Customs, Excise and Gold Tribunal - Ahmedabad
Shri C.B. Maheshwari And Mac Fab Engg. ... vs Cce on 8 October, 2007
Equivalent citations: 2007(123)ECC40, 2007(149)ECR40(TRI.-AHMEDABAD), 2007(218)ELT555(TRI-AHMD)
ORDER Archana Wadhwa, Member (J)
1. We have heard Shri Hardik Modh, learned advocate appearing for the appellant and Shri Sameer Chitkara, learned SDr appearing for the Revenue.
2. The appellant is engaged in the job work of drawing and re-drawing of pipes and tubes falling under sub-heading No. 7304.10. Prior to 1997 Budget, the said goods were exempted from payment of Central Excise duty in as much as the same were not considered as manufacturing activity. However, with introduction of Chapter Note (3) to Chapter 73 in the Budget of 1997, drawing and re-drawing of pipes and tubes was held to be amounting to manufacturing activity. As a result, the appellant became liable to pay the duty.
3. The appellant filed the declaration from time to time, showing the value of clearance as that of job charges only. In as much as the job charges were less than Rs. 50 lakhs, they claimed the benefit of various small scale exemption notifications.
4. The demand in the present case has been raised against them for the period 1997-98 to 2000-01 by way of issuance of show cause notice dt.5.3.02 on the ground that while computing the total value of clearance, the value of the raw material sent by the principal manufacturer was required to be included. As such, the adjudicating authority by invoking the longer period of limitation, confirmed the demand of duty of Rs. 23.52 lakhs (approx.) against M/s Mac Fab Engineering Corpn. along with imposition of identical penalty under Section 11AC of Central Excise Act. In addition, the personal penalty stands imposed upon the partner and supervisor of the said unit, and proprietor of M/s C.S. Tube Corpn., who had sent the raw material to the appellant.
5. Shri Hardik Modh, learned advocate appearing for the appellant does not dispute that the value of the raw material sent by M/s C.S. Tube Corpn. was required to be added while computing the total value of clearances and as such, the duty should have been paid by them accordingly. However, he assailed the impugned order on the basis of limitation, in as much as, the show cause notice was raised after the normal period available under Section 11A of the Act. He submits that proper declarations were being filed by them from time to time and exemptions under the various notifications were being claimed on the ground that the value of clearances was not more than Rs. 50 lakhs. He submits that they were under bonafide belief that only the job charges value has to be reflected in the declaration. He submits that there is nothing on record to show that they have shown less value with an intent to evade the payment of duty. In fact, they were never advised by jurisdictional Central Excise officers to include the value of the raw material. Even after filing of declaration, they were never questioned by the range officer as to whether the value as reflected by them is inclusive or exclusive of value of the raw material. By drawing our attention to the various decisions, learned advocate submits that "intent to evade duty" being one of the essential ingredients for invocation of proviso to Section 11A, has to be proved by the Revenue and mere failure on the part of the appellant to disclose the actual value of the clearance, cannot be held to be suppression on their part or mis-statement with an intent to evade payment of duty.
6. Learned SDR appearing for the Revenue, draws our attention to the reasonings adopted by the adjudicating authority, which for ready reference, is being reproduced below:
In paragraph 5 of their defence reply dt.09.12.02, all the noticees have stated that even after introduction of re-drawing amounted to manufacture in the financial year Budget 1997-98, they continued to file declarations showing job charges only. This proves that all the noticees including the traders who supplied the raw material and received back the processed goods from M/s Mac Fab were fully aware that the activities carried out by M/s Mac Fab amounted to manufacture and therefore the goods manufactured and cleared by M/s Mac Fab were liable to discharge Central Excise duty. Hence, they were required to declare the correct value of the goods manufactured by them in their declarations filed for availing exemption from payment of duty, however, M/s Mac Fab did not disclose the correct assessable value but continued to show only job charge value and thereby availed exemption for 1997-98 and subsequent years thereafter. As such, it is evident that M/s Mac Fab had knowingly suppressed the correct assessable value of the goods in question from the department with sold intention to evade payment of Central Excise duty.
7. As is seen from the above, Commissioner has attributed intention to the appellant on the sole ground that they have filed declaration showing only job charges. This fact is not being disputed by the appellant. It is their contention that the job charges were being reflected under the bonafide belief and there was no intention on their part to evade the duty in as much as they would have been reimbursed with the duty by the principal manufacturer. We find, in an identical situation, Tribunal, in case of CCE Hyderabad v. Decent Enterprises as reported in 2002 (147) ELT 520 (Tri-Chennai), after taking note of the various decisions of Hon'ble Supreme Court has observed that in order to extend the larger period, it is not enough that there was failure on the assessee's part in performing the act, but there has to be intention to evade duty and there has to be something more positive than mere non-action or failure on the part of the manufacturer or producer by deliberate withholding of information when the manufacturer knew otherwise that it was required to have been disclosed to the Revenue. Accordingly, it was observed by the Bench that "the ground made out in this case by the Revenue is that had they disclosed the value of the inputs or raw materials used in the final product, then the value of clearance would have crossed Rs. 30 lakhs. However, this failure of the appellant/assessee's part was not as a result of any intention to evade duty as noted by the Commissioner as they would have got the relief from their principal namely APDDCF Ltd. and also would have got the Modvat credit. Therefore, once it is established that they had bonafide belief and had no intention to evade duty, then it would have to be held that assessee's had not suppressed the facts with an intent to evade duty or willfully mis-stated or committed fraud or collusion for extending the larger period. In this case the only ground raised is about the suppression of fact in as much as they had not disclosed the entire details of clearances in the declaration filed.
8. Further, the Hon'ble Supreme Court in the case of Tamil Nadu Housing Board v. Collector of Central Excise, Madras , has held that the proviso to Section 11A is in the nature of exception to the principal clause. Therefore, its exercise is hedged on one hand with existence of such situations as have been visualised by the proviso by using such strong expression as fraud, collusion etc. and on the other hand it should have been with intention to evade payment of duty. Both must concur to enable the Excise Officer to proceed under this proviso and invoke the exceptional power. Since the proviso extends the period of limitation from six months to five years it has to be construed strictly. The initial burden is on the Department to prove that the situations visualised by the proviso existed. But once the Department is able to bring on record material to show that the appellant was guilty of any of those situations which are visualised by the Section, the burden shifts and then applicability of the proviso has to be construed liberally. Similarly, in case of Cadilla Laboratories (P) Ltd. v. CCE Vadodara 2003 (152) ELT 262 (SC), it was held that non-filing of classification list or non-intimation to the Supdtt., by itself, can not be made a ground for invocation of longer period of limitation. In case of Collector of Central Excise v. H.M.M. Ltd. , it was observed that inference of intention to evade payment of duty is not drawable automatically.
9. By applying the law, as declared by the Hon'ble Supreme Court in the above cases, to the facts of the present case, it has to be held that mere non-disclosure of the actual figures of clearances by including the value of the raw material will not automatically reflect upon the malafide intention of the appellant, as held by the adjudicating authority. Admittedly, the appellant was filing the declarations disclosing the job charges only. It was equally the duty of the Revenue also to cross-check with the assessee as to whether the value of the raw material is included in the clearance figures or not. The fact that the clearance was declared to be less than Rs. 50 lakhs, should have been sufficient to raise the doubt or suspicion of jurisdictional range officer as to the fact that the value of the raw material is not included in the above figures, keeping in view the heavy cost of the pipes. The goods were exempted till 1997 when they were made liable to duty for the first time. As such, it can be presumed that the assessee was not aware of the Central Excise law and was required to be guided properly by their Central Excise authority, who also did not take any steps to verify the correctness of the declaration. As observed by Tribunal in case of Decent Enterprises referred supra, the duty cleared to be paid by the job workers was reimbursable to him by the principal manufacturer. As such, there cannot be any malafide intention on the part of the appellant to evade duty. Accordingly, we hold that major part of the demand is barred by limitation and no penalties are required to be imposed. However, a part of the demand may be within the limitation period, which may be quantified by the original adjudicating authority accordingly.
10. All the appeals are allowed in above terms.
(Pronounced in Court 8/10/07)