Customs, Excise and Gold Tribunal - Tamil Nadu
Mahindra And Mahindra Ltd. vs Commr. Of Cus. And C. Ex. on 22 December, 2000
Equivalent citations: 2001(74)ECC132, 2001(129)ELT188(TRI-CHENNAI)
ORDER G.R. Sharma, Member (T)
1. This is an appeal filed by the appellants against the Order-in-Original No. 8/98, dated 31-3-1998 passed by Commissioner of Customs & Central Excise, Hyderabad. In the impugned order, the learned Commissioner held as follows :-
"12.1. I demand an amount of Rs. 1,57,94,315/- (Rupees one crore fifty-seven lakhs ninety-four thousand three hundred and fifteen only), towards the Central Excise duties collected from buyers, but not paid by M & M (both in respect of parts cleared on reversal of proportionate credit and those cleared without payment of duty); the Modvat credit irregularly availed by them on imported O.E. parts and irregularly utilised on the sub-assemblies and also the duties not paid on the clearances of sub-assemblies, in terms of Rule 9(2), Rule 57F(1)(ii) of the C.E. Rules, 1944 and Section 11D of the Act, read with the proviso to Section 11A(1) of the Act, as respectively applicable and as specified in the Annexure II to this order.
12.2. I impose a penalty of Rs. 32,00,000/- (Rupees thirty-two lakhs only), on M & M under Rules 9(2), 52A, 173Q & 226 of C.E. Rules, 1944 for the contraventions ibid.
12.3. I also order for confiscation of the Plant & Machinery of the assessees, under Rule 173Q of the Central Excise Rules, 1944. However, I give an option to the assessee to redeem the same on payment of redemption fine of Rs. 10,00,000/- (Rupees ten lakhs only) under Section 34 of the Central Excise Act, 1944."
2. The facts of the case in brief are that appellants are engaged in the manufacture of Light Commercial Vehicles. They are availing the benefit of credit of duty paid on inputs under the Modvat scheme. While they are manufacturing light commercial vehicles, they are also selling spares from their Spare Parts Division. Certain irregularities were observed during the course of checking the stocks and verification thereof. Accordingly, a show cause notice was issued to the appellant asking them to explain as to why an amount of Rs. 37,91,395.94 should not be demanded from them for the period 1-4-1990 to 31-3-1994 for spare parts sold by their Spare Parts Division as detailed in Annexure-Dl which was sold by them at higher prices, why an amount of Rs. 2,62,989.72 should not be demanded from them in respect of inputs cleared to the spare parts division on which Central Excise duty was collected from the buyers during the period 1990-94 as detailed in Annexure D1(a), why an amount of Rs. 1,07,75,626.83 should not be demanded from them for goods removed without payment of duty during the period 1-4-90 to 31-12-94 and why an amount of Rs. 5,81,069.79 being the Modvat credit utilised irregularly on the clearances of sub-assemblies which were manufactured out of imported original equipments. Appellants were also asked to explain as to why penalty should not be imposed on them and why the seized goods should not be confiscated.
3. Heard Shri Sasidaran, Ms. Mythili and Shri V.J. Sankaram, learned Advocates appeared for the appellant and Shri S. Kannan, ld. DR appeared for the respondent.
4. For the purpose of clarity, the matter is being discussed, commented and disposed of demand-wise.
5. The first demand confirmed by the learned Commissioner was for Rs. 37,91,395.94. This demand pertained to the inputs cleared to the spare parts department and sold at higher price. Out of this demand, there was a demand of Rs. 2,53,557'/- on the ground that appellant had sold the processed inputs and since the inputs had been processed, duty was payable on these inputs. This demand for Rs. 2,53,557'/- was conceded by the learned Counsel for the appellant. For the remaining demands, the allegation was that no classification list or price list was filed by the appellant to indicate the clearances of the goods. The Revenue argued that duty was chargeable on the final sale price from the spare parts division. The contention of the appellant in this case was that Modvatable inputs were cleared by them after reversing the credit in terms of Rule 57F; that subsequent sale price had nothing to do with the duty payable on the higher price at which the spare parts were sold.
6. The learned Counsel for the appellant submitted that their case is fully covered by the division of this Tribunal in the case of CCE v. American Auto Service reported in 1996 (81) E.L.T. 71 and further by the decision of this Tribunal in the case of CCE v. Asia Brown Boveri Ltd. reported in 2000 (120) E.L.T. 228 (Tribunal-LB).
7. We considered the submissions of both sides on this issue. We find that this Tribunal in the case of CCE v. American Auto Service cited by the appellant held that rate of duty when Modvat inputs on which credit was taken and are utilised, removed for home consumption under Rule 57F(1)(ii) of Central Excise Rules, 1944, the duty suffered earlier and already utilised to be paid back and not the effective rate of duty as prevalent at the time of removal of goods for home consumption is applicable. Assessment finalised at original manufacturer's end is not to be reopened at purchaser's end. From this, we find that since duty on these goods was already assessed at the original manufacturer's premises, therefore there was no question of fresh assessment and hence we observe that this remaining demand is fully covered by this decision. We further note that in the case of CCE v. Asia Brown Boveri (supra) this Tribunal further observed that requirement of Rule 57F(1)(ii) is for demand of duty on the inputs received for home consumption where the inputs have not been used by the manufacturer; that a legal fiction treating the inputs as having been manufactured by the recipients of the inputs was only to see that the manufacturer restores the original position by debiting the same rate of duty at which he had taken the credit. On analysis of this finding of the Larger Bench of this Tribunal, we note that in this case appellant, no doubt, sold the inputs from their spare parts department, but these inputs were sent to the spare parts department after reversing the Modvat credit of duty taken by them earlier and thus we find that both the cases support the case of the appellant and therefore the demand of duty amounting to Rs. 35,37,838.94 is set aside.
8. The second demand confirmed in the impugned order is for Rs. 2,62,989.72. The ld. Counsel for the appellant argued that appellant could not make out from the show cause notice the basis for this demand; that adjudication order also does not examine in any detail. The Commissioner confirmed the demand without any argument in support of the demand. We have perused the impugned order. We note that the Commissioner, no doubt, confirmed the demand but he has not given any reason as to how this demand is justified and thus liable to be confirmed. Since the demand has been confirmed without any reasoning, the demand is not sustainable in law and therefore same is hereby set aside.
9. The third case is for demanding a sum of Rs. 1,07,75,626.83. This demand is for the period 1-5-90 to 31-12-94. This demand has been confirmed on the ground that appellant collected Central Excise duty but not paid to the Central Excise authorities. Appellant had been clearing the inputs on a document named as Spare Parts Transfer Note (SPTN). It was seen that no G.P.I was issued for clearance under this document. It was further noticed that in certain cases some items were being cleared after reversal of Modvat credit taken on the items whereas in some cases identical goods were being cleared without reversing the Modvat credit. It was further noticed that appellant had issued a circular in 1993 reading as "This has reference to the Union Budget 1993-94 where the Excise Duty on the spare parts has been enhanced from 23% to 25%. Hence with effect from 1-3-93, we shall be charging Excise Duty in all our invoices except on body shells were Excise Duty has been reduced from 23% to 20%". It was observed by the department that there was further noting reading as "Since we are not showing excise duty separately, prices to be revised and to be circulated". The department also alleged that there were statements of the employees of the company stating that this was the practice; that prices were being revised from time to time; that according to this circular, the prices were actually revised. Therefore, the department alleged that since the appellant collected duty on spare parts sold from their spare parts department, therefore the duty must be deposited with the Government as required under Section 11D. It was also alleged that Section 12A required that duty should be shown separately. To avoid payment of duty, the appellant had devised the system of showing composite price in their sale bills meaning thereby duty was included in the price. The appellant explained that these parts which were cleared and sent to the spare parts department were declared by the assessee under Rule 57G as inputs; that no evidence has been produced to prove that they were non-Modvatable items. It was submitted by the appellant that the adjudicating authority was misguided since he misread the evidence on record; that the correlation that was done and filed before the Commissioner at the time of personal hearing was not fully examined. It was contended by the Counsel for the appellant that every receipt in the bin card which was permitted to be maintained jointly by the authorities is properly explained whether it was Modvatable item or non-Modvatable item. Because of every receipt, the source is clearly and distinctly mentioned by reference to the GR Notes. Ld. Counsel also submitted that if the goods are Modvat goods those documents showed this at the time of sending to the manufacturing section and they are sent to the excise department of the factory for properly entering them in RG 23A Parts I & II registers. Therefore, the Modvat credit taken and the documents on which credits were taken in respect of entries in the RG 23A Parts I & II were always and at all time available to the department; that whatever was not entered in RG 23A Parts I & II were non-Modvat items. It was contended that to account for the Modvated items cleared to the spare parts department a correlating document called "Spare Parts Transfer Note" clearly mentioned the relevant RG 23A Parts I & II entry, a corresponding document like excise gate pass was invariably issued. Ld. Counsel therefore submitted that there was no scope for any error to quantify item wise and input wise; that Modvat credit was being reversed. It was also submitted by him that the total amount of Modvat utilised for clearing trucks is also available in RG 23A Part I; that the Modvat credit was reversed in respect of clearances made in a spare parts transfer note and the Modvat credit debited; that clearances on payment of duty in respect of trucks are aggregated. The sum total would be equal to the Modvat credit taken into the RG 23A Part-II. It was submitted that ld. Commissioner only discussed the maintenance of bid cards and that in the absence of discussing other documents, an error has crept in holding that demand of Rs. 1,07,75,627/- is sustainable in law. At this stage, ld. Counsel for appellant submitted that they have been able to reconcile from the documents that 64% of the inputs were such on which no Modvat credit was taken. It was submitted by the appellant that this position could be examined by the authorities if the documents are sent back to them to verify this aspect. Ld. Counsel submits that though it was proved before the ld. Commissioner that correlation was done to the extent of 64%, he ignored the correlation and failed to extend the benefit even for those inputs where proof was furnished.
10. In reply to the contention of the Counsel for the appellant, ld. DR submitted that the Commissioner examined the statements furnished by the appellant and by stating that entries did not lead anywhere, the ld. Commissioner has rightly confirmed the demand.
11. We have carefully considered the submissions on this aspect. We find that demand on this score is more than Rs. 1.07 crore. We further note that emphasise of the Counsel for the appellant was that they had been able to reconcile 64% of the entries to prove that no Modvat credit was taken on the goods. Counsel went to the extent of showing that they will be able to establish it by the records maintained by the appellant. We find that it is a vital issue to find out whether the statement of the assessee is correct in which he has stated that 64% of the inputs were non-Modvatable on which no Modvat credit was taken. We find that this statement has not been examined in depth. No doubt certain entries were picked up but those entries did not prove or unprove the case. A detailed examination of the contention of the appellant is necessary. Therefore, on this demand we find that this issue needs further examination. Therefore, the matter is sent back to the learned Commissioner on this score to examine their contention about the inputs being goods on which no Modvat credit was taken and other aspects also. Thus, in respect of this demand, the appeal is allowed by way of remand.
12. Regarding demand of Rs. 35,38,748.16, ld. Commissioner has brought down the demand to Rs. 5,81,070/-. This demand has been confirmed on the ground that duty was not paid on imported inputs; that inputs were imported as original equipments; that Modvat was availed and that duty was collected without payment to Government. The contention of the appellant was that it was incorrect to believe that any sub-assembly was made out of only imported components and no local part on which Modvat credit was availed was contained in such assemblies. It was submitted that transmission assemblies contained gears which are procured from the local market of which Modvat credit was availed; that chassis assembly contained cross number which was obtained from the local market which contained Modvated inputs; the cabin assembly was primed and painted, both primer and paint was from local market on which Modvat credit was availed and thus the assumption of the ld. Commissioner was wrong.
13. The ld. DR submitted that the Commissioner had examined these aspects at great length and that after careful examination of the documents presented before him and submissions made, he reduced the demand for duty from Rs. 35.38 lacs to Rs. 5.81 lakhs. He submits that demand has correctly been computed and prayed that demand may be sustained.
14. We note in the instant case that no documentary concrete evidence has been produced by the appellant to prove that in the sub-assemblies the indigenous goods were used on which Modvat credit has been taken. In the absence of concrete evidence being produced and the assembly being original equipment being self-contained item as has rightly been taken by the ld. Commissioner and correctly held that duty was demandable to the extent of Rs. 5.81 lakhs. The demand in the circumstances is sustainable in law and we uphold the same accordingly.
15. Regarding confirmation of the demand of Rs. 16,66,902.53, the allegation was that appellant indulged in the manufacture and clearance of sub-assemblies without accountal and without payment of duty thereon to their spare parts department. Counsel for the appellant submitted that the allegation of the department is that spare parts department of the appellant was sending Spare Parts Transfer Notes and that on the date of sending of this STPN records do not show the clearance movement of the assemblies and therefore the allegation of the department was that assemblies were removed without payment of duty. The department has relied upon the latter from the Manager to the Chief Materials Manager in which it was stated "By a copy of this letter, we are requesting...to quickly follow up the excise formalities as even this cabin was transferred without excise gate pass". Ld. Counsel submitted that this letter has been given importance out of proportion; that was only to show that the excise formalities should be completed; that negative inference drawn by the department was not desirable. Ld. Counsel submits that even today, if they are required to correlate these spare parts transfer notes with the RG. 1 register, they will be able to satisfy the department. We note that the ld. Commissioner has confirmed a demand of Rs. 2.51 lacs only in respect of these items. Since the contention of the appellant appears to be reasonable and if they can show that each spare parts transfer note can be correlated with the entries and clearances in the relevant document, we consider it that matter needs further examination. In this view of the matter, we hold that this aspect needs to be examined further. Thus the demand of Rs. 2.51 lakhs is set aside and the matter is referred back to the ld. Commissioner to examine the contention of the appellant in respect of accounts maintained.
16. The last demand is for Rs. 5,81,069.75. This demand has been raised and confirmed on the ground that appellant manufactured and cleared sub-assemblies, manufactured out of imported inputs on which no credit of input duty accrued since the same was examined from CVD. It was also alleged that no Modvat declaration was filed by the assessee specifying 'N' assemblies as final products and therefore for the duty demand for such assemblies requires to be made in PLA. Counsel for the appellant submitted that PLA demand is not tenable; that indigenous parts/inputs were also used in the assemblies; that they filed Modvat declaration specifying the asssemblies also as final products; that I.C. Engines, vehicle parts, etc., were taken; that there was no warrant of one to one correlation for utilisation of Modvat credit.
17. Ld. DR submitted that appellant had not submitted any document to show each of the indigenous parts which were fitted in the assembly; that sub-assemblies were also imported goods on which no CVD was payable.
18. We have considered the submissions of both sides on this count. We find that sub-assemblies were imported. We also note that appellant had not furnished any documentary evidence to show that indigenous inputs were used in the sub-assemblies and that Modvat credit was taken on the indigenous input. Thus, we hold that demand is sustainable in law in the absence of any documentary evidence produced by the appellant.
19. With regard to limitation, we find that appellant was selling the goods at higher prices. We also note that Spare Parts Transfer Notes were private documents. They were not being sent along with RT-12 returns. Thus, there has been a suppression and therefore we hold that demands are not hit by limitation.
20. In so far as penalty is concerned, we note that in view of the fact that major items on which single highest demand is being sent to the Commissioner for examining afresh still remains to be settled. Penalty aspect shall be examined by the ld. Commissioner at the time of passing the orders in remand.
21. In so far as the redemption fine is concerned we find that it is not too much on the higher side and therefore we do not feel it necessity of interfere with the imposition of redemption fine.
22. Appeal is disposed of in the above terms.