Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, ... vs B. Tej Enterprises on 18 August, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL Nos. E/320 & 321/04-Mum (Arising out of Orders-in-Appeal No. SDK(219-222)219-222/M-V/2003 and SDK(226-227)226-227/MV/03 dated 31.10.2003 passed by Commissioner of Central Excise (Appeals), Mumbai-V) For approval and signature: Honble Mr. P.K. Jain, Member (Technical) and Honble Mr. S.S. Garg, Member (Judicial) ======================================================
1. Whether Press Reporters may be allowed to see : No 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 : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== Commissioner of Central Excise, Mumbai-V Appellant Vs. B. Tej Enterprises Respondent Vinod T. Jain Godrej Appliances Ltd. Appearance: Shri V.K. Agrawal, Additional Commissioner (AR), for appellant Shri Vinay Sejpal, Advocate, for respondents 1 & 2 Shri K.A. Photographer, Asstt. Vice President, for respondent 3 CORAM: Honble Mr. P.K. Jain, Member (Technical) Honble Mr. S.S. Garg, Member (Judicial) Date of Hearing: 5.8.2015 Date of Decision: 18.8.2015 ORDER NO Per: P.K. Jain
These appeals are filed by Revenue against the order passed by Commissioner (Appeals), dated 31.10.2003. The said order in turn covered two orders-in-original and three notices. The two orders-in-original are for different period involving the same issue.
2. Brief facts of the case are that the respondent, B. Tej Enterprises, was manufacturing certain plastic moulded parts for use in the refrigerator by respondent 3 viz. Godrej Appliances Ltd. M/s. B. Tej Enterprises was paying excise duty on the parts so manufactured and cleared and Godrej Appliances Ltd. was availing the credit of the duty paid by B. Tej Enterprises. For manufacture of such plastic parts, certain moulds were required. These moulds were provided/supplied by Godrej Appliances Ltd. to B. Tej Enterprises and B. Tej Enterprises was not doing any modification in the moulds and after use, was also returning to appellant 3 viz. Godrej Appliances Ltd. as and when directed by them. The issue involved is inclusion of amortization cost of such moulds in the assessable value of the plastic moulded components manufactured by B. Tej Enterprises. The said issue has already been decided by this Tribunal in the case of Flex Industries Ltd. vs. CCE, Meerut reported in 1997 (91) ELT 120. Later on, during 1999 there were certain conflicting decisions in the matter, and issue went to the Larger Bench in the case of Mutual Industries Ltd. vs. CCE, Mumbai reported in 2000 (117) ELT 578, wherein the Tribunal has held that this is an additional consideration and proportionate cost of moulds supplied free by supplier and used in the manufacture of finished goods is includible in the assessable value. The respondents are not disputing that the proportionate cost was required to be included while determining the assessable value and hence now paying duty. During the period 1996 to 2000, however, the respondents paid duty without including the said proportionate cost. After the introduction of a new Section 4 in the Central Excise Act and consequent new Central Excise Valuation Rules, they had started including the proportionate cost. Later on, they realized that even for the period prior to 2000 i.e. between 1996 to 27.8.2000, they were required to include the proportionate cost of moulds in the assessable value. On realization of their mistake, they ascertained the proportionate cost of the moulds from M/s. Godrej Appliances Ltd. and thereafter computed the additional duty liability and paid the same on 28.3.2002. These acts were suo motu on the part of the respondent, B. Tej Enterprises. After the respondent paid the said amount, Revenue started investigating the case by recording certain statements and issued a show cause notice demanding interest under Section 11AB, penalty under Section 11AC and also appropriating the amount already paid. The original authority confirmed the allegations in the show cause notice and, therefore, confirmed the interest and penalty. Aggrieved by the said order of the original authority, the respondents filed appeal before the Commissioner (Appeals). The Commissioner (Appeals) has allowed the appeal of the respondents relating to interest under Section 11AB, penalty under Section 11AC and also penalty under Rule 209A on individual, Shri Vinod Jain, partner, as also on Godrej Appliances Ltd. The Revenue is in appeal against the said order of the Commissioner (Appeals) relating to interest and penalties. The respondents are not disputing the duty amount and had already paid on 28.3.2002 much before the issuance of the show cause notice.
3. Learned Additional Commissioner (AR) submitted that the fact that the proportionate cost of the moulds is required to be added is a settled issue as per this Tribunals judgment in the case of Flex Industries Ltd. which was pronounced as early as 17.1.1997. The learned AR further submitted that the said judgment held the field and it is only during 1999 some contrary judgments were issued by the Tribunal and the matter was referred to a five-member bench in the case of Mutual Industries Ltd. reported in 2000 (117) ELT 578 and even in that case, the matter was settled on 16.3.2000. He submitted that in view of the clear legal position, a company like Godrej Appliances Ltd. cannot say that they were not aware how to compute the value or that the proportionate cost of the moulds was required to be added. The learned Additional Commissioner (AR) submitted that the very fact that the legal position was very clear and the buyer involved is a very large company, the value was undoubtedly misdeclared with the sole intention of evading duty. The learned AR submitted the following case laws in support of his contention that the extended period of limitation is applicable in the present facts of the case and, therefore, interest under Section 11AB and penalty under Section 11AC as also penalty on individual is imposable:-
(i) Flex Industries Ltd. vs. CCE, Meerut reported in 1997 (91) ELT 120 (T);
(ii) Flex Laminators & Flex Industries Ltd. vs. CCE, Meerut reported in 2004 (163) ELT 297 (SC);
(iii) Mutual Industries Ltd. vs. CCE, Mumbai reported in 2000 (117) ELT 578 (T);
(iv) Bharat Automotive Pressings (I) Pvt. Ltd. vs. CCE, Pune reported in 2010 (262) ELT 720 (T);
(v) Automotive Stampings and Assemblies Ltd. vs. CCE, Pune-I reported in 2015-TIOL-836-CESTAT-MUM.
4. Learned counsel for the respondents 1 and 2 submitted that his client is a small manufacturer and manufacturing certain parts on behalf of Godrej Appliances Ltd. He submitted that before 2000 under the erstwhile Section 4 of the Central Excise Act and the corresponding Central Excise Valuation Rules, there was no specific mention about the amortization cost to be included in the value of the goods. It is only after the introduction of new Section 4 and new Valuation Rules that the Rules specifically speak of including the amortization cost of moulds while computing the assessable value. He further submitted that his client was not aware of including such cost and, therefore, the same was not included by mistake. However, the mistake was a bona fide misstate and there was no intention to evade any duty. He further submitted that after the introduction of new section, his client came to know that such cost was to be included and, therefore, they had started including the amortization cost. After some time they came to know from other vendors like them that they were including the amortization cost of moulds even prior to 2000. After coming to know the same, they got in touch with Godrej Appliances Ltd. and obtained the details of the cost of the moulds and Chartered Accountant certificate etc. to understand and know the amortization cost. It was further submitted that after getting the details, his client on their own paid the differential duty amount. It was also submitted that during this period no enquiries whatsoever were made by any central excise official and the whole action was a bona fide action and was an action to follow the Rules properly. He further submitted that after the payment of the said amount, the department started asking them to pay the penalty, interest etc. which were not legally payable and thereafter the department issued the said show cause notice. It was also submitted that it would be seen that the show cause notice was issued on 13.3.2003 i.e. after almost one year of making the payment. Further, the five-year period from the date of issuance of show cause notice goes back only upto 1.3.1998 and his client has paid the differential duty even for the period 1.4.1996 to 13.3.1998. Thus his client has paid the differential duty which was even beyond the period of five years prescribed under the law. He further submitted that in the first show cause notice, out of an amount involved of Rs.4,90,122/-, Rs.4,59,620/- is pertaining to these two years which was not even legally payable. However, the respondent being a law abiding citizen had paid the duty suo motu and the department instead of appreciating the action, started investigation and issued the show cause notice. He further submitted that the ingredients for imposing penalty at the relevant time both under Section 11AB and 11AC were the same i.e. fraud, collusion, wilful misstatement, suppression of facts etc. The learned counsel submitted that the conduct of the respondent clearly indicates that there was no such ingredient present in the whole matter. Under the circumstances, no penalty can be charged under Section 11AC. He also submitted that Section 11AB has undergone change in 2001. However, the period involved in the present case is upto 2000 and the old Section 11AB would be applicable. He further submitted that no penalty is imposable on Shri Vinod T. Jain, partner, under Rule 209A as there was no intention to evade any duty.
4.1 Shri K.A. Photographer, Assistant Vice President from Godrej & Boyce Mfg. Co. Ltd., on behalf of Godrej Appliances Ltd., submitted that they have large number of vendors and they do not keep track of valuation of each and every vendor, even though they do guide the vendors to follow the law correctly and strictly. He further submitted that all the vendors were including the proportionate cost of moulds in the assessable value. It is by inadvertent error that mistake had happened in case of one vendor and as soon as the same was realized by the vendor, the same was corrected by them by providing the necessary input. He submitted that in view of the said position, no penalty is imposable on them.
5. We have considered the submissions made by both the sides. At the outset, we observe that there is no dispute about the duty liability. The dispute is only relating to imposition of penalty under Section 11AC, interest under old Section 11AB and penalty under other rules such as Rule 209A etc. As described in the brief of the case, we observe that the period involved in the present case is from 1996 to 2000 and under the old Central Excise Valuation Rules there was no specific mention of adding the proportionate cost of moulds. It is true that this Tribunal vide the order in the case of Flex Industries Ltd. (supra) has held that the said cost would be includible. However, that by itself does not imply that any manufacturer who was not including the said proportionate cost was doing so with the wilful intention to evade payment of duty and each case has to be considered in the facts and circumstances of that case. In the present case, we note that some time in 2001 the respondent realized their mistake and they did take remedial measures and they themselves approached Godrej Appliances Ltd. and got details such as certificate from the Chartered Accountant etc. and thereafter computed the differential duty. The respondent B. Tej Enterprises paid the duty suo motu without any enquiries or any objection from the department. This conduct of the respondent clearly indicates that there was no intention leave alone wilful intention to evade payment of duty. Under the circumstances, in our considered view, this is not a case of imposition of penalty under Section 11AC or imposition of interest under the old Section 11AB (which again requires fraud, collusion, wilful misstatement, suppression of facts etc. with intention to evade duty). We do not find any case for imposition of penalty under Rule 209A also either on second respondent or third respondent.
6. The counsel for the respondents as also the representative of Godrej Appliances Ltd. and the learned AR has quoted a number of judgments. The issue involved in the present case is relating to penalty under Section 11AC which depends on the facts and circumstances of the case and we do not consider it necessary to discuss each of the case laws quoted by both the sides. Similar is the position about interest under old Section 11AB.
7. In view of above analysis, all the appeals filed by the Revenue are dismissed.
(Pronounced in Court on 18.8.2015) (S.S. Garg) Member (Judicial) (P.K. Jain) Member (Technical) tvu 1 10