Customs, Excise and Gold Tribunal - Tamil Nadu
Brakes India Ltd. vs Commissioner Of Central Excise on 4 January, 2005
Equivalent citations: 2005(100)ECC300, 2005(184)ELT179(TRI-CHENNAI)
ORDER P.G. Chacko, Member (J)
1. This appeal is against an order passed by the Commissioner of Central Excise demanding differential duty on enhanced value of the goods in question. The subject goods are motor vehicle components manufactured by the appellants in their Solinghur factory and cleared on payment of duty from October 96. The appellants have another factory at Padi (Chennai). Goods manufactured in both the factories used to be removed to a packing unit (a "duty-paid godown") at Sholinghur, on payment of duty and, from his godown, the stock was transferred to their sales depot at Chennai, from where some sales were effected and the rest of the stock was transferred to their sales depots at Pune, Delhi and Calcutta. The appellants paid duty on the subject goods manufactured and removed from the Sholinghur factory during the above period on the basis of the price prevailing at the Chennai depot at the time of removal of the goods from factory. The department objected to this and took the view that the assessable value of the goods should be the price at the Pune, Delhi and Calcutta depots, depending on from where the goods were ultimately sold. On this basis, a show-cause notice was issued to the assessee demanding differential duty on the differential value of the goods for the aforesaid period, by invoking the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act, on the basis of alleged suppression of facts. The notice also proposed penalty on the assessee. The proposals were contested. The adjudicating authority rejected the basis of valuation adopted by the assessee and sustained the departmental view, after considering the relevant provisions of Section 4 of the Central Excise Act as amended with effect from 28.9.1996. The authority, however, partly accepted the assessee's plea of limitation, holding that there was no suppression on their part upto 27.6.1997 and therefore the extended period of limitation was not invocable upto this date. Ld. Commissioner accordingly restricted the demand of duty. He also imposed a penalty of equal amount on them under Section 11AC, in addition to a penalty of Rs. 90,000 under Rule 173Q. Hence, this appeal
2. Heard both sides. Ld. Counsel for the appellants submits that the subject goods removed or payment of duty from their Sholinghur factory was a part of stock transfer from the factory to their Chennai depot where a sale price for identical goods was available at the time of removal of the goods from the factory. In such circumstances, further stock transfer from Chennai depot to other depots and subsequent sales from such other depots were immaterial to the valuation of the subject goods under the amended provisions of Section 4 of the Act. According to Ld. Counsel, the Chennai depot price of like goods at the time of removal of the subject goods from the factory was the only price to be adopted as the basis of valuation of the goods in terms of proviso (ia) to Section 4(1)(a) read with the definition of "place of removal" under Clause (b) of Sub-section (4) of the said Section. Ld. Counsel, in this connection, relies on the following decisions of the Tribunal.
1. Malwa Cotton Spinning Mills Ltd. CCE, 2001 (132) ELT 671
2. Lipi Data Systems Ltd. v. CCE, Jaipur, 2001 (130) ELT 91
3. Gastrol India Ltd. v. CCE, New Delhi, (118) ELT 35 It is submitted that the decision in Castrol India case was affirmed by the Supreme Court vide 2000 (121) ELT A.224 (SC). Reliance is also placed on the Board's Circular Mo. 251 /85/96-CX dated 14.10.1996. It is argued that the issue is squarely covered in favour of the appellants by the above decisions of the Tribunal. As regards penalty, it is submitted that more than the amount of duty demanded was paid by the assessee before issuance of the show-cause notice and therefore any penalty under Section 11AC or under Rule 173Q was not warranted. In this connection, reliance is placed on E.I.D. Parry (I) Ltd. v. CCE, Chennai, 2003 (58) RLT 63 (CESTAT-CH).
3. Ld. SDR argues in justification of the impugned order. She also refers to the above provisions of law and relies on certain clarifications given by the Board in the same Circular. Reliance is also placed on the Supreme Court's judgment in Prabhat Zarda Factory Limited v. CCE, 2002 (146) ELT 497 (SC).
4. After considering the submissions, we note that the period of dispute is entirely after the amendment of Section 4 of the Central Excise Act, which was effected on 28.9.96 vide Finance Act, 1996. Both sides have adverted to the amended provisions. After the amendment, a depot or any other place or premises from where the excisable goods are to be sold after their clearance from the factory is also a "place of removal" for the purpose of valuation of such goods under Section 4 of the Central Excise Act. "Place of removal" figures significantly in proviso (ia) to Clause (a) of Sub-section (1) of Section 4 also. This provision, which came into force on 28.9.96, reads as under:
"(ia) Where the price at which such goods are ordinarily sold by the assessee is different for different places of removal, each such price shall, subject to the existence of other circumstances specified in Clause (a), be deemed to be the normal price of such goods in relation to each such place of removal."
Against the backdrop of the above provisions, we have got to analyse the undisputed facts of this case. The subject goods were removed on payment of duty from Sholinghur factory to packing godown. That was a stock transfer. From the godown, the goods in fully packed condition were stock-transferred to the Chennai depot. Stocks transferred from their Padi (Chennai) factory were also received in a similar manner in this depot. A part of the stock in this depot was put to sale. It was the price prevailing in this depot at the time of removal of the subject goods from the Sholinghur factory that was adopted by the assessee for valuation of the goods. The department looked beyond this depot and found that the subject goods were actually transferred to other depots at Pune, Delhi and Calcutta and sold from there. The sale prices prevailing at these depots concerned at the time of removal of the subject goods from the Sholinghur factory were adopted as assessable values. In this manner, the department determined differential value for the goods removed from the factory, depending on the sale price prevailing at Pune, Delhi or Calcutta, as the case may be, at the time of such removal from the factory.
5. Reverting to the provisions of law, we find that the proviso (ia), extracted above, presupposes a normal price in respect of each "place of removal." Admittedly, in this case, a part of the total quantity of the subject goods cleared from Sholinghur factory was ultimately sold at the Pune depot, another part at Delhi depot and the rest at Calcutta depot. The question is whether these depots are the appropriate "places of removal" for the purpose of the above proviso. The depots at Pune, Delhi and Calcutta were only outlets for sale of goods, while the depot at Chennai was partly used as outlet for sale and partly used for stock transfer. The subject goods were, admittedly, sold from Pune, Delhi and Calcutta depots. Thus, it appears, in the appellants' scheme of marketing, their goods were ordinarily sold at Pune, Delhi and Calcutta and not at Chennai. Here the prices charged by the Pune, Delhi and Calcutta depots should be taken as "price at which such goods arc ordinarily sold" for the purpose of the above proviso. In this view of the matter, the decision recorded by the Commissioner appears to be based on a reasonable interpretation of proviso (ia) ibid. The Commissioner has ignored the sale price at Chennai depot and adopted the sale prices of the other depots from where the appellants' goods were ordinarily sold and the subject goods were actually sold. This seems to be in accordance with the terms of Section 4, as amended with effect from 28.9.96. In Circular No. 14.10.1996 of the Board, we come across the following clarification:
"In case of inter-depot transfer of goods, duty may be initially charged with reference to place of removal from where the goods are actually removed/in tended to be sold and by charging differential duty, if any, on the basis of assessable value prevalent at the actual "place of removal" i.e. the storage depot etc, from which the goods are finally sold." The expression "ordinarily sold" in proviso (ia) appears to have been duly taken care of by the Board in this clarification.
6. We have examined the decisions cited by Ld. Counsel. These decisions are to the effect that, under the amended provisions of Section 4, the assessable value of the goods cleared from factory for subsequent clearance from depot is to be determined with reference to the price prevailing at the depot on the date of removal of the goods from the factory. We find great significance in the expression "goods cleared from factory for subsequent clearance from depot", which can only mean that, where the goods sought to be valued under the amended provisions is, after its removal from factory, cleared from a depot, such depot has to be chosen as "place of removal." In the instant case, the goods were admittedly sold from the depots at Pune, Delhi and Calcutta. No part of the consignment was sold from the Chennai depot. We have applied the cited case law to the facts of this case. The Supreme Court's judgment in the case of Prabhat Zarda Factory Limited (supra) also supports the Revenue's view in this case.
7. For the reasons noted, we endorse the view taken by the Commissioner insofar as the valuation of the goods in concerned. The Commissioner has, also, partly accepted the assessee's plea of limitation. What remains to be considered is whether the penalties imposed by him are sustainable. Admittedly, the entire amount of duty, and more than that, was paid by the assessee before issuance of the show-cause notice. It has been consistently held by the Apex Court that, where duty was paid prior to issuance of show-cause notice, no penalty is liable to be imposed on the assessee under Section 11AC or under Rule 173Q. This Tribunal also has consistently taken this view. In the case of EID Parry Ltd. (supra), a Larger Bench of this Tribunal has settled the issue against the Revenue. Accordingly, the penalties imposed by the Commissioner are not liable to be sustained.
8. In the result, we uphold the demand of duty and set aside the penalties. The impugned order stands modified accordingly. The appeal is disposed of.