on the issue. We are mentioning the following.
(i) CCE, Ghaziabad v. Dabur India Limited 2004 (166) ELT 225 (Tri.-Del.) - Adjudication - Show Cause Notice - Classification sought by department under one tariff heading - But in adjudication classification done under another tariff heading and demand confirmed - HELD : Completely new case made out of which assessee had no notice - setting aside of adjudication order upheld - However, liberty given to department to issue notice for classification under the new tariff heading - Section 33 of Central Excise Act, 1944.
(ii) Volvo India Private Limited v. CC, Chennai - Appeal - Order-in-Appeal, traveling beyond the scope of Original show cause notice, legality of - Valuation - Remand -Commissioner (Appeals) order seeking to make out a new case which is not found in the show cause notice, legally unsustainable.
(iii) Hindustan Polymers Co. Ltd. v. CCE, Guntur 1999 (106) ELT 12 (SC) - Appeal - Demand - New Case - Order of the Tribunal proceeding upon a basis altogether different from that of the demand notice served upon assessee is not "moulding" relief but making of new case which is not permissible.
It is seen that as regards the classification of the above item, there are different views. In these circumstances, we agree with the learned advocate's contention that willful mis-declaration cannot be alleged when there are different interpretations. In such a case, there is no justification for invokation of longer period, hence the demand is not sustainable on account of time bar also.
8. An amount of Rs. 53,206/- in Annexure D-4 is on account of the adhesive vinyl stickers graphics removed by the appellants under debit notes. We find that the debit notes were handed over to the officers after the search of the factory premises in response to the summons dated 15.9.1998 issued to the appellants but the Show Cause Notice has been issued only in 2001. In the Highland Dye Works (supra) decision cited by the learned advocate, it has been held that when the documents containing all available information are supplied to the department and on the date of search department came to know about the activities of the assessee, the charge of suppression is not sustainable. The ratio of the above mentioned case is clearly applicable to the present case. Hence the demand in Annexure D-4 is clearly time barred and not sustainable.
9. In annexure D-7 the amount demanded to the tune of Rs. 6,20,268/- is on account of non-inclusion of the value of fascia supplied by Autographics and Visual Display Systems. In this case also the DGCEI Officers searched the factory, even as early as 1.9.1998 and took possession of large number of documents. Therefore, the issue of belated Show Cause Notice dated 2.3.2001 is bad in law and is clearly time barred by applying the ratio of Highland Dye Works case. The appellants have stated that these goods were directly supplied by the manufacturers to the ITC and HCC on payment of duty. Therefore, the inclusion of the value of the goods to the value of awnings supplied by the appellants to ITC and HCC is not correct for the reason that the appellants supplied awnings without fascia, hence the above demand in Annexure D-7 is also not sustainable.
10. As regards the demand in Annexure D-8 to the tune of Rs. 5,05,564/-, the main allegation is that these goods were removed without payment of duty by issuing invoices in the name of Vivek Trading Company. The appellants have stated that they did job work for Vivek Trading Company as they did not have proper infrastructure. After receiving the raw materials they completed the job work and finished goods were dispatched to the buyers of VTC under the commercial invoices of VTC. Since the clearances of VTC were within the exemption limit for SSI, no duty was paid. In any case, even in this case we find that the demand is time barred. In these circumstances, the demand in Annexure D-8 is not sustainable.
11. As discussed above all the demands confirmed by the learned Adjudicating Authority are time barred. We find that in the lengthy adjudication order running to 55 pages, the Adjudicating Authority in one paragraph has given a finding that the demands in Annexure D-4 to D-8 are sustainable saying that the appellants had malafide intention and never disclosed the facts to the department. We also find that the classification of their main products under chapter 63 was earlier a subject matter of adjudication and the Asst. Commissioner after having seen the photographs and other documents, approved the classification under chapter 63. The decision of the Asst. Commissioner in his order 16.1.96 has not been questioned by the higher authorities. The allegation of the DGCEI in the Show Cause Notice to the effect that the appellants misrepresented the facts for getting the approval of classification claimed by them has no much basis. In view of what we have stated above, we find that the demand confirmed of Rs. 22,47,960/- in respect of Annexures D-4, D-5, D-7 and D-8 is not at all sustainable. It is liable to the set aside. In that case, no penalties can be levied. Hence we allow the appeals with consequential relief.
(Pronounced in open Court on 24 FEB 2006)