Customs, Excise and Gold Tribunal - Delhi
Mazagon Dock Ltd. vs Commissioner Of C. Ex. on 8 November, 1999
Equivalent citations: 2000(115)ELT396(TRI-DEL)
ORDER
K. Sreedharan, J. (President)
1. Appellant, M/s. Mazagon Dock Ltd., is a Public Sector Undertaking. They challenge the Or-der-in-Original No. 14/91, dated 29-11-1991 whereby the adjudicating authority confirmed the demand of differential duty amounting to Rs. 1,44,53,945.00 as claimed in show cause notice dated 15-3-1990. This demand was in relation to manufacture of a jack-up rig cleared to M/s. ONGC, Bombay and delivered against gate pass No. 15, dated 13-4-1988. The adjudicating authority further imposed a penalty of Rs. 25 lakhs on the appellant under Rule 173Q of the Central Excise Rules, 1944 as well.
2. The short facts necessary for the disposal of this appeal are as follows :-
3. Oil and Natural Gas Commission placed orders with the appellant firm for the manufacture of two jack-up rigs. Terms and conditions of the transaction were contained in contract executed in February, 1983 clause 25.2 of the contract provided for the price of the rigs. Rupee content was Rs. 21.32 crores per rig and foreign exchange content came to Rs. 20.48 crores per rig. The total price per rig was fixed at Rs. 41.80 crores. It also stated that the total contract price for the two rigs is Rs. 83.60 crores. Pursuant to this contract, rigs were manufactured by the appellant. They filed price list. Price list dated 29-3-1988 showed price of one rig at Rs. 45,88,55,418.00. That price list was approved by the excise authorities as could be seen from the date affixed under their signature, namely, 15-4-1988. Monthly periodical returns of excisable goods manufactured by the appellant were regularly being filed in form RT-12. In the said form for the month of April, 1988, value of the rig was mentioned and the duty payable thereon was also included. Basic excise duty at the rate of 10% on the value of the rig came to Rs. 4,58,85,542.00. Special excise duty at the rate of 5% of basic duty came to Rs. 22,94,277.00. The entire duty on the value of the rig was paid. Form RT-12 filed by the appellant was accepted by the Inspector of Central Excise, Mangalore on 1-6-1988. Long subsequent to the said payment, it is stated that officers of the excise department came by the balance-sheet published by the appellant. That made mention of subsidy receivable by them from Government. On enquiry, it is alleged, that they came to know of the appellant getting 30% of the price of the rigs as subsidy consisting of 20% from the Central Government and 10% from ONGC. It is the case of the excise department that from the said information they came to know that the price fixed in the contract entered into between ONGC and the appellant did not bring out the actual price of the jack-up rigs manufactured. Consequently, show cause notice dated 15-3-1990 was issued calling upon the appellant to pay the differential duty.
4. Appellant raised all possible contentions before the adjudicating authority. They were that the contract between the appellant and the ONGC brought out the actual price of the rigs manufactured, that no other consideration flowed to the appellant from ONGC, that the subsidy given by the Central Government cannot be taken to increase the price of the rigs manufactured, that no facts were suppressed from the knowledge of the excise department to invoke the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act, 1944 and that the jack-up rigs were exported out of India and so are not excisable to duty. The adjudicating authority negatived all the contentions raised by the appellant and passed the impugned order.
5. Main argument advanced by learned Counsel representing the appellant is bar of limitation. He then contended that the adjudicating authority was not justified in adding the subsidy payable by Central Govt. to the value of the jack-up rigs manufactured. Lastly, he submitted that the rigs manufactured were exported out of India and so, the appellant was not liable to pay any amount by way of excise duty. We shall proceed to deal with these arguments herein below.
6. Contract for the manufacture of the rigs was entered into between the appellant, on the one hand and ONGC, on the other in February, 1983. That contract fixed the price of each rig at Rs. 41.80 crores. No portion of that contract was brought to our notice wherein it was provided that, over and above the said amount, 30% is also payable to the appellant by the Central Govt. and ONGC. Pricing Policy for ships built in Public Sector Shipyards adopted by the Government of India in the Ministry of Shipping and Transport was made available to us. As per that Policy, the Government of India was to pay to the shipyards a direct subsidy of 20% of the international parity price. Ship owners were also required to pay the shipyards 10% over and above the international parity price towards partial cost of import substitution. This payment was adopted because the normal cost of construction of ships in Indian yards was much higher than the foreign offers made by ship builders elsewhere. ONGC claimed damages from the appellant on account of the delay caused in the supply of jack-up rigs, This claim for liquidated damages was considered by a Committee constituted by the Government of India. In the report of that Committee, it was found that the price in the contract was fixed without any reference to the subsidy that the appellant will be getting from the Government of India. It further opined that the representative of Ministry of Petroleum conceded that the subsidy at the rate of 20% should be paid to the appellant herein by Ministry of Petroleum for multipurpose support vessels and jack-up rigs. The consensus arrived at during that meeting was that the contract entered into between the appellant and ONGC for the manufacture of rigs was at fixed price contacts and that the subsidy had nothing to do with the price.
7. From the discussion made above, it is evident that the appellant, on the one hand and ONGC, on the other entered into contract for the manufacture of two rigs and the said contract fixed price of those rigs. There is no material to show that the price shown in the said contract was not the real price. Nothing has come out in the enquiry conducted by the department that anything over and above the price fixed in the contract flowed from ONGC to the appellant. The price at which rigs were sold to ONGC was mentioned in the price list which was submitted by the appellant. That price list was approved by the authorities of the excise department. Forms RT-12 were filed by the appellant showing the duty payable on the price of the rigs manufactured. Excise duty on that value has been remitted. The rigs were removed in terms of gate pass issued for the said purpose. When the price list was approved and goods manufactured were removed in conformity with that price list, the department was not justified in issuing a show cause notice claiming differential duty after the lapse of nearly two years therefrom. Reference in this regard may be made to the decision of the Supreme Court in Collector of Central Excise, Baroda v. Cotspun Ltd. -1999 (113) E.L.T. 353.
8. As per Rule 5 of the Central Excise (Valuation) Rules, 1975, where the excisable goods are sold in the circumstances specified in clause (a) of Sub-section (1) of Section 4 of the Act except that the price is not the sole consideration, the value of such goods shall be based on the aggregate of such price and the amount of money value of any additional consideration flowing directly or indirectly from the buyer to the assessee. The contract concluded between the appellant and ONGC in February, 1983 gave the price of the jack-up rigs. There is nothing in that contract to show that over and above the price fixed in the contract any additional consideration flowed directly or indirectly from the ONGC to the appellant. Subsidy paid by the Central Govt. to maintain the ship building yards by the appellant cannot be considered as consideration flowing from the buyer, namely, ONGC to the appellant. Except the price paid by ONGC as per the terms of the contract, nothing was received by the appellant from ONGC. Viewed in this light, we cannot say that the adjudicating authority was justified in loading the price of the jack-up rigs manufactured by the appellant.
9. Learned Departmental Representative was relying on a decision taken by a Committee of Secretaries directing ONGC to pay 20% of the value to the appellant, which the Central Govt. was to pay. Pursuant to this direction, amounts were paid by ONGC to the appellant and that payment must be considered to be consideration flowing from the purchaser to the appellant. This argument appears to be quite attractive, but on a closure scrutiny we are not in a position to agree with the learned Departmental Representative. As observed by their Lordships of the Supreme Court in Indian Oil Corporation Ltd. v. Chief Inspector of Factories -1999 (113) E.L.T. 761 (S.C.), various corporations like Indian Oil Corporation Ltd. created by the Central Govt. really carried on business with a corporate mask. So, when the Govt. of India wanted to pay subsidy to the appellant, a Public Sector Undertaking, it directed ONGC, another Public Sector Undertaking, to pay the amount. That payment effected by ONGC on behalf of the Govt. of India at its dictates cannot be considered as augmenting price of the jack-up rig manufactured by the appellant. So, the said payment cannot be taken as a consideration for the jack-up rig. Further, after its clearance pursuant to an approved price list, after about two years therefrom any payment made by ONGC at the dictates of Central Govt. cannot be taken as consideration for the rigs manufactured. Show cause notice was not issued on the basis of this payment. The reason for the issue of show cause notice was some entry in the Balance-sheet. Department has failed to substantiate those allegations. Central Govt. directed ONGC to pay amounts to appellant in furtherance of their pricing policy, independent of the contract under which ONGC agreed to purchase the rig. This aspect is clear from the covering letter dated 24-1--1991 sent by ONGC to the appellant which is in the following terms :-
"ONGC in its 27th meeting held on January 4,1991, have resolved to pay an amount of Rs. 15,27,00,000/- to MDL subject to Govt. agreeing for reimbursement of the same during the financial year 1991-92. Accordingly, you will find enclosed a cheque 246711, dated 24-1-1991 for the amount of Rs. 15,27,00,0007- (Rupees fifteen crores twenty seven lakhs only) on the above account. This is a one time payment to be reimbursed by the Govt. of India."
The payment made mention in this letter can under no circumstances go to load the price of the jack-up rig dealt with by the adjudicating authority in the impugned order.
10. In reply to the show cause notice, it appears that the appellant raised a contention that the jack-up rig manufactured was not an excisable article because it was exported outside India. Before proceeding further, we must state here that this contention was raised nearly two years after effecting the payment of excise duty on the rig manufactured by the appellant. Within the said period of two years the appellant did not put forth any claim for refund of the duty paid. This shows that the belated claim now put forth is only as a shield. When the said claim was urged by them, they had lost their right to get the refund even. In such a situation, we do not think it necessary to probe further into that matter for no relief can be given to the appellant on that count.
11. In the circumstances detailed above, we allow the appeal and the impugned order, in so far as it goes against the interest of the appellant, is set aside with consequential reliefs.