Custom, Excise & Service Tax Tribunal
M/S.Hmm Coaches Limited vs Cce, Panchkula on 7 September, 2015
THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH NEW DELHI
Date of Hearing/ Decision:07.09.2015
E/Misc/50101/2015 in Appeal No.3301/2009-EX(DB)
[Arising out of Order-in-Original No.11/Commr/PKL/2009-10 dated 30.09.2009 passed by the Commissioner of Central Excise, Panchkula]
M/s.HMM Coaches Limited Appellants
Vs.
CCE, Panchkula Respondent
Appearance:
Rep. by Shri B.L. Narsimhan, Advocate for the appellant.
Rep. by Shri Nanthuk, JCDR and Shri Govind Dixit, DR for the respondent.
For approval and signature:
Honble Shri Ashok Jindal, Member (Judicial) Honble Shri B. Ravichandran, Member (Technical) 1 Whether Press Reporters may be allowed to see 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 CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?3
Whether Their Lordships wish to see the fair copy of the Order?4
Whether Order is to be circulated to the Departmental authorities?
Coram: Honble Shri Ashok Jindal, Member (Judicial) Honble Shri B. Ravichandran, Member (Technical) Final Order No. 52865/2015 dated:07.09.2015 Per Ashok Jindal:
The appellant is in appeal against the impugned order confirming demand of duty along with interest and imposing penalty by invoking extended period of limitation. Revenue has also filed an application for early hearing of the appeal.
2. As the appeal itself has been listed for final hearing, therefore, the application for early hearing filed by the Revenue has become infructuous. Therefore, the same is dismissed as infructuous.
3. The facts of the case are that the appellant is engaged in the manufacture of motor vehicles (buses) on job work basis, by receiving the duty paid chassis from the automobile manufacturers which was supplied to them free of cost by the chassis manufacturers. The appellant built bodies of the buses on the chassis and cleared the same on payment of duty w.e.f. 1.4.2007. Rule 10 A was introduced to the Central Excise Valuation Rules, 2000 and as per the said provisions, the job worker has to pay duty on the sale price of the principal manufacturer. From the purchase/sale invoice of the appellant, it was observed that the appellant has received duty paid chassis free of cost from the chassis manufacturer and availing credit of duty paid on such chassis and then manufactured body building i.e buses using that such duty paid chassis and the buses so manufactured were cleared by the appellant to the depot /sales office of the chassis manufacturer on payment of central excise duty calculated on the value arrived at by adding the value of chassis received free of cost plus job charges but as per Rule 10 A of the said valuation Rules, the appellant was required to pay duty on the sale price of the chassis manufacturer. Therefore, a show cause notice dated 17.04.2009 was issued to the appellant by invoking extended period of limitation for the period 1.4.2007 to 31.01.2009. The show cause notice was adjudicated relying on the decision in the case of Audi Automobiles Vs. CCE, Indore reported in 2010 (249) ELT 124 (Tribunal-Delhi). Demand of duty was confirmed along with interest and equivalent penalty was imposed. Aggrieved from the said order, the appellant is before us.
4. Shri B.L. Narsimhan, Ld. Counsel for the appellant appeared before us and submits that on merits the appellant have no case in the light of the decision in the case of Audi Automobiles (supra) and Hyva (India) Pvt. Ltd. (supra) reported in 2013 (292)ELT 59 (Tribunal-Mumbai) but he prayed that in the facts and circumstances of the case, the extended period of limitation cannot be invoked. Therefore, the demand confirmed by invoking extended period of limitation is to be set aside.
5. On the other hand, Shri S. Nanthuk, Joint CDR along with Shri Govind Dixit, DR appeared before us and submits that the extended period of limitation has been rightly invoked by the ld. Commissioner. In fact, the appellant has deliberately adopted the way of valuation of their goods i.e paying duty on the cost of chassis + job charges and deliberately chose not to pay duty as per value determined as per Rule 10 A of the Valuation Rules and the appellant did not supply the value/sale invoice of the chassis manufacturer to the department. Therefore, there is suppression of facts on the part of the appellant. He also submits that as the intention of the appellant was clear from the day one not to pay duty as per Rule 10 A of the Rules and deliberately choose not to pay duty, in that circumstances, the allegation of suppression has been proved and extended period of limitation is rightly invoked.
6. Apart from the oral arguments, Shri Govind Dixit, AR filed written arguments which are recorded as under:-
The appellant filed a letter with the department on 1.4.2007 explaining therein the method of valuation followed by them as job workers in accordance with Central Excise Law as applicable to job workers, (like the appellants) who manufactured Motor Vehicles (Buses) on chassis supplied by the Principal Manufacturers such as Tata Motors Ltd. In response to the said letter dated 1.4.2007, the Superintendent of Central Excise vide letter dated 1.8.2007 asked for information pertaining to the sale of Motor Vehicles (Buses) which were sold after being dispatched upon competition of job work in their factory. The appellant did not sell the complete Motor Vehicles (Buses) but only dispatched it to the Regional Sale Office (RSO) at Karnal. The appellant provided all other information except relevant information for correct valuation of the Motor Vehicles (excisable goods) under Rule 10 A(ii) of the Central Excise Valuation Rules, 20000. Through a vague and general letter, the appellant intimated to the department but denied valid and material information to the department required under Rule 10A(ii).
This denial of crucial information to the department was an act of deliberate obstruction to access material information for correct valuation of excisable goods, reflecting their clear intention to evade payment of appropriate Excise Duty.
Subsequently, the department was able to receive the relevant information on 16.03.2009 after issuance of summons to M/s. Tata Motors Ltd., Lucknow. To ascertain the contractual terms between the appellant and M/s. Tata Motors Ltd., Lucknow, a statement of Shri Ajay Kumar Gupta, Sr. Manager, Finance was recorded under Section 14 of the Central Excise Act, 1944 on 8.4.2000 in which he explained the terms and conditions governing the transactions between M/s. Tata Motors Ltd. and the Appellant. Similarly, another statement of Shri Ajay Mittal, Director of M/s. HMM Coaches Ltd., Village Mandur (Ambala), Haryana was also recorded under Section 14 on 1.4.2009 in order to bring to record the contractual arrangement between the Appellant and their Principal manufacturers i.e. M/s. Tata Motors Ltd. These terms and conditions are mentioned in paragraph 3.1 of the show cause notice dated 17.04.2009 issued to the appellant by the Commissioner of Central Excise, Panchkula.
It may please be noted that these terms and conditions excluded the value of ex-showroom price of fully built Motor Vehicles sold by M/s. Tata Motor Vehicles from their Regional Sales Offices after receipt from Appellant. The Motor Vehicles were built by the appellant on the chassis provided free of cost by M/s. Tata Motors Ltd. The information regarding sale price of fully built vehicles when sold by M/s. Tata Motors Ltd. from show room was a vital piece of information required by the department to determine and quantify the amount of central excise duty short paid by the Appellant in terms of Rule 10 A (ii) of the Central Excise Valuation Rules, 2000. This vital information was in the exclusive domain and control of the appellant and M/s. Tata Motor Ltd. and not disclosed to the department even after Rule 10A(ii) had become effective on 1.4.2007. It was not disclosed even when the department asked for it in context of Rule 10A(ii) in May, 2008. Tata Motors and Appellant together, had agreed to the contractual terms of their mutual transactions and together did not disclose to the department until investigations took place.
Such a contractual arrangement between the Appellant and M/s. Tata Motors Ltd. is unlawful under Section 23 of the Indian Contract Act, 1872. The object of such an agreement was to defeat the provisions of Rule 10 A (ii) of the Central Excise Act, 1944 which had come onto the statute book w.e.f. 1.4.2007. Section 23 of the Contract Act says that the object of an agreement is unlawful if it would defeat the provisions of any law.
The deliberateness of the acts of the appellant to prevent the material information from reaching the department is substantiated by the facts of the events as they took place during the course of investigations and are recorded in paragraph 5 to 10 of the show cause notice in question.
The Unlawful Object of the agreement between the appellant and M/s. Tata Motors is substantiated by the judgement of the Honble Supreme Court of India in the case of M/s. Mc Dowell & Co. Ltd. Vs. Commercial Tax Officer dated 17.04.1985 reported as 1985 SCC (3)/1986 AIR 649. The Honble Supreme Court after discussing a number of binding authorities/case law on the subject came to a conclusion which is as mentioned below:-
We must recognize that there is behind taxation laws as much moral sanction as behind any other welfare legislation and it is a pretence to say that avoidance of taxation is not unethical and that it stands on no less moral plane than honest payment of taxation. In our view, the proper way to construe a taxing statute, while considering a device to avoid tax, is not to ask whether the provisions should be construed literally, or liberally, nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is a device to avoid tax, and whether the transaction is such that the judicial process may accord its approval to it. A hint of this approach is to be found in the judgement of Desai, J. in Wood Polymer Ltd. Vs. Bengal Hotels Limited (1) where the learned judge refused to accord sanction to the amalgamation of companies as it would lead to avoidance of tax.
It is neither fair nor desirable to expect the legislature to intervene and take care of every device and scheme to avaoid taxation. It is upto the Court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and consider whether the situation created by the devices could be related to the existing legislation with the aid of emerging techniques of interpretation as was done in Ramsay, Burma Oil and Dawson, to expose the device (1) 40 Company Cases, 597.
for what they really are and to refuse to give judicial benediction.
7. Heard the parties. Considered the submissions .
8. In this case, ld. Counsel for the appellant has conceded the issue on merits in the light of the decision of the Audi Automobiles (supra) and Hyva (India) Pvt Ltd. (supra), it has been held by this Tribunal time and again that the appellant is liable to pay duty as per Rule 10 A of the Valuation Rules on the same price of the chassis manufacturer. Therefore, we hold that on merits, the appellant is liable to pay duty on the value determined as per Rule 10 A of the Valuation Rules, 2000.
9. Ld. Counsel also contended that in the facts and circumstances of the case, the extended period is not invokable. We find that in this case the appellant has intimated to the Department the method of valuation on 1st April, 2007, wherein it was stated as under:-
1. We are undertaking the activity of body building of vehicles at our factory. The chassis manufacturer (hereinafter referred to as CM) manufacturers the chassis fitted with engines for motor vehicles and entrusts the body building work to us. CM clears the chassis on payment of excise duty to us for which cenvat credit is taken by us. We charge consolidated sales consideration for our body building work that also includes the cost of raw materials procured by us, other body building costs & our profit mark up.
2. For the purpose of body building, we purchase various raw materials on our own account and undertake the body building work. We understand that the clearance of vehicle after body building to CM amounts to sale under the Central Excise Law (Section 2(h) of Central Excise Act, 1944) since there is a transfer of possession of body from us to CM. We also understand that the clearance of vehicle after body building to CM amounts to sale under Section 4 of the Sale of Goods Act, 1930 since there is a transfer of property in body from us to CM. Thus, at the time of sale built on chassis to CM, we pay applicable sales tax on our sales consideration and which is accepted by the Sales Tax authorities.
3. In the light of above, we understand that the assessable value of body cleared by us to CM would be sum of the body building charges (under Section 4(1)(a) plus cost of chassis (under Rule 6 of the Valuation Rules since there is flow of consideration from CM to the body builders when CM gives the chassis to the body builders for fabrication). We are paying excise duty on the aforesaid basis.
10. We further find that as per the letter issued by the department to the appellant on 2.08.2007, the Superintendent Preventive written to the appellant that as an inquiry against the body builders who are manufacturing bus bodies on the chassis supplied by the original manufacturer is being conducted, in that context, it was requested to submit the sales invoice w.e.f. 1.4.2007 and the purchase invoice of chassis along with other record maintained for chassis on 2.8.2007. The observation of the ld. Commissioner in the impugned order that the appellant has not provided the details of the sale price of the chassis manufacturer to determine the correct value is not correct as the appellant has given the method of valuation of their goods and in that context, when the investigation was being going on to arrive at the correct value as per Rule 10 A of the Valuation Rules, the sale invoice of the chassis manufacturer was not asked from the appellant. Moreover, whatever asked from the appellant, the appellant supplied the same to the department on the next day. Thereafter also, nothing was asked from the appellant. Only on 8.4.2008, first time the sale invoice of the chassis manufacturer was asked from the appellant as the same was not in possession of the appellant, the appellant showed their inability to provide the same and thereafter they summoned to the chassis manufacturer to provide such details which were provided. As the sale invoice of the chassis manufacturer was not in possession of the appellant, therefore, the appellant was not in a position to provide the same to the department. In that way, it cannot be said that as the appellant has not supplied the complete details regarding the sale price of the chassis manufacturer and same attracts to suppression, therefore, the charge of suppression stands not proved and as per the decision of the Honble Apex Court in the case of Pushpam Pharmaceuticals Company Vs. CCE, Bombay reported in 1995 (75) ELT 401 (SC), the Honble Apex Court has held as under:-
A perusal of proviso to Section 11 A indicates that the expression suppression of fact has been used in company of such strong words as fraud, collusion or willful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression.
11. In the light of the observation of the Honble Apex Court, we find that in the case in hand, the appellant has disclosed their method of valuation to the department on 1.4.2007. The valuation was known to the Department w.e.f. 1.4.2007 and the Department failed to do any positive act to issue show cause notice within one year from the said date, therefore, extended period of limitation is not invokable alleging suppression. Further we find that in the case of Audi Automobiles (supra), this Tribunal has observed as under:-
22. As regards the penalty, however, we find that the learned Advocate is justified in contending that matter being related to the interpretation of the provisions of law and the fact that the Apex Court in Prestige Engineering (India) Ltd., case had taken a particular view on the aspect of expression job work, the appellant, taking shelter of the said decision, was seeking to claim benefit in terms of Rule 6. In the circumstances, we don to find any justification for imposition of penalty in the matter in hand. The impugned order does not disclose consideration of this aspect of the matter.
12. In the case of Hyva (India) Pvt. Ltd. (supra), this Tribunal has held as under:-
19. As regards imposition of penalty, we find that prior to 1.4.2007, duty was being paid under Rule 6 of the Valuation Rules red with Section 4(1)(a) of the Central Excise Act and only with effect from 1.4.2007, after insertion of Rule 10Aof the Valuation Rules, 2000, the dispute relating to valuation of goods is raised by the Department. Since the valuation of goods is regarding the interpretation of Rule 10 A and Rule 6 of the Valuation Rules, we find that there cannot be any case for imposition of any penalty. Accordingly, the penalties imposed are set aside.
13. In the light of the said decisions, we hold that in this case also, the extended period of limitation is not invokable at all. Therefore, the demand pertaining to the period prior to March, 2008 are held as barred by limitation.
14. In the light of these observations and discussions, the following order is passed :-
(a) The demand for the normal period of limitation is confirmed along with interest;
(b) The demand for the period beyond the normal period of limitation is set aside; and
(c) Penalty is also set aside.
With these observations, the appeal is disposed of.
[Operative part of the order pronounced in the open Court] ( Ashok Jindal ) Member (Judicial) ( B. Ravichandran) Member (Technical) Ckp.
1