Custom, Excise & Service Tax Tribunal
M/S Unique Enterprises vs Commissioner Of Central Excise, Mumbai ... on 30 December, 2010
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Appeal Nos. E/1097 & 1112/98 (Arising out of Order-in-Original No.30/97 dated 19.12.1997 passed by Commissioner of Central Excise (Adjudication), Mumbai.) For approval and signature: Honble Mr. P.G. Chacko, Member (Judicial) Honble Mr. Sahab Singh, Member (Technical) ======================================================
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2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
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====================================================== M/s Unique Enterprises Roshan Minoo Irani Appellant (Represented by:Mr. V.M. Doiphode, Advocate) Vs Commissioner of Central Excise, Mumbai I Respondent (Represented by: Mr. S.S. Katiyar, SDR ) CORAM:
Honble Mr P.G. Chacko, Member (Judicial) Honble Mr. S.K.Gaule, Member (Technical) Date of Hearing : 30.12.2010 Date of Decision: 30.12.2010 ORDER NO..
Per: P.G. Chacko
1. These appeals are directed against the order passed by the learned Commissioner of Central Excise in adjudication of show-cause notices dated 6.1.1993 issued to M/s Unique Enterprises, M/s Roshan Industries, M/s Cloud-9 Air-conditioning Systems, M/s Durga Refrigeration Co and a few others including Smt. Roshan Minoo Irani. The said show-cause notices had proposed to demand duty of Rs 39,53,517/- from M/s Unique Enterprises (proprietor: Mr. F.M Irani) M/s Roshan Industries (proprietress: Smt. Roshan Minoo Irani) and M/s Cloud-9 Air-conditioning Systems (partners: S/Shri Cloud DSouza and Fardoon Irani) by clubbing the clearances of excisable goods found to have been manufactured by all of them during the period of dispute. The show-cause notices had proposed to confiscate certain goods seized from the premises of M/s Unique Enterprises, Durga Refrigeration Co and a few others. Penalties were proposed on all the noticees including Smt. Roshan Minoo Irani. The adjudicating authority confirmed the above demand of duty against M/s Unique Enterprises and imposed on them a penalty of Rs 50 lakhs. A penalty of Rs 10 lakhs was imposed on Smt. Roshan Minoo Irani under Rule 209A of the Central Excise Rules, 1944. Confiscation of the seized goods was also ordered, but this aspect is not relevant to the present case. What is under challenge in Appeal E/1112/98 is mainly a demand of duty of Rs 39,53,517/-. The penalty of Rs 50 lakhs imposed on the proprietor of M/s Unique Enterprises is also under challenge in this appeal. Appeal E/1097/98 of Smt. Roshan Minoo Irani is against the penalty imposed on her under Rule 209 A ibid.
2. A perusal of the records indicates that the clubbing of clearances of M/s Unique Enterprises, M/s Roshan Industries and M/s Cloud-9 Air-conditioning Systems is no longer under challenge. As a matter of fact, the appellants conceded the clubbability of the clearances and approached the Settlement Commission for a settlement of surviving disputes. [Records indicate that they had gone to the Settlement Commission after withdrawing these appeals and that, after their application was rejected by the Commission, they came back to get these appeals revived.] A copy of the Settlement Commissions order dated 23.12.2005 is available on record and the same indicates that the duty liability was partially admitted before the Commission by the appellants. The demand of duty under challenge is partly attributable to clandestine removal of certain air conditioner parts and partly to undervaluation of air conditioner parts normally cleared. The total amount of duty demanded in respect of the air conditioner parts is Rs 15,13,252/-, out of which clandestine removal found against the appellants accounts for Rs 7,93,255/-. Accordingly, the amount of differential duty demanded in respect of air conditioner parts price on the ground of undervaluation is Rs 7,19,997/-. The Settlement Commissions order shows that duty liability on air conditioner parts to the extent of Rs 7,93,255/- was admitted by the appellants. This admission has been reiterated before this Tribunal also. Therefore, in respect of air conditioner parts, the dispute is only in relation to duty amount of Rs 7,19,997/- which was worked out at higher rates than declared in the invoices. We shall first address this valuation dispute.
3. The learned counsel for the appellants submits that there is no basis for demanding differential duty of Rs 7,19,997/- on air conditioner parts. It is submitted that, even in the show-cause notice, the said goods were proposed to be valued on the basis of certain quotations without any legal basis. In this connection, the learned counsel has referred to para 16.0 of the show-cause notice. On the other hand, the learned SDR submits that the admitted amount of duty of Rs 7,93,255/- on air conditioner parts was itself determined on the same basis and, therefore, the appellants are precluded from challenging the basis of quantification of duty of Rs 7,19,997/-. The learned counsel has contested this argument by submitting that the show-cause notice had, in fact, demanded duty of Rs 8,33,964/- on air conditioner parts which were alleged to have been clandestinely removed by the appellants. It is submitted that duty of Rs 7,93,255/- has been admitted towards this demand. In this connection, the learned counsel has also filed a tabulated statement of clearances of air conditioner parts, which has been prepared apparently on the basis of Annexure A to the show-cause notice. With reference to this statement, the learned counsel submits that the value of the goods was enhanced on the basis of the rates quoted by the appellants for third parties. It is submitted, however, that a small part of the above demand of duty was worked out on the basis of entries contained in a note book recovered from a customer of the appellants. It is claimed that duty of Rs 7,93,255/- worked out by the department in respect of the air conditioner parts covered by the above tabulated statement does not disclose that the basis of valuation of these goods is the same as the basis of valuation of other air conditioner parts on which duty of Rs 7,19,997/- was demanded based on enhancement of value.
4. A perusal of the show-cause notice indicates that undervaluation of air conditioner parts was alleged in para 16.0. Three quotations were referred to in the sub-para viz (i) quotations dated 14.12.1991 and 14.1.92 of the appellants in favour of Indra Refrigeration & Electricals, Secunderabad; (ii) quotation dated 13.3.92 of the appellants in favour of M/s Reliance Refrigeration Co, Calcutta. The prices of each part of air conditioner were taken from the three quotations and the higher among them was adopted, generally, for enhancing the value of the same commodity cleared by the appellants. In a few cases, the assessees own invoices were also considered and the one showing the higher rate was chosen as basis for enhancement of value. It would, thus, appear that, for most of the goods in the present category, the quotations were relied on by the department for enhancing the value. The tabulated statement furnished by the learned counsel in respect of the air conditioner parts clandestinely removed by the assessee also indicates that the value of the goods was determined on the basis of quotations. Thus, it appears that most of the air conditioner parts covered by the demand of duty of Rs 7,19,997/- were valued by the Revenue in the same way as the air conditioner parts clandestinely removed were valued. Only a few parts covered by the demand of Rs 7,19,997/- were valued at higher rates shown in the assessees own invoices rather than on the basis of quotations. The learned counsels argument that the air conditioner parts covered by the demand of Rs 7,93,255/- and those covered by Rs 7,19,997/- should have been differentiated for the purpose of valuation may be acceptable only in relation to those air conditioner parts whose value was enhanced on the basis of the assessees own invoices. In respect of other parts of air conditioners covered by the demand of duty of Rs 7,19,997/-, in respect of which the quotations were relied upon for enhancement of value, we have not found any differentiation inasmuch as the impugned order adopted the quotations as the basis for valuation of the air conditioner parts covered by the demand of duty of Rs 7,93,255/- (clandestine) also. As the assessee had admitted duty liability to the extent of Rs 7,93,255/- in respect of the air conditioner parts removed clandestinely, they should be held to have accepted the basis of valuation of this category of goods as well. The same basis was used by the adjudicating authority for enhancing the value of most of the air conditioner parts covered by the demand of duty of Rs 7,19,997/-. Therefore, in our view, there is no good reason for the appellants to have a grievance in relation to the valuation of this category of air conditioner parts. Para 16.0 of the show-cause notice indicates that the assessees own invoices showing higher rates were also relied on by the adjudicating authority for enhancing the value of a few clearances of air conditioner parts covered by the demand of Rs 7,19,997/-. According to the learned counsel, the rates mentioned in such invoices were higher than those shown in the quotations and hence the former was adopted in quantification of duty. The learned counsel, however, has not been able to give a break-up of the quantity of air conditioner parts in respect of which the assessees invoices were relied on for enhancement of value. We have already held to the effect that the appellants are precluded from contending that the value of air conditioner parts could not have been enhanced on the basis of quotations inasmuch as they have already admitted demand of duty based on the very same quotations. If it is the grievance of the appellants that their own invoices could not have been taken in preference to the quotations as the basis for enhancement of value of some clearances of air conditioner parts, they should establish their case by placing on record the requisite facts and evidence. We have already observed that even the break-up has not been furnished. In this scenario, we have no option other than sustaining the demand of duty of Rs 7,19,997/- in respect of the air conditioner parts which were found to have been undervalued.
5. 227 air conditioners were found to have been clandestinely removed by the appellants. The adjudicating authority found that a major part of these goods were clandestinely removed without payment of duty in the pretext of clearing repaired air conditioners. This finding was recorded after examining the Service Cards of the customers. The adjudicating authority also found that a larger number of air conditioners had been clandestinely removed without payment of duty in the pretext of recovering labour charges for repairs of air conditioners. It was also found that many clearances of air conditioners had been clandestinely effected without payment of duty by the appellants in the guise of second-sale of compressors. A further finding recorded by the adjudicating authority was that a few air conditioners had been cleared clandestinely in the pretext of recovering higher rental charges from customers. Six air conditioners were found to have been clandestinely removed in the guise of sale of old/second-hand air conditioners.
6. The Settlement Commissions order indicates that the appellants admitted duty liability partially in respect of the 227 air conditioners. The learned counsel has submitted that the appellants would like to stand by their admissions made before the Settlement Commission. Accordingly, duty liability in respect of 44 air conditioners out of 227 stands conceded. The categorywise break-up is as follows:
Service Cards Labour charge Second-sale of compressors Hire charges Sale of Old air conditioners Total 22 out of 102 12 out of 58 6 out of 59 0 out of 2 4 out of 6 44 out of 227
7. Accordingly, the appellants have disputed duty liability in respect of a total number of 183 air conditioners found by the Commissioner to have been clandestinely removed by them. Out of this categories, 80, 46, 53, 2, 2 air conditioners are respectively in the category of Service Cards, Labour Charges, Second-sale Compressors, Hire Charges and Sale of old air conditioners. A perusal of the show-cause notice indicates that 102 Service Cards were examined by the department and 4 statements were also recorded and, on the basis of these materials, duty was demanded from the appellants on the premise that 102 air conditioners had been clandestinely removed without payment of duty. The show-cause notice indicates that statements were recorded from four customers of M/s Cloud-9 (one of the clubbed units), who stated that they had received complete air conditioners from M/s Cloud-9 without any invoice and that they had paid price in the range of Rs 12,000 to Rs 15,500. The names and addresses of these customers of M/s Cloud-9 were taken from the relevant Service Cards. Though similar particulars were available from other Service Cards, the department did not choose to make any further enquiry. Apparently, the department quantified demand of duty on all 102 air conditioners allegedly manufactured and clandestinely removed by the appellants, on the basis of the four statements. The adjudicating authority adopted the same method, but without any reasoning. At this stage also, no further evidentiary material, nor any reasoning, is forthcoming. The demand of duty, in this category, can be sustained only in respect of those air conditioners which were admittedly received without invoice by the four customers of M/s Cloud-9, who also furnished the price paid by them to M/s Cloud-9. The demand of duty on the goods covered by other Service Cards cannot be sustained in the absence of evidence. It is for the adjudicating authority to requantify the demand of duty on this basis in the Service Cards category of goods except to the extent admitted by the appellants. In this context, we have to state, at the risk of repetition, that the appellants admitted duty liability on 22 air conditioners in the Service Cards category. One can prudently say that these 22 air conditioners would include the air conditioners purchased from M/s Cloud-9 by the four customers whose statements were recorded by the department. In the absence of evidence, there can be no demand of duty on 80 air conditioners in the Service Cards category. The correct amount of duty in this category requires to be requantified by the adjudicating authority.
8. In the Labour Charge category, the show-cause notice refers to documentary evidence pertaining to eight air conditioners covered by equal number of invoices raised in favour of various customers. In this category, the appellants have conceded duty liability on 12 air conditioners. The above eight air conditioners must reasonably be held to be part of these 12 out of 58 air conditioners on which duty was demanded by the adjudicating authority in this category. The show-cause notice further indicates that the other air conditioners (58 minus 8 = 50) were also proposed to be charged to duty of excise on the basis of the quotationcum-price-lists dated 12.10.89 produced by M/s I.R. Joshi and Co unless otherwise confirmed by the buyer. Nevertheless, there appears to be no confirmation by any other buyers. In the absence of evidence, we hold that there can be no demand of duty on air conditioners in this category except in respect of 12, for which duty liability was admitted by the appellants before the Settlement Commission and before us. The correct amount of duty, therefore, should be requantified by the Commissioner.
9. In the Second-sales of Compressors category, the show-cause notice and the impugned order demanded duty on 59 air conditioners. The liability in respect of 6 of these air conditioners was admitted before the Settlement Commission and also before us. The dispute is in relation to 53 air conditioners in this category. The show-cause notice indicates that the entire demand is based on a solitary invoice raised in the name of M/S J.J. Jewellers. It shows that the value of Rs 11000 for 1.5 ton split air conditioner shown in the invoice was not accepted and it was proposed to be raised to Rs 25000 on the basis of quotation-cum-price-list dated 12.10.89. Again, this quotation-cum-price-list was adopted as the basis for valuation of all other air conditioners in this category. In this context also, the show-cause notice employed the phrase unless otherwise verified with the customers. No results of any further verification with the customers are forthcoming. The aforesaid invoice indicates an amount of Rs 11,000/- for 1.5 ton split air conditioner. The buyer (M/s J.J. Jewellers), in a letter, confirmed that they had purchased it. The department apparently did not choose to make any further verification with the buyer to gather the correct price of the goods. In the circumstances, we do not find any justification in enhancing the value of the above air conditioners, over and above the price mentioned in the invoice. Further, in the absence of specific evidence, there can be no demand of duty on other air conditioners in this category except to the extent admitted by the appellants. Hence, after considering the rival submissions, we hold that the demand of duty on the air conditioners, barring six, in this category cannot be sustained. The adjudicating authority should requantify the correct amount of duty.
10. In the Hire Charges category, there are only two air conditioners as part of the subject-matter of this case and the appellants did not admit duty liability in respect of the same. It appears from the show-cause notice that both the air conditioners are covered by invoices which were raised in the name of M/s Arun Video. A statement of Mr. Arun Jaiswal (proprietor) is also available on record and the same indicates that he paid price for the two air conditioners totaling to Rs 20,000/-. The demand of duty on these two air conditioners is on the basis of this price and, therefore, the demand in this category would be sustained. It is ordered accordingly.
11. The last category is Sale of old/used air conditioners. The show-cause notice alleged that M/s Cloud-9 had raised invoices for sale of old air conditioners after carrying out certain repairs as mentioned in the relevant invoices. However, Mr. F.M. Irani, when confronted with the invoices, stated that they had been purchasing old air conditioners from individuals and scrap dealers and hence did not have any purchase bills. In the circumstances, the show-cause notice proposed to demand duty on six air conditioners covered the invoices, on the basis of quotation-cum-price-list dated 12.10.89. The appellants have admitted duty liability in respect of 4 out of 6 air conditioners. After considering the submissions of both sides, we are of the view that the Revenue has failed to establish the assessees liability to pay duty on the remaining two air conditioners. The Commissioner is, therefore, required to requantify the demand of duty reckoning only four air conditioners out of the six in this category.
12. The learned counsel has also raised another issue. He submits that the benefit of Section 4 (4) (d) (ii) of the Central Excise Act was not given to the appellants in this case while quantifying the demand of duty. It is submitted that the appellants are entitled to the benefit of the Honble Supreme Courts decision in Commissioner vs Maruti Udyog Ltd 2002 (141) ELT 3 (SC). On the other hand, the learned SDR has submitted that the above benefit is not admissible to goods clandestinely removed. In this connection, he has claimed support from a more recent decision of the apex court in Amrit Agro Industries Ltd vs Commissioner 2007 (210) ELT 183 (SC). He has also relied on the Tribunals decision in Eon Polymers Ltd vs Commissioner 2010 (258) ELT 225 (Tri-Del). After considering the submissions, we note that, in the case of Maruti Udyog (supra), the apex court held that the price on which the waste and scrap were sold by the assessee should be considered to be cum-duty price and, therefore, the assessable value should be determined after deducting the element of excise duty. In the case of Amrit Agro Industries (supra), the Court distinguished the case of Maruti Udyog and held that the wholesale price of the goods should be considered to be cum-duty price and, further, that the manufacturer claiming the benefit of Section 4 (4) (d) (ii) ibid should show that the price of the goods included excise duty payable by him. In the case of Eon Polymers Ltd (supra), a co-ordinate Bench of this Tribunal considered the question whether the price realized by the assessee from their customers was to be treated as cum-duty price. Different types of clearances were considered by the Bench including clandestine clearances. It was held to the effect that the concept of cum-duty price was not to be invoked by a tax evader and accordingly the apex courts decision in Maruti Udyogs case was not applied to the facts of the particular case. The point emerging before us is that the burden is on the manufacturer to show that the price charged by them included duty element. We are of the considered view that this burden should be discharged before the lower authority.
13. The next issue debated before us pertains to interest on duty. The show-cause notice did not invoke any provision for levy of interest on duty. However, in the impugned order, the learned Commissioner demanded interest on duty under Section 11AB of the Act without indicating the date from which such interest should be paid. The learned counsel submits that such demand of interest is beyond the scope of the show-cause notice. The learned SDR submits that the liability to pay interest on an amount of duty is automatic and hence it is not necessary that a specific provision of law should be invoked in a show-cause notice. It is his submission that, on the facts of this case, interest is leviable under Section 11AB of the Act from 28.9.96, the date on which the provision of law came into force. In this connection, reliance is placed on Raj Leather Cloth Industries Pvt Ltd vs Union of India 2010 (256) ELT 209 ( P & H). In his rejoinder, the learned counsel submits that, if at all any provision of law is applicable, it should be Section 11AA of the Act. On our part, we find that this issue was not adjudicated by the lower authority inasmuch as the show-cause notice did not propose levy of interest on duty. Therefore, it is necessary that this issue also be addressed by the Commissioner.
14. As regards the penalty on the proprietress Smt. Roshan Minoo Irani, the learned counsel has submitted that she was in no way associated with the day-to-day affairs of the assessee. The day-to-day affairs of the assessee were looked after by her son. This fact is clear from the statements of the mother and the son. We have also examined the records and have found the factual position to be clear. The son was managing the affairs of the assessee and the mother only made occasional visits. There is no evidence of the proprietress having dealt with any excisable goods in any manner envisaged under Rule 209A of the Central Excise Rules, 1944. Even in the show-cause notice and the impugned order, the penalty is sought to be imposed on the proprietress not on the ground of her association with any excisable goods but for the mere reason of her being the proprietress. There is no convincing argument to rebut this finding. Therefore, we are inclined to vacate the penalty imposed on the proprietress.
15. The learned counsel has, at the outset, argued that the concession made by the Revenue before the Settlement Commission on the basis of records was binding on themselves and, therefore, the final stand taken by the Revenue before the Settlement Commission in relation to the demand of duty of Rs 7,19,997/- was not to ignored in the present proceedings. In this connection, the learned counsel relied on the Supreme Courts decision in Nagindas Ramdas vs Dalpatram Ichharam alias Brijram and others AIR 1974 SC 471. The learned counsel particularly referred to para 27 of the apex courts judgment which reads as under:
27. From a conspectus of the cases cited at the bar, the principle that emerges is, that if at the time of the passing of the decree, there was some material before the Court, on the basis of which, the Court could be prima facie satisfied, about the existence of a statutory ground for eviction, it will be presumed that the Court was so satisfied and the decree for eviction, though apparently passed on the basis of a compromise, would be valid. Such material may take the shape either of evidence recorded or produced in the case, or, it may partly or wholly be in the shape of an express or implied admission made in the compromise agreement, itself, Admissions, if true and clear, are by far the best proof of the facts admitted. Admissions in pleadings or judicial admissions, admissible under s. 58 of the Evidence Act, made by the parties or their agents at or before the hearing of the case, stand on a higher footing than evidentiary admissions. The former class of admissions are fully binding on the party that makes them and constitute a waiver of proof. They by themselves can be made the. foundation of the rights of the parties On the other hand evidentiary admissions which are receivable at the trial as evidence, are by themselves, not conclusive. They can be shown to be wrong.
It was submitted by the learned SDR that the admissions, if any, made by the Revenue before the Settlement Commission would not be covered by the admissions referred to by the apex court in the above case. On a perusal of the above judgment of the Supreme Court, we find that one class of admissions was held to be fully binding on the party and to constitute waiver of proof against them and this is judicial admission different from the other class viz. evidentiary admission. The Honble Supreme Court held that judicial admissions, admissible under Section 58 of the Evidence Act, made by the parties or agents on or before the hearing of the case stood on a higher footing than evidentiary admissions and hence the same were fully binding on the parties. In our view, the proceedings before the Settlement Commission were not judicial proceedings and hence any admission made before that Commission, whether by the party or by the Revenue, would not be called judicial admission. In this view of the matter, the appellants cannot claim support from the decision cited by the learned counsel. We have referred to the Settlement Commissions order in various contexts in this order but those references do not mean that the admissions made by the appellants before the Settlement Commission have been held to be binding on the appellants in the present proceedings. Rather we have accepted the admissions of the appellants whenever they have reiterated such admissions before us. The learned counsel has categorically stated that the appellants would like to stand by the admissions already made before the Settlement Commission. This would mean that the appellants have reiterated their admissions before us which we have considered.
16. In the result, appeal No E/1097/98 filed by the proprietress stands allowed and the appeal No E/1112/98 filed by the assessee is disposed of in the following terms:
(a) The demand of duty of Rs 15,13,252/- on air conditioner parts is sustained, a part thereof amounting to Rs 7,93,255/- having been admitted by the assessee;
(b) The demands of duty on air conditioners in the hire rental charges category is sustained;
(c) The demand of duty on air conditioners in other categories (Service Cards, Labour Charge, Second-sale of compressors and sale of old air conditioners) are sustained to the extent admitted by the assessee. The adjudicating authority is required to requantify the amount of duty on 22 out of 102 air conditioners, 12 out of 58, 6 out of 59 and 4 out of 6 in the categories Service Cards, Labour Charge, Second-sale of compressor and sale of old air conditioners respectively. In this context, the question whether the price of the air conditioners on which duty is leviable should be considered to be cum-duty price under Section 4 (4) (d) (ii) of the Act should be settled after giving the assessee a reasonable opportunity of being heard;
(d) Any other incidental question that may arise in the context of valuation should also be addressed by the Commissioner;
(e) The question whether any interest is leviable on duty under Section 11AA or under Section 11AB of the Act is also remanded for decision by the Commissioner in accordance with law and the principles of natural justice;
(f) Now that the task of requantifying the amount of duty stands remitted to the adjudicating authority, the question whether any penalty is imposable on the assessee under Rule 173Q of the Central Excise Rules, 1944 and, if so, to what extent, should also be determined by the Commissioner. Needless to say that, in this context, the question relating to confiscation and redemption fine in relation to plant and machinery and the goods seized from the appellants should also be examined by the learned Commissioner in accordance with law and the principles of natural justice.
(Dictated in Court.) (S.K.Gaule) Member (Technical) (P.G. Chacko) Member (Judicial) rk 21