Customs, Excise and Gold Tribunal - Bangalore
Deccan Enterprises Pvt. Ltd. vs Commissioner Of C. Ex. on 14 July, 2005
Equivalent citations: 2005(190)ELT241(TRI-BANG)
ORDER T.K. Jayaraman, Member (T)
1. This is an appeal filed against the Order-in-Original No. 31/2002, dated 24-6-2002 passed by the Commissioner of Customs and Central Excise, Hyderabad.
2. The brief facts of the case are as follows :-
The appellants, M/s. Deccan Enterprises Pvt. Ltd. (hereinafter referred to as 'DEPL' for short) received raw materials from M/s. Deccan Industrial Products Pvt. Ltd. (hereinafter referred to as 'DIPPL' for short) for the manufacture of 'Grooved Rubber Sole Plates and molded pads' meant for Indian Railways. After manufacture of the said products, DEPL used to sent the same to DIPPL. After further processing, DIPPL to clear the goods on payment of duty. DEPL took Modvat credit on the raw material received. Further they received Rs. 3.50 per pad as job charges. But while clearing the goods they paid duty only on the value which is equal to the Modvat credit taken on the input raw materials. In other words, they have not adopted the correct value as per Rule 6(b)(ii)) of the Central Excise (Valuation) Rules, 1975. The Revenue proceeded against the appellants and in the impugned order, the adjudicating authority has demanded an amount of Rs. 23,69,564/- in terms of proviso 1 to Section 11 of the Central Excise Act. Equal penalty under Section 11 AC has been imposed. Interest under Section 11AB has also been demanded. Penalty of Rs. 1,00,000/- under Rule 173Q has been imposed. Penalty of Rs. 10,000/- each has been imposed on S/Shri O.P. Jalan, MD of DEPL and Vikas Jalan, Joint MD of DEPL under Rule 209A of CER, 1944. The appellants strongly challenged the impugned order.
3. Shri M. S. Rajappa, learned Consultant appeared on behalf of the appellants and Shri R. V. Ramakrishnappa, JDR appeared on behalf of the Revenue. The learned Consultant urged the following points :-
(i) In the agreement entered between the appellants and DIPPL, it has been clearly stated that the value of the goods is to be fixed on the basis of Modvat credit taken on the raw material used. This agreement dated 11-5-98 was submitted to the Assistant Commissioner of Central Excise, Division-VI with a copy to the Assistant Commissioner of Central Excise, Division-IV who is the Jurisdictional Assistant Commissioner of the appellants. The receipt of agreement was acknowledged by the department on 12-5-98. Hence the appellant has not suppressed any facts from the department.
(ii) The department did not object the agreement till October 1999.
(iii) Even when the department conducted audit, no objection was raised.
(iv) Even the Accountant General Audit was carried out, no objection was raised.
(v) Only on 14-10-99, the Department raised the issue. The appellants furnished a reply dated 18-1-2000. The Department had acknowledged the receipt of the letter on 19-1-2000. For 9 months the department did not take any action. On 25-10-2000, the department wanted cost data for certain models. In view of the damage due to flood in August 2000, most of the documents were lost and damaged. Hence, the appellants was not in a position to submit cost data for certain models. However in respect of the models which constituting 99.62% of the total job work done by the appellants, cost data has already been submitted and the same has been acknowledged by the Department.
(vi) Since the appellant had not suppressed any facts with an intention to evade duty, the longer period cannot be invocable.
(vii) This case is one of the revenue neutrality. Even if the duty is paid by the appellants, the Modvat Credit would be availed by the DIPPL. Hence there cannot be any intention to evade duty in the light of the following decisions :-
(i) Kitply Industries Ltd. v. Commissioner of Central Excise, Mumbai [ (Tri. - Mumbai)
(ii) Kores (India) Ltd. v. CCE, Hyderabad [2004 (178) E.L.T. 901 (Tri. - Bang.)] (iii) MRF Ltd. v CCE, Hyderabad [ (Tri -Bang.)]
(iv) R.H. Industries v. CCE, Chandigarh [2001 (133) E.L.T. 798 (Tri. - Del.)]
(v) Smithkline Beecham Consumer Healthcare Ltd. v. CCE, Chandigarh
(vi) Bajaj Tempo Ltd. v. CCE, Pune [(Tri. - Mumbai)]
(vii) PTC Industries Ltd. v. CCE, Jaipur [(Tri. - Del.)]
(viii) Jay Yuhshin Ltd. v. CCE, New Delhi [ (Tri. - L.B.)]
4. Shri R.V. Ramakrishnappa, JDR reiterated the points made in the adjudication order.
5. We have gone through the records of the case carefully. The appellants have manufactured the goods out of the raw materials supplied by the DIPPL. They could have received the raw material by Rule 57F challan procedure and returned the goods after job work to the principal manufacturer without payment of duty. However in the present case, they have followed the procedure of taking Modvat credit on the inputs and paying duty only on the value equal to the Modvat credit portion. No doubt, this does not represent the correct value as per Section 4 of the Central Excise Act. When excisable goods are cleared, the value adopted should be in accordance with the Central Excise law. Each assessee cannot adopt a procedure according to his will ignoring the Central Excise law. But in the present case, the appellants have made clear their intention of paying duty only on the value representing the Modvat credit taken. The Department has received the agreement entered by the appellants with the principal manufacturer DIPPL. In view of this fact, we cannot hold that the appellants had suppressed the facts from the department. As regards intention to evade Central Excise duty, we find that even in the present case the duty paid by the appellants was taken as Modvat credit by the principal manufacturer DIPPL. Hence, any duty paid by the appellants would be available as Modvat credit to the principal manufacturer, and the whole exercise is one of revenue neutrality. In view of the various case laws stated supra by the learned Counsel, there cannot be any intention to evade payment of Central Excise duty. Hence, proviso 1 to Section 11A cannot be invoked; and the demand is time-barred. Therefore, we set aside the duty demand. Once the duty demand is set aside, no penalty can be levied. In these circumstances, we set aside the Order-in-Original and allow the appeals with consequential relief.
(Pronounced in the open Court on 14-7-2005)