Customs, Excise and Gold Tribunal - Delhi
V.K. Oils (P) Ltd. vs Collector Of Central Excise on 8 December, 1998
Equivalent citations: 1999(112)ELT137(TRI-DEL)
ORDER G.R. Sharma, Member (T)
1. Captioned two appeals have been filed against the findings of the Collector holding that "the value of Spent Nickel Catalyst was required to be added for working out the value of Nickel Sulphate/Nickel Carbonate to be supplied to the units of Noticee No. 2. The Collector, therefore, confirmed the duty demand of Rs. 6,20,931.00 against M/s. V.K. Oils (P) Limited and imposed a penalty of Rs. 1.5 lac on M/s. V.X. Oils (P) Limited and also a penalty of Rs. 75,000/- imposed on M/s. Hindustan Lever Limited. Being aggrieved by this order, these two appeals have been filed by the appellants.
2. The facts of the case briefly stated are that on 8-9-1993, Central Excise Officers visited to the factory premises of M/s. Hindustran Lever Limited who are engaged in the manufacture of excisable goods and availing the credit of duty paid on the inputs. A scrutiny of the records showed that they were transferring Nickel Catalyst after availing Modvat credit, to M/s. V.K. Oils (P) Ltd. under Rule 57F(2) for processing Hardened Technical Oil. In the course of utilisation of Nickel Catalyst while processing Hardened Technical Oil, an excisable product namely Spent Nickel Catalyst comes into existence as byproduct. This item is classifiable under sub-heading 2620.00. Spent Nickel Catalyst manufactured in the premises of M/s. V.K. Oils (P) Ltd. was required to be returned to M/s. Hindustan Lever Ltd. in terms of Rule 57F(2). However Spent Nickel Catalyst was not being returned by M/s. V.K. Oils (P) Ltd. Further investigations revealed that Spent Nickel Catalyst was being retained by M/s. V.K. Oils (P) Limited. They had been manufacturing Nickel Carbonate/Sulphate. Nickel Corbonate/Sulphate manufactured by M/s. V.K. Oils was sold to M/s. Hindustan Lever Limited. M/s. V.K. Oils had a contract bearing No. 9/90 dated 15-3-1990 entered into with M/s. Hindustan Lever Limited according to which M/s. Hindustan Lever Limited was supplying Rice Bran Oil and Nickel Catalyst free of cost to M/s. V.K. Oil (P) Ltd. for hydrogenation of Rice Bran Oil and were paying processing charges at the fixed rates to M/s. V.K. Oils (P) Ltd. M/s. V.K. Oils (P) Ltd. were filing price lists. Scrutiny of the price lists revealed that M/s. V.K. Oils (P) Ltd. had neither included the value of raw material received by them free of cost nor had they declared in the price lists or the questionnaire attached to the price lists, the fact about the receipt of free of cost raw material and claimed approval of the value on the basis of price quoted. M/s. Hindustan Lever Limited sought permission to remove without payment of duty Nickel Catalyst on which Modvat credit had been taken by them. The permission was granted by the Asstt. Collector. M/s. Hindustan Lever Limited had undertaken the responsibility of discharging duty liability on the finished goods. However in their application they did not declare spent Nickel Catalyst produced from the inputs sent by them to M/s. V.K. Oils without including the value of the raw material in the assessable value of the finished products. It was alleged that they have suppressed the material facts. It was ascertained that M/s. V.K. Oils (P) Ltd. had consumed 444.255 MTs of Spent Nickel Catalyst for the manufacture of 12.250 MTs of Nickel Sulphate and 178.355 MTs of Nickel Carbonate. It was alleged that by not including the value of Spent Nickel Catalyst (Rs. 8,610.00 per MT as per the statement dated 20-10-1993 of Sh. Naresh Kumar) in the value of Nickel Carbonate and Nickel Sulphate, they had evaded the payment of duty amounting to Rs. 6,20,931.00 by undervaluing the goods of Rs. 38,25,036.00 during the period 19-11-1988 to 22-6-1993. It was also alleged that M/s. Hindustan Lever Limited failed to get Spent Nickel Catalyst back or to clear on payment of duty to M/s. V.K. Oils (P) Ltd.
3. M/s. V.K. Oils in reply to the show cause notice submitted that there was no mis-statement or suppression of facts; that classification list containing description of goods produced and manufactured was approved; that the price lists for Nickel Sulphate and Nickel Carbonate were filed with complete details; that the raw material account in respect of Spent Nickel Catalyst had been maintained in proper form; that the purchase orders included the value of Spent Nickel Catalyst; that Spent Nickel Catalyst had been obtained by them free of cost; that there was no undervaluation in respect of the clearances of Nickel Sulphate/Corbonate; that RT12 returns had been finalised.
4. M/s. Hindustan Lever Limited in reply to the SCN submitted that they were engaged in the manufacture of soaps; for the manufacture of soaps, they were using Rice Bran Oil; that before making Rice Bran Oil suitable for soaps, it was required to be hardened; that appropriate duty of Excise was nil and, therefore nil, duty was paid; that under Note. No. 19/88, dated 1-3-1988 spent Nickel Catalyst was exempt. After careful consideration of the submissions made, the Collector held as indicated above.
5. Shri G.S. Bhangoo and Shri P.K. Mittal, ld. Advocates for the two appellants reiterated submissions made before the lower authorities. In support of their contention, they cited and relied upon the decision of the Apex Court in the case of Texmaco Limited v. CCE 1995 (77) E.L.T. 501 (S.C.). They also cited and relied upon the decision of the Apex Court in the case of Hindustan Steel Limited v. State of Orissa 1978 (2) E.L.T. (J 159) wherein the Apex Court held that no penalty should be imposed for technical or venial breach of legal provisions or where the breach flows from the bona fide belief that the offender is not liable to act in the manner prescribed by the statute. They, therefore, submitted that the appeals may be allowed.
6. Shri S.P. Rao, ld. JDR submitted that under Rule 57F(2) the inputs on which Modvat credit had been availed could be removed to another person for carrying out further process subject to the condition that wastage arising, if any, in the course of such processing was returned to the beneficiary of Modvat credit or the same could be cleared on payment of duty or the person carrying out such process. He submitted that the admitted position was that Spent Nickel Catalyst was not returned to M/s. Hindustan Lever Limited. Ld. JDR submitted that there was valuation of the provisions of Rule 57F(2); that the contention of the appellants was that the Spent Nickel Catalyst attracts nil rate of duty as it was not a manufactured product, was not tenable inasmuch as the Spent Nickel Catalyst is identifiable product under sub-heading 2620.00. Ld. JDR submitted that the Collector has already cited the decision of the Apex Court reported in 1985 (20) E.L.T. 179 (S.C.). In support of his contention, he further cited and relied upon the decision of this Tribunal reported in 1988 (38) E.L.T. 176. Ld. JDR submitted that the Spent Nickel Catalyst is supplied free of cost by M/s. Hindustan Lever Limited. Spent Nickel Catalyst is obtained in the process of hardening of Rice Bran oil; that this spent Nickel Catalyst is used in the manufacture of Nickel Sulphate and Nickel Carbonate; that the Spent Nickel Catalyst is the raw material for the manufacture of Nickel Carbonate and Nickel Sulphate, therefore, inclusion of the value of Spent Nickel Catalyst in the value of Nickel Sulphate and Nickel Carbonate was necessary. Ld. JDR submitted that it was contended that M/s. Hindustan Lever Limited had permitted M/s. V.K. Oils (P) Ltd. to retain Spent Nickel Catalyst. He submitted that this argument is not convincing inasmuch as the Spent Nickel Catalyst is saleable commodity, has a value inasmuch as it is used as raw material for the manufacture of Nickel Carbonate and Nickel Sulphate. He submitted that the value of Spent Nickel Catalyst was required to be added for arriving at the value of Nickel Sulphate and Nickel Carbonate; that there was no evidence that the same has been so added. He submitted that the charge of undervaluation is fully proved.
7. On limitation, ld. JDR submitted that though M/s. V.K. Oils (P) Limited had been filing price lists on the basis of contract, there was no declaration that any extra consideration was flowing to them from M/s. Hindustan Lever Limited directly or indirectly. He submitted that M/s. V.K. Oils (P) Limited had not declared anywhere in the price lists that they were getting Spent Nickel Catalyst free of cost, there has been suppression and proviso to Section 11A has rightly been invoked. He, therefore, prayed that the appeals may be rejected.
8. We have heard the submissions of both sides and have persued the evidence on record. On careful consideration of the submissions made, we find that there are two main issues in this case. The first issue is that the value of Spent Nickel Catalyst was not included in the value of Nickel Sulphate and Nickel Carbonate. There was undervaluation. Detailed arguments were adduced by the appellants on this issue stating there was no undervaluation inasmuch as same price was being charged by others also saying that Spent Nickel Catalyst is not manufactured goods and that at the time of fixing job charges the value of spent Nickel Catalyst was already taken into consideration. Looking to the submissions made, we agree that there was undervaluation. Hence, we do not see any reason to interfere with the confirmation of demand of Rs. 6,20,931.00. The second issue was that of Limitation. We have carefully considered the rival submissions on the issue. We note that spent Nickel catalyst has a ready market, it is a saleable commodity and is neither a trash, dross or skum but is a material used for manufacture of Nickel carbonate/sulphate.The value of this item was not declared. There is a specific provision under Rule 57F (2) that the waste, if any, arising in the course of any operation mentioned in Sub-rule (4) shall be returned to the factory of the manufacture of final product. In the instant case spent Nickel catalyst was not returned. There is no mention that the value of spent Nickel catalyst was taken into consideration at the time of fixing the job charges. Even if the value was taken into consideration for fixing job charges, then the duty thereon was not paid. Thus there was a suppression and mis-statement and hence the proviso to Section 11A of Central Excise Act, 1944 has rightly been invoked. We sustain this invocation of extending the period of demand beyond 6 months.
9. Insofar as the imposition of penalty is concerned, we find that the penalty has been imposed on M/s. V.K. Oils (P) Limited and M/s. Hindustan Lever Limited. Looking to the fact that the value of goods is considerable, Spent Nickel Catalyst was not returned to M/s. Hindustan Lever Limited who had taken Modvat credit on Nickel Catalyst as also there was intention not to declare Spent Nickel Catalyst by M/s. V.K. Oils (P) Limited, we hold that the penalty is sustainable in law. Quantum of penalty does not appear to be unreasonable. In the circumstances, the impugned order is upheld and the two appeals are rejected.