Custom, Excise & Service Tax Tribunal
M/S. Icomm Tele Ltd vs Cc,Ce&St, Visakhapatnam-Ii on 26 August, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Bench DB Court I Appeal No.E/25818/2013 (Arising out of Order-in-original No.72/2012(BVSNK) dt. 30/11/2012 passed by CC,CE&ST, Visakhpatnam-II) For approval and signature: Honble Ms. Sulekha Beevi, C.S., Member(Judicial) Honble Shri Madhu Mohan Damodhar, 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 Lordship wish to see the fair copy of the Order? 4. Whether Order is to be circulated to the Departmental authorities? M/s. ICOMM Tele Ltd. ..Appellant(s) Vs. CC,CE&ST, Visakhapatnam-II ..Respondent(s)
Appearance Shri G. Natarajan, Advocate for the appellant.
Shri Arun Kumar, Deputy Commissioner(AR) for the respondent.
Coram:
Honble Ms. Sulekha Beevi, C.S., Member(Judicial) Honble Shri Madhu Mohan Damodhar, Member(Technical) Date of Hearing:26/08/2016 Date of decision:26/08/2016 FINAL ORDER No._______________________ [Order per: Madhu Mohan Damodhar] 1.1. The appellants are engaged in the manufacture of telecom equipment and parts thereof, falling under Chapter 85 of the First Schedule to the Central Excise Tariff Act, 1985. Appellant procured Purchase Order No. WiMAX/5-9/PO/2009-10/1 dated 20.06.2009 for Supply, Installation, Commissioning and Maintenance Support of Urban WiMAX equipment in BSNL Kerala Circle, on Turnkey basis for Phase-I from M/s. BSNL, Kerala Circle; and P.O. No. CT/PO/369-10 dated 22.10.2009 for the supply of Next Generation Play Network (GEPON) Equipment from M/s. BSNL, New Delhi. They later secured Purchase Order No. CGPM/CHI/PO/WiMAX(e)-Project-2/2010-11/11 dated 08.07.2010 for Supply, Installation, Commissioning and Maintenance Support of WiMAX equipment in BSNL network on turnkey basis for Project-2 and were supplying the goods as required under the said Purchase Orders.
1.2. During verification of records, it appeared to the Department that appellants are clearing certain goods under a document to whom so ever it may concern and Delivery Note (Way Bill) mentioning the purpose as testing, without mentioning any value or by mentioning very low values, without raising Central Excise Invoice and without payment of Central Excise duty. No record evidencing such removal of the same for testing or return of the same after intended purpose of testing is available; that stock statements and Work-in-Progress statements are not at all tallying with the R.G.1 Register; that they have not maintained proper records to show inventory of the goods manufactured as envisaged in Rule 10 of the Central Excise Rules, 2002 to ascertain production, clearances on a particular date and under Rule 9(5) of the CENVAT Credit Rules, 2004 for receipt, disposal, consumption and inventory of the inputs and capital goods.
1.3. Show Cause Notice dated 20-01-2012 was issued to appellants, inter alia, alleging (i) non-payment of duty to the tune of Rs 94,57,417/- on account of clandestine removals, (ii) short payment of duty to the tune of Rs.14,98,267/- on account of non inclusion of packing charges in the value, (iii) non-payment of duty to the tune of Rs. 38,902/- in respect of goods cleared by declaring value as NIL, (iv) wrong availment of CENVAT Credit to the tune of Rs. 6,51,577/- in respect of goods meant for installation & commissioning and (v) removal of capital goods in contravention of CENVAT Credit Rules, 2004 with intent to evade payment of duty by indulging in:-
> Clearance of goods under the cover of to whom so ever concern letters and Delivery note(Way Bills) by mentioning as not for sale (testing purpose), without raising invoice and without payment of duty.
> Suppression of the production and clearance of the said goods in the Daily Stock Account and ER-1 returns.
> Mis-statement by initially stating that no job work was required for Wimax and Gepon projects and later claimed as short supply without producing any evidence.
> Not obtaining any permission for clearance of goods for job work under Rule 16A, B of Central Excise Rules, 2002.
> Undervaluation of clandestine clearances vide delivery notes and to whomsoever concern letters by mentioning very low values vis-a vis purchase order values.
> Undervaluation of goods by suppression of the fact of charging of forwarding, packaging charges and inland charges by mis-declaring the amount as Freight plus Insurance in their invoices.
> Mis-declaring value of the goods cleared as NIL even though the values are available in the related purchase orders.
> Mis-declaring the installation material as inputs and wrongly availing CENVAT Credit.
> Clearance of capital goods without reversing the CENVAT Credit availed as envisaged under Rule 4(5) (a) of CENVAT Credit Rules, 2004.
> Fabrication of documents.
1.4. After due process of adjudication, adjudicating authority, vide impugned order dt. 30.11.2012, confirmed the proposals in the show-cause notice. Hence, this appeal.
2.1. During the hearing, learned counsel Shri G. Natarajan appearing for the appellant countering the allegations submitted the following in respect of each demand:-
a. Alleged removals without payment of duty under the cover of letters, etc.
i) The goods were originally invoiced to meet the project deadlines and to avoid liquidated damages for late supply. Some goods short supplied were subsequently despatched under private documents.
ii) The goods in question are technological products, which would work only in the specified spectrum band, allotted for BSNL and nobody else can use them.
iii) Most of the goods are imported under specific Import licence and we cannot procure / assemble these goods locally.
iv) All persons from the company have deposed the above facts in their statements. The standard of proof in clandestine removal cases has been laid down in various judgements, which ahs not at all been satisfied in this case. There is no discussion on source of raw materials, process of manufacturing, to whom the goods are sold, sale proceeds, etc.
v) Detailed reconciliation had been provided by them but not considered by the Commissioner.
vi) Various goods such as USB Dongle, Clamp, cable etc. are not manufactured but bought out goods. The activity of assembling them together is manufacture. When the individual item is removed under private document, no duty can be demanded as they are not manufactured by the appellant.
b. Demand of duty on Freight, Forwarding, Packing and Insurance Charges
i) The charges are collected only towards freight and insurance and not liable to be included in the assessable value.
ii) Even if packaging cost is includible, the entire amount collected under Freight and Insurance cannot be added in the assessable value.
c. Demand of duty on NIL Value Invoices Reference is invited to Page 350 of Volume II and Page 488 of Volume III of the documents submitted in adjudication. Some battery back up, which are under 4.1b of PO are cleared on payment of duty. Same Battery back are also part of Maintenance spare 4.4, which has not been cleared along with the maintenance spare. Subsequently cleared without duty along with clearance of similar battery back ups with payment of duty.
d. Denial of CENVAT Credit
i) These are forming part of the BOQ of supplies, on which ED is being paid. So credit is entitled.
ii) Even if the goods are meant for installation and commissioning, credit is entitled, as proper service tax is being paid on installation and commissioning charges.
e. Demand of CENVAT Credit on Capital goods removed
i) There is no confirmation of demand in Order portion, though there is observation in para 20 of the OIO that Rs. 3,24,428/- is payable. Demand of Rs. 3,24,428/- is not being disputed and appellant has paid with interest.
ii) Penalty cannot be imposed for the entire demand as the demand to be confirmed is only Rs. 3,24,428/-.
iii) Since it is only inter unit removal, there is no intention not to reverse the credit and hence penalty is not justified.
2.2. Learned counsel further argued that adjudicating authority has incorrectly confirmed demand of Rs.94,57,147/- without evidence that appropriate duties of excise was not paid on these goods. During adjudication, they had explained that the duty paid goods, in respect of accessories items and small value items, beyond a shadow of doubt, were procured on excise documents, however during the dispatch of the materials, some of the duty paid materials could not be dispatched and they were later dispatched with the alleged documents to whomsoever it may concern only cover the dispatches. These goods were not produced in the factory, which is an admitted fact, that other items are high value items and are only imported. Being imported items the commissioner ought not to have formed an opinion that these items are surreptitiously cleared under the guise of disputed documents To whom so ever it may concern and Delivery Note (waybill). Learned counsel further submitted that Commissioner also ought to have noticed that the demand of the duty of Rs. 14,98,67/- as being duty payable on the assumed apportioned values of packing charges is incorrect and improper. As per the Purchase Order BSNL has contracted to pay 0.5% on the aggregate on duty values as extra amount. The details of the this amount figures in Annexure-B in a different nomenclature as Freight, Forwarding, Packaging and Inland Charges. It is submitted that it is the comprehension of BSNL that the appellants should be reimbursed of packing charges also, and in any case a total charge that can be claimed cannot be more than 0.5% of duty value in the final analysis and actual, therefore, it is enjoined on the revenue authorities to find out whether any amounts supposed to be packing charges were sought for collection from BSNL. They did not collect any amount towards packing charges at all. It should be remembered that the cap of aggregate of Freight, Forwarding, Packaging and Inland Charges is more than 0.5% reckoned and not on actuals. Consequently if the freight charges themselves are more than 0.5%, in actual, the appellants would not get any payment in respect of packing charges, forwarding charges etc., In the present case, the freight charges themselves are more than 0.5%, hence the assumption that 0.5% is inclusive of packing charges is itself, wholly erroneous.
2.3. With regard to amount of Rs. 38,902/- sought to be levied as duty on Battery Backup, they submit that non-payment cannot be alleged since in the ultimate analysis, the total duty as per the contractual values is paid. Central Excise Invoices were prepared for the GEPON Equipment which included value of Battery Backups also. However since, batteries were though sent under Central Excise Invoices showing the value as NIL, but indicating that the items were already billed at the time of initial dispatch, hence the value was shown as Nil, therefore no duty was again payable on such duty-discharged battery backups.
2.4. With regard to demand of Rs. 6,51,577/-, alleged as wrong CENVAT Credit availment, since inputs were used for the installation and erection purposes, they submit that the dispatched goods were used in the manufacture and therefore the proposal to recover is irregular.
2.5. The learned counsel further submitted that they had submitted all records and documents during the adjudication process to substantiate their contention, however, the same have not been taken cognizance of by the adjudicating authority and impugned order has been passed by him without any analysis or weighing the contention made by them and has merely confirmed the allegations in the show-cause notice without giving any justification grounds or proper reasoning.
3. On behalf of the Department, learned AR reiterated the correctness of the Order-in-Original.
4. We heard both the sides and have gone through the facts of the case. With the discussions made, we find merit in the contentions of the learned counsel that the adjudicating authority has not taken full cognizance of the submissions and documents produced by them. In the circumstances, we are of the considered opinion that the matter requires to be considered de novo by original authority after giving an opportunity to the appellant to submit all documents and materials in their defence, which should be properly analysed and correlated to arrive at well reasoned findings with regard to the veracity or otherwise of the contentions of the appellant. All the issues are kept open. Appeal is allowed by way of remand.
(Operative part of this order was pronounced in court on conclusion of the hearing) MADHU MOHAN DAMODHAR MEMBER(TECHNICAL) SULEKHA BEEVI C.S. MEMBER(JUDICIAL) Raja.
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