Custom, Excise & Service Tax Tribunal
M/S Cheekatla Polymers (P) Ltd vs The Commissioner Of Central Excise, ... on 13 November, 2012
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, SOUTH ZONAL BENCH
AT BANGALORE.
Bench Single Member
Court I
Date of hearing: 13.11.2012
Date of decision: 13.11.2012
Central Excise Appeal No. 662 of 2011
[Arising out of Order-in-Appeal No. 06/2011 (H-IV)CE dated 18.01.2011, passed by the Commissioner of Central Excise, Customs and Service Tax (Appeals-II), Hyderabad]
For approval and signature:
Honble Shri P. G. Chacko, Member (Judicial)
1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not ? Yes
3. Whether Their Lordships wish to see the fair copy of the Order? Seen
4. Whether Order is to be circulated to the Departmental authorities? Yes
M/s Cheekatla Polymers (P) Ltd.
Appellant
Versus
The Commissioner of Central Excise, Hyderabad.
Respondent
Appearance:
Mr. B. Seshagiri Rao, Advocate for appellant Mr. A. K. Nigam, Additional Commissioner (AR) for respondent CORAM :
Honble Mr. P.G. Chacko, Member (Judicial) ORDER NO. dated 13.11.2012 This appeal filed by the assessee is directed mainly against the demand of duty of Rs. 4,46,248/- on the goods cleared by the appellant to one M/s XL Telecom Ltd., Charlapally, Hyderabad during the period from June to October 2006. The appellant has also challenged the demand of interest on duty. There is also serious challenge to the penalty imposed on the appellant under Section 11AC of the Central Excise Act.
2. The demand of duty arises out of denial of the benefit of Notification No. 6/2006-CE dated 1.3.2006 (Sl. No. 31). At present, this demand on merits is not under challenge inasmuch as the learned counsel for the appellant had made submissions to this effect when the stay application of the appellant was considered. For the sake of brevity, the relevant portion of Stay Order No. 877 dated 29.9.2011 is reproduced below :-
However, at the bar today, learned counsel submits that the liability to pay duty for the period of dispute without benefit of Notification No. 6/2006-CE dated 1.3.2006 is conceded. It is further clarified that the appellant is presently aggrieved only by the invocation of the extended period of limitation as also the imposition of penalty. The matter, which is otherwise within the jurisdiction of Division Bench, is being taken up on the basis of learned Counsels submissions. As indicated above, the appellant is seriously challenging the invocation of the proviso to Section 11A(1) of the Central Excise Act. A brief statement of the facts of this case is required to appreciate this challenge. During the period of dispute, the appellant was clearing Power Cord without payment of duty, to M/s XL Telecom Ltd. on the strength of Annexure-45 received from the said company. The exemption from payment of duty was claimed under Sl. No. 31 of the aforesaid notification wherein nil rate of duty was prescribed as effective rate of duty for parts, components and accessories of mobile handsets including cellular phones, falling under CSH No. 8529 90 90 of the First Schedule to the Central Excise Tariff Act, subject to one condition which was that the procedure laid down in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 should be followed where the goods manufactured and cleared by the assessee was intended to be used elsewhere than in the factory of its production. The appellant had, during the aforesaid period, cleared Power Cords to certain other customers on payment of duty at appropriate rate without claiming the benefit of the above notification inasmuch as the aforesaid condition was not met in that case. The resultant situation was that the appellant, during the aforesaid period, cleared Power Cords to M/s XL Telecom Ltd. without payment of duty and to other customers on payment of duty. On scrutiny of their records, the jurisdictional Superintendent of Central Excise found that separate accounts were not maintained in respect of inputs used in the manufacture of dutiable and exempted goods. On this basis, the Superintendent raised a demand in terms of Rule 6(3)(b) of the CENVAT Credit Rules, 2004 requiring the appellant to pay 10% of the total price (excluding taxes) of the goods cleared to M/s XL Telecom Ltd. during the aforesaid period. This demand was raised in a letter dated 27.10.2006 and the same was honoured by the party by paying Rs. 2,79,564/- in terms of Rule 6(3)(b) ibid with interest thereon amounting to Rs. 18,545/-. Later on, the jurisdictional Assistant Commissioner issued show-cause notice dated 5.2.2010 demanding duty of Rs. 4,56,248/- in respect of the Power Cords cleared to M/s XL Telecom Ltd. from June to October 2006, proposing to appropriate the aforesaid amount of Rs. 2,79,564/-, demanding interest on duty under Section 11AB of the Act, and proposing penalties under Section 11AC of the Act and Rules 25 & 27 of the Central Excise Rules, 2002. In this show-cause notice, the aforesaid interest amount was proposed to be appropriated towards the demand of interest on duty, also.
3. In a reply to the show-cause notice, the assessee challenged the demand of duty both on merits and on the ground of limitation. It was submitted that they did not suppress any material fact with intent to evade payment of duty but disclosed every material fact duly to the department. On this basis, the party objected to invocation of the extended period of limitation as also to the proposal for imposing penalty under Section 11AC of the Act. After hearing the party, the Assistant Commissioner passed the following order :-
(i) I confirm the demand of Rs. 4,56,248/- (Rupees Four Lakhs Fifty Six Thousand Two Hundred and Forty Eight only) being the duty on impugned goods removed during the period from June, 2006 to October, 2006 in terms of the proviso to sub-section (1) of Section 11A of the Act;
(ii) I appropriate the amount of Rs. 2,79,564/-, paid towards 10% of the value of the impugned goods while clearing them at nil rate of duty under Rule 6 of Cenvat Credit Rules, 2004, and adjust the same towards duly confirmed at (i) above;
(iii) I confirm the demand of interest, at the applicable rates, on duty amount confirmed at (i) above under Section 11AB of the Act and appropriate the interest amount of Rs. 18,545/- paid by them on Rs. 2,79,564/- paid towards 10% of the value of the impugned goods while clearing them at nil rate of duty under Rule 6 of Cenvat Credit Rules, 2004, and adjust the same towards interest confirmed;
(iv) I impose penalty equal to the duty confirmed at (i) above under Section 11AC of the Act;
(v) I impose penalty of Rs. 5,000/- under Rule 27 of Central Excise Rules, 2002 for contravention of the provisions of Central Excise Rules 2002 mentioned supra;
(vi) I do not prefer to impose penalty under Rule 25 of the Central Excise Rules, 2002 as equal penalty is already imposed at (iv) above under Section 11AC of the Act.
4. Aggrieved by the above order, an appeal was preferred to the Commissioner (Appeals). The appellate authority granted only partial relief to the assessee by setting aside the penalty imposed on them by the lower authority under Rule 27. The demand of duty and interest thereon and the other penalty imposed by the original authority came to be upheld.
5. Heard both sides. The learned counsel for the appellant has drawn my attention to certain documents in the context of setting up a challenge against the invocation of extended period of limitation as also against the imposition of penalty under Section 11AC. Copies of the ER-1 Returns filed for the period from June to October 2006 are amongst these documents. Each of these returns indicates clearance of Power Cords at nil rate of duty as also clearance at 16% duty. In respect of the latter category, the tariff entry indicated in the return is CSH No. 8544 19 90 and, in respect of the former, Annexure-45 is mentioned in the column for tariff entry. Notification No. 6/2006-CE and Sl. No. 31 thereof have also been indicated in the appropriate column in respect of the goods cleared at nil rate of duty. A copy of Annexure-45 [application under Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001] is another document produced by the appellant. This application was, obviously, submitted by M/s XL Telecom Ltd. to the Assistant Commissioner having jurisdiction over their factory. This application describes the goods to be procured by the said company as parts, components and accessories of mobile handsets including cellular phones fixed wireless telephone; POWER CORD. In this application, the said company undertook to use the said goods for the purpose of manufacturing parts, components and accessories of CDMA mobile handsets - cellular phones fixed wireless telephone as also to follow any other condition attached to the above notification. A copy of the notification has also been produced and the same, at Sl. No. 31, prescribes nil rate of duty for parts, components and accessories of mobile handsets including cellular phones, falling under CSH No. 8529 90 90.
6. The question before me is as to whether the suppression of fact alleged in the show-cause notice is true or not. The relevant part of the show-cause notice reads thus :
It appears that the assessee has suppressed the information relating to classification of the power cords in the ER1 returns from June, 2006 to October, 2006 as they did not indicate its classification which is the vital aspect for the purpose of exemption under the relevant notification but removed the same (without payment of duty) with an intention to evade payment of duty. It also appears that the assessees have removed the excisable goods by contravening the provisions CE Act and the rules made thereunder with an intention to evade payment of duty inasmuch as the power cords manufactured and cleared by them are not actually eligible for clearance at nil rate of duty. It therefore appears that it is a fit case for invoking proviso to Section 11A of CE Act, 1944 to recover the duty for the larger period with interest under Section 11AB of CE Act, 1944. Further, it appears that the assessees have willfully violated the provisions of the Notification referred to above by removing power cords at nil rate of duty with an intention to evade payment of duty and thereby rendered themselves liable for penal action under Section 11AC of Central Excise Act, 1944. The learned counsel, with reference to the aforesaid documents, submits that no information relating to classification of the goods in question was withheld by the appellant and that such information was clearly disclosed to the department. In this connection, he refers to the Superintendents letter dated 27.10.2006 addressed to the appellant, wherein the fact that they had cleared power cords at nil rate of duty on the basis of Annexure-45 / application of M/s XL Telecom Ltd was acknowledged by the Range officer. It is submitted that Annexure-45 read with Sl. No. 31 of Notification No. 6/2006-CE clearly disclosed the classification of power cords which were cleared by the appellant to M/s XL Telecom Ltd. This information was available to the department as early as in June 2006. In this connection, reference is made to the appellants letter to the Range Officer, dated 9.6.2006, whereunder a copy of Annexure-45/ application of M/s XL Telecom Ltd. was furnished to the Range officer. Even though the material facts were disclosed to the department by the appellant in June 2006, the show-cause notice alleging suppression of such facts came to be issued as late as on 5.2.2010. On these facts, the learned counsel submits that the proviso to Section 11A(1) of the Act was wrongly invoked in this case. On the same reasoning, it is submitted that Section 11AB for levy of interest on duty and Section 11AC for imposition of penalty were also wrongly invoked.
6. In the above context, the learned counsel has claimed support from Commissioner vs. Tulsiani Builder & Textile Pvt. Ltd. [2012 (276) E.L.T. 451 (Guj.)] He has also referred to certain other decisions cited in the Grounds of the Appeal such as Padmini Products Ltd. vs. Collector of C. Excise [1989 (43) E.L.T. 195 (S.C.)].
7. The learned Additional Commissioner (AR) has made a fervent plea to the effect that the classification of the subject goods was vital for the assessee to claim the benefit of Sl. No. 31 of Notification No. 6/2006-CE ibid but yet it was not disclosed in the returns filed by them. It is argued that this amounted to suppression of a material fact with intent to evade payment of duty on the goods and provided sufficient ground for the department to invoke the extended period of limitation. The same reasoning has been set up in defence of the penalty imposed on the appellant under Section 11AC. The learned Additional Commissioner (AR) has also claimed support from some of the decisions cited in the impugned order.
8. After giving careful consideration to the submissions, I am not impressed with the arguments of the learned Additional Commissioner (AR). It cannot be gainsaid that the classification of the goods was a vital fact to be disclosed by the assessee to the department in the context of claiming the benefit of exemption under Sl. No. 31 of Notification No. 6/2006-CE ibid. The Superintendents letter dated 27.10.2006 clearly acknowledged the fact that the appellant cleared the power cords to M/s XL Telecom Ltd. at nil rate of duty on the basis of Annexure-45 issued by the said company. A copy of Annexure-45 had been supplied by the assessee to their Range officer in June 2006. Annexure-45 had clearly described the goods as parts, components and accessories of mobile handsets including cellular phones fixed wireless phones. It had specified the item as power cord. This shows that the fact that the appellant had cleared power cords as parts/components/accessories of mobile handsets/cellular phone/fixed wireless telephone to M/s XL Telecom Ltd. during June to October 2006 claiming nil rate of duty under Notification No. 6/2006-CE dated 1.3.2006 (Sl. No. 31) was very much disclosed by the assessee to the department as early as in June 2006 and this fact was clearly acknowledged by their Range officer in his letter dated 27.10.2006. The relevant monthly returns also described the goods as power cords in the relevant column. Against this description, the assessee specified Annexure-45 and also mentioned Notification No. 6/2006-CE dated 1.3.2006 and Sl. No. 31 thereof. If all these documents are read together, it is not difficult to find that the material fact was very much known to the department from June 2006. There was no justification for the department to allege in the show-cause notice dated 5.2.2010 that the appellant had suppressed that fact with intent to evade payment of duty. In other words, the extended period of limitation was not reasonably or justifiably invoked in this case. The plea of limitation succeeds, and so is the plea against the penalty imposed under Section 11AC of the Act.
9. Needless to say that the appellant can legitimately claim support from some of the decisions cited by them.
10. In the result, it is ordered as under :
(a) The demand of duty is set aside on the ground of limitation.
(b) The penalty imposed under Section 11AC of the Central Excise Act is also set aside.
(c) The appeal is allowed in terms of (a) and (b) above.
(Pronounced and dictated in open court) (P.G. Chacko) Member (Judicial) /vc/