Customs, Excise and Gold Tribunal - Mumbai
Ownes Brockway (I) Ltd. vs Commissioner Of Central Excise on 8 September, 2000
Equivalent citations: 2000(121)ELT710(TRI-MUMBAI)
ORDER G.N. Srinivasan, Member (J)
1. These three appeals have been filed by the assessee as well as the two other Noticees on whom penalties have been imposed under Rule 209A of the Central Excise Rules have been filed against Order-in-Original No. 45/CEX/1998, dated 10-12-1998 passed by the Commissioner of Central Excise, Pune-I whereunder, he confirmed the demand of Rs. 2,14,30,340/- under Section 11A(2) of the Central Excise Act against the assessee demanded under show cause notice dated 26-6-1998. He also imposed a penalty of equal amount under Section 11 AC of the Act. He further imposed penalties of Rs. 10 lakhs on appellant in Appeal No. E/1048-V/99 and Rs. 5 lakhs on appellant in Appeal No. E/1047-V/99, who were employees of the assessee.
2. The appellants have manufactured at their factory at Pimpri, Pune, imprinted soft drink at their unit No. 1. They have also another manufacturing unit called Unit II at Chinchwad, Pune. It is stated by the assessees that the said imprinted bottles were cleared on payment of duty by the appellants at their Pimpri Unit, thereafter, is transferred to their own unit (referred to above) which is a few kilometers away for printing the logos of different soft drinks/soft drink manufacturers such as Coke, Pepsi, Mangola etc. It is stated by the appellants that the issue as to whether the similar imprinted bottles are sold by the appellants to various purchasers at the factory gate should be considered for purpose of levy of excise duty or not ? They have filed Part-I price list for such manufacturer and sale of the goods at Pimpri Unit. It would appear that on 30-7-1994 they filed a price list No. 1/94-95 in part-I for sale of the said imprinted bottles sold in the wholesale trade. The prices of those bottles were approved (provisionally) at Rs. 2190/- for 215 ML. variety and at Rs. 2260/- for 300 ML variety. It is stated by the appellants that the percentage of sale in the wholesale trade would be about 32%. Percentage of captively consumed bottles would be 68% of the above price lists which were provisionally approved. They had filed subsequently two price lists one on 15-6-1994 and another on 10-4-1995 mentioning same prices. The only difference is that the percentage of sales in the wholesale trade slightly valid namely it was increased to 38% and percentage consumed variety was reduced 62%. On 20-1-1997 show cause notice was issued to revise the said provisionally approved price lists referred to above (please see paragraph 3 of the page 5 of the compilation) on the basis of the value of the said goods declared to the proper officers having jurisdiction over the assessee's unit at Rishikesh/Pondicherry which is of a higher value and the normal prices/assessable value declared in the price lists contained represent as such (please see paragraph 6 of the said notice at page 6 of the paper book). The assessee filed a reply to the show cause notice by its letter dated 20-2-1997. On 30-4-1997 the Assistant Commissioner Pune IV, by his Order-in-Original No. 43/97 dated 30-4-1997 approved finally, the prices value of which submitted by the appellants in their price lists dated 30-7-1994, 15-6-1994 and 10-4-1995, In doing so the Assistant Commissioner held inter alia that in the case before him, it was not a fit case where focal point the Assistant Commissioner should be involved because the items were of different in quality and supplied to the different regions. The items he meant that what is produced in the Pune factory was different from what were produced in Rishikesh and Pondicherry factory. The Assistant Commissioner in the said order further emphasized that the items made by the local unit and the Rishikesh unit were not going into a common wholesale stream, apart from the fact that they are different in quality. It is stated further by the appellant before us that against this orders passed by the Assistant Commissioner no review order/Appeal has been filed before any authority. The demand notices issued on various dates from 1st November 1994 to 15th January 1997 comprised in pages 15 to 42 of the compilation have been dropped by order dated 23-6-1999. The department did not file any review order against the dropping of the demand by the Assistant Commissioner. In this connection it is useful to refer to paragraph 2 of show cause notice dated 1-11-1994 where the Supdt. makes a point that the assessees were manufacturing same kind of goods in their goods unit at Rishikesh (U.P.) and at Pondicherry. For the sake of repetition it is stated that this point has been negatived by the Assistant Commissioner in his order dated 30-4-1997 which is mentioned in the earlier portion of the order.
3. Be that as it may, the appellant further states that price list was filed on 10-12-1996 declaring the value of bottles for captive consumption at Rs. 2,460/- for bottles 250 ML and at Rs. 2,530/- for bottles of 300 ML taking notional profit of margin shown at 14%. Against this price lists Assistant Commissioner caused a cost audit in terms of provisions of Section 14A of the Central Excise Act, 1944, the price lists was not approved the order was dated 5-3-1998. Against this order an appeal was filed by the assessee before the Commissioner (Appeals) and it is still pending. In the meantime a show cause notice was issued by the Assistant Commissioner on 17-4-1998 demand on payment of Rs. 54,18,202.90 for the period from January 1997 to October 1997 on the basis of the report of the cost accountant. On 26-6-1998 show cause notice was issued by the adjudicating authority before us namely the Commissioner of Central Excise Pune, demanding the payment of the confirmed demand of Rs. 2,14,30,340/-. This show cause notice dealt with for the period January 1995 to October 1997, charging the appellants inter alia on suppression and for not properly valuing the goods. The Commissioner sought to revise the assessable value on the ground that the valuation was not in terms of the cost audit undertaken under Section 14A of the Central Excise Act and also Rule 7 of the Valuation Rules. The appellants replied to the said show cause notice by its letter dated 25-11-1998. Written submissions were filed on 3-12-1998 the appellants were heard in person by the adjudicating authority. However, the adjudicating authority by the impugned order disregarded findings given by the cost audit, but, confirmed the demand following the provisions of Rule 7 of the Valuation Rules and he also imposed penalties on the assessee and the other appellants described in the earlier portion of the order. Hence these three appeals.
4. Shri A. Hidayatullah Sr. Counsel, S/Shri M.P. Baxi, J.B. Verma along with Miss Shailaja Kher, Advocates appeared for the appellants.
5. Departmental Representative Shri K.M. Patwari appeared before us today and pleaded for adjournment of the hearing he said a miscellaneous application has been filed by the department represented by the Commissioner which reads as under :-
"The Applicant (Respondent) herein is the Commissioner of Central Excise, Pune I Commissionerate. The applicant respectfully submits that the Appeal Nos. E/1046-1048/V/99-Bom are pending before the Hon'ble CEGAT, Mum-bai and are coming up for final hearing on 5th July, 2000. The case for the Department is to be argued by Shri M.I. Sethna, Senior Standing Counsel.
It has been intimated by Shri M.I. Sethna, Senior Standing Counsel that he is arguing the case of M/s. Godrej & Ors. on 5th, 6th and 7th July, 2000 and therefore totally engaged on these days. He has expressed his inability to argue the case in the present appeal on 5th July, 2000 for the said reason. In view of this it is requested that short adjournment may be given so that Shri M.I. Sethna, Senior Standing Counsel is able to argue the case for the Department on the adjourned date.
The applicant shall be highly obliged if the request in this Miscellaneous Application is accepted."
Last time when the matter was taken up for hearing on 27-6-2000 we had specifically told both sides that on 5-7-2000 the cases will be taken up for final disposal irrespective of either sides being ready and irrespective of presence of Sr. Counsel or not. The order was dictated in open Court. The matter has also been adjourned several times previously. We were concerned with the matter because the Revenue involved nearly Rs. 2 crores, therefore, we ordered earlier disposal of the appeal, we therefore, disinclined to agree with request of the Commissioner for adjournment. Shri K.M. Patwari said that the department is not being represent by the departmental representative. Under these circumstances last time Shri Arun Bakre, Jr. Counsel was named by Shri Sethana, Sr. Counsel as junior Counsel. We do not find any Vakalatnama filed by Shri Bakre, hence we have to make the department ex parte under the very peculiar circumstances.
6. Shri A. Hidayatullah opening the arguments stated that the case is of very peculiar nature. Here is a case where the price lists have been filed, which have been approved provisionally, thereafter, trying to revising the such provisional assessment and such a proposal for revision was dropped by the Jurisdictional Assistant Commissioner. Against that order passed by the Juris-dictional Assistant Commissioner on 30-4-1997 no appeal was filed by the department. He also stressed the fact that the demand notices numbering about 7 ranging for period from 1-11-1994 to 15-1-1997 were dropped by the Assistant Commissioner's order dated 23-6-1999 no appeal was filed by the department against dropping of the demands. When such is the position, he states in a very forceful way how the department could initiate proceedings under Section 14A of the Central Excise Act. He states that in terms of Section 14A of the Central Excise Act, only if any Central Excise Officer not below the rank of Assistant Commissioner having regard by the nature and complexity of the case and the interest of revenue was of the opinion that the value has not been correctly declared as determined by a manufacturer with the previous approvel of Chief Commissioner direct the manufacturer to get accounts audited by a Cost Accountant nominated by Chief Commissioner, the powers enshrined under Section 14A of the Act could be invoked. Here it is a case where the price lists were approved provisionally. Such a provisional approval was sought to be revised on the basis of higher valuation in respect of the goods manufactured at the appellant factory at Rishikesh and Pondicherry, which were finally dropped by the same Assistant Commissioner. Shri Hidayatullah further stresses the point that the department choose not to file an appeal against that. The further fact is the seven demands which were issued from 1994 to 1997 were also dropped in June 1999. Against which no further proceedings were inclined by the department, when such is the position he asks and pleads before us in a very persuasive way how proceedings could be initiated under Section 14A of the Central Excise Act, 1944.
7. Shri Hidayatullah continuing his arguments states that, in this case the adjudicating authority before us namely the Commissioner curiously dropped the proceedings initiated under Section 14A of the Act, but invokes the provisions of Rule 7 of the Valuation Rules. Shri Hidayatullah further states that the adjudicating order was passed on 10-12-1998, no revision or appeal has been filed by the department against the finding given by the Commissioner in respect of dropping of Section 14A of the Act. He states that the invocation of Rule 7 of the Valuation Rules is not warranted in this case. He took us through the provisions of Section 4(l)(a) of the Act, as well as (b) of the Act. He also read the Valuation Rules 3 to 7 of the Valuation Rules. He states that in terms of the provisions of Rule 4 which states inter alia value of the excisable goods shall be based on the value of such goods sold by the assessee for delivery at any other time nearest to the time of removal of goods under assessment. He states that the mandatory word "shall" contained in Rule 4 clinches the issue in his favour of the client. Here it is the case known that the goods have been sold at 32% to 38%. The fact that the department sought to revise the price lists on a different ground was dropped by the Jurisdictional Assistant Commissioner himself. No appeal having been filed he states that the provisions of Rule 4 is clearly applicable to the facts of this case. The invocation of Rule 7 of the Central Excise Rules cannot be made applicable to the case, because the said rule stress inter alia that in the value of the excisable goods cannot be determined under forgoing rules viz. only on failure to determine in terms of that Rule 4 read sequentially thereafter to Rule 5 and Rule 6 and only finally, what is contained in Rule 7 can be invoked. Shri Hidayatullah concedes that show cause notice invokes the Rule 7 of the Central Excise Rule. He also concede that he may not be having a good case in respect of suppression. But fact remains when the price of the goods are available as contained in respect of the wholesale price and similiar case are available at factory gate invocation of Rule 7 of the Valuation Rules is totally unwarranted. He cites the judgment of the Tribunal in the case of CCE v. Mohan Crystal Glass Works - 2000 (37) RLT 345 (CEGAT). He invited our attention to specifically what is contained in para 3 thereof.
8. We have considered the interesting arguments made by Shri Hidayatullah and perused the records. We have considered the various portions of the show cause notices as well as the finding given by the authorities. We are of the view that the valuation of the goods was known to the department when they filed the price lists No. 3 which has been referred to in the earlier portion of the order, when that is the case, the price lists were not approved in a quick manner. It was deliberated upon by approving provisionally after some time only the price lists was sought to be revised by means of a show cause notice dated 20-1-1997 contained in page Nos. 5 to 7 of the compilation. The grounds of that changing the revision of the show cause notice is contained in para 3 and para 6 of the said show cause notice which reads as under :-
(3) AND WHEREAS, the assessee have filed with this office price-declarations in form Annexure-II/III as detailed below, in terms of second proviso to Sub-rule (1) of Rule 173C of the Central Excise Rules, 1944, in respect of various types of glass bottles manufactured by them at their Pune unit.
______________________________________________________________________ S.No. Price declaration No. Date from which effective ______________________________________________________________________ (1) 1-94-95 30-3-94 (2) 9-94-95 15-6-94 (3) 26/95-96 10-4-95 ______________________________________________________________________ (6) AND WHEREAS, it appears that the values of the said goods declared by the assessee in the price declarations under consideration, are artifically lower as compared to values of the said goods declared to the proper officer having jurisdiction over the assessee's units at Rishikesh/Pondicherry, and that they do not represent the normal prices/Assessable values as contemplated under Section 4 of trie Central Excise Act, 1944.
On 30-4-1997 the Assistant Commissioner dropped respective demands issued from 1994 to 1997 consequent upon revision were also dropped on 23-6-1999. It is rightly contended by Shri Hidayatullah that no proceedings were initiated against the orders passed on 23-6-1999 and 30-2-1997; when such is the position we fail to see how the department initiated action under Section 14A of the Central Excise, that is not matter before us. In the sense, the Department has not challenged that portion of the order which has dropped the proceedings initiated under the powers enshrined in Section 14A of the Central Excise Act, 1944.
9. We find that, as far as the valuations is concerned, it is not as if the department did not have the Price lists of similar goods. It was emphasised that the three Price lists clearly referred to above, indicated the price. The pepcentage of sales being 32% and 38%, when available for similar types of goods, then we find that the Judgment of the Tribunal decision in the case of Mohan Crystal Glass Works [2000 (37) RLT 345], with which agree, would be applicable. No doubt that case Revenue had contended that the adoption of comparable goods price could not be the basis for cap-tively consumed goods as, the quantities under sale was very negligible sale prices were below the cost of production and purchasers were franchise holders. Yet the Tribunal followed the same, as reported in para 3 of the Judgment.
"The Revenue have come up in appeal contending that the impugned order is incorrect and is contrary to law. With regard to adoption of comparable sale price the Revenue has contended that these prices cannot be the basis for assessment of captively consumed goods as the quantities under sale were quite negligible, the prices were below cost of production and the purchasers were franchise holders of the appellant. It has also been submitted that the Order-in-Original No. 13/96 for the same period issued by the Collector could not be taken as having become final because the demand was set aside in that order on the ground that the demand was time-barred and not on merits. With regard to these submissions, the respondents have submitted that the submissions are contrary to the correct legal position. Here Supreme Court has held in A.K. Roy v. Voltas Ltd. -1977 (1) E.L.T. (J 177) (S.C.) that quantum of Ex-factory sales to independent wholesale buyers is wholly irrelevant for the purpose of valuation of the goods. What is material is only whether the prices are genuine. In the instant case, there is no dispute that the prices charged are commercial prices and there is no allegation of their being manipulated prices. Therefore, they are eligible to be the basis for assessment of captively consumed goods also under Rule 6(1) of Central Excise (Valuation) Rules which provide that the goods are captively consumed, they shall be assessed based on the value of comparable goods. Similarly, it is not open to the Revenue to examine whether sale price is below the cost of production or not. It is settled law that once the sale price is the sole consideration, it is not open to the department to investigate whether the sale price is above cost of production. It has also been submitted that the franchise holders of the appellant are not related to the appellants as they have no shareholding or any other interest in the appellant's busines In the present case, we find that the appellants have a stronger case to get the price for captively consumed goods, determined on basis of comparable goods price as per the Price List sale invoice and evidence of removal on such invoices. We are therefore of the view that the Valuation Rules as applied by the Commissioner cannot be invoked on a true construction of Rule 7 of Valuation Rules, in light of the facts in this case and the language of the said rule.
10. For the period January 1997 to October 1997 there is an overlap in the demands being raised by the Commissioner and the show cause notice issued by the Assistant Commissioner. Examining, this issue, we find the Commissioner in para 17 of the impugned order has found as under:
"However in view of the fact that an overlapping has occurred and for the same period, two different authorities have issued two in a hierarchy have issued show cause notices, legal propriety demands only one can survive. As per the Departmental convention when two different authorities in a hierarchy have issued the show cause notice, the show cause notice issued by the senior functionary alone would survive and the orders issued by the Commissioner would prevail. The Assistant Commissioner has himself restrained from passing any order awaiting the orders of the Commissioner in this regard. Therefore, the grievance of the assessee in this regard, would be taken into a account and only one order would be issued for that period and that to by the Commissioner, Central Excise in this proceeding, the show cause notice issued by the Assistant Commissioner would be withdrawn through issue of suitable orders."
In fact the Assistant Commissioner has already passed the order against the show cause notice dated 17-4-1998 it was withdrawn by his order dated 24-12-1998. In view of the facts mentioned above whether such an action envisaged in para 17 of the impugned order is correct or not is not before us. But we would like to mention that initially if authority is vested with proper jurisdiction and has initiated proceedings vested in terms of provisions of Acts and rules, that authority alone him can come to the proper decision in respect of this show cause notice issued by and not any other authority, unless the Act authorises to do so. Even though superior officer, Commissioner, cannot divest the inferior authority from exercising the jurisdiction, unless the law says so in a clear words. All quasi judicial authorities have to function in terms of powers delineated in terms of what is contained in the Act viz. Central Excise Act. It was nobody's case that a show cause notice under the circumstances could not have been issued by the Assistant Commissioner. We are therefore of the view, taking the tolallity of the circumstances that the impugned order passed by the Commissioner is wrong in law.
11. One more point to be considered is whether invocation of Sections 11AB and 11 AC of the Act could be made under the facts and circumstances of the case in respect of a period earlier to coming into existence of these Sections 11AB and 11 AC of the Act. In our view for the period covering earlier period there penal provisions cannot be made applicable which is the settled law. [Lakshmi Packaging (P) Ltd. v. CCE - 1998 (98) E.L.T. 91]. Even in respect of subsequent period in view of what is stated in the earlier portion of the order the invocation of section cannot be made applicable to the facts of the present case. We find that Rule 209A has no application as we do not find any goods liable for confiscation in this case as mentioned in the impugned order, which we do not find and be substantiated on merits of the demand itself. Appeals of the employees are therefore to be allowed after setting aside the pe-nalies imposed on them.
12. The appeals are allowed setting aside the impugned order.