Customs, Excise and Gold Tribunal - Tamil Nadu
Fal Industries Ltd. vs Cce on 10 August, 2006
Equivalent citations: 2006(113)ECC526, 2006ECR526(TRI.-CHENNAI)
ORDER P.G. Chacko, Member (J)
1. The appellants are engaged in the manufacture of manual typewriters and parts / spares/accessories thereof, plastic components and parts for vacuum cleaners, etc. They have manufacturing units at Chennai and Hosur. During the period January 1997 to March 1998, the Chennai Unit stock-transferred components (rear cover / cord winder assembly) for vacuum cleaners to the Hosur Unit on payment of duty based on assessable value determined by cost construction method and these goods were used captively in the manufacture of vacuum cleaners by the latter Unit. The Department, by investigations, found that the Hosur Unit had sold the said goods in the spares market at a higher rate in wholesale. On the basis of this finding, the Department took the view that, in terms of Section 4(1)(a) of the Central Excise Act, the price at which the Hosur Unit sold the goods in wholesale in the spares market should be adopted for the assessable value of the goods stock-transferred to them from the Chennai Unit. Accordingly, a show-cause notice was issued on 17.11.1998 demanding differential duty of Rs. 10,75,017/- from the appellants [Chennai Unit] under the proviso to Sub-section (1) of Section 11A of the Act. The extended period of limitation prescribed under the proviso was invoked by alleging that the noticee had deliberately suppressed the value available under Section 4(1)(a) ibid, the price at which the goods were sold in wholesale by the Hosur Unit. The show-cause notice also proposed penalties on the party under Section 11AC of the Act and Rule 173Q of the Central Excise Rules, 1944. Before the original authority, the assessee defended their assessable value determination by cost construction method under Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975 read with Section 4(1)(b) of the Act, by submitting that any wholesale price was not ascertainable for the goods. The authority rejected this contention after a perusal of the relevant invoices produced by the assessee. It also found that the assessee had not declared to the Department the value available under Section 4(1)(a), which was held to be suppression of vital information with intent to evade payment of duty. Therefore, the adjudicating authority determined the assessable value of the goods on the basis of the price at which the Hosur Unit sold the goods in wholesale in the spares market, and confirmed the differential duty against the assessee by invoking the extended period of limitation under Section 11A of the Act. It also imposed penalties on the assessee under Section 11AC and Rule 173Q. Appeal No. 1067/99 is against this decision of the Commissioner,
2. Heard both sides and considered their submissions. It was submitted by learned consultant that a major part of the stock of goods transferred from the appellant-Unit to the Hosur Unit was consumed captively in the manufacture of vacuum cleaners by the latter Unit and removed on payment of appropriate duty and that the rest of the goods received from the appellant-Unit was used by the Hosur Unit for repairing old vacuum cleaners returned for the purpose by their customers under the provisions of Rule 173H of the Central Excise Rules, 1944. The consultant also submitted that the return of vacuum cleaners by the customers to the Hosur Unit for repairs was duly intimated to the Department in Form D-
3. It was also claimed that the D-3 intimation was evidenced by endorsements made on the relevant invoices issued by the Hosur Unit, Learned consultant submitted that the value addition made by the Hosur Unit to the components used for repairs of vacuum cleaners returned by their customers was adopted by the Department for enhancing the assessable value of the components stock-transferred by the appellant Unit. Such value addition, according to learned consultant, was not contemplated under Section 4(1)(a) of the Central Excise Act. Learned SDR pointed out that this argument of the consultant was without any factual support. We must accept this submission of learned SDR inasmuch as we have not found any evidence of the facts pleaded by the consultant. Four invoices of the Hosur Unit were cited by the Commissioner in his order. A copy of one of these invoices [No 9635175 dated 31.1.1997] is available on record and we have perused the same. There is nothing in this invoice to indicate that it was issued in connection with removal of repaired vacuum cleaners after following the procedure [including D-3 intimation] under Rule 173H. In answer to a query from the Bench, the consultant conceded that the other relevant invoices also did not indicate that the transactions thereunder were in terms of Rule 173H. We find that even the appellants did not choose to plead anything, in this appeal, with reference to Rule 173H. The consultant, along with his written submissions produced copies of a few correspondences between his clients and the Department, but these also did not indicate that the Hosur Unit was following Rule 173H procedure. In the circumstances, we must repudiate the above arguments of the consultant based on facts not even pleaded by his clients. Contextually, we must also observe that, where a consultant or advocate ventures to alter the facts of the case pleaded by his clients, in a desperate bid to win the case, he is acting in excess of his brief. Learned consultant relied on the Tribunal's decision in Commissioner v. Ashok Leyland in support of the cost construction method adopted for valuation of the goods transferred by the appellant-Unit to the Hosur Unit. In the cited case, it was held that assessable value of goods stock-transferred by one of the manufacturing unit of the company to another unit of the same company was liable to be determined by the cost construction method under Rule 6(b)(ii) read with Section 4(1)(b) of the Central Excise Act. But we find that the correctness of the view taken by the Tribunal in the said case was doubted by the Supreme Court in Ashok Leyland v. Commissioner . Further, we note that, in the case considered by the apex Court there was an ascertainable price at which the goods were sold in the market and therefore it was held that there was no question of application of Section 4(1)(b) and Rule 6 of the valuation of the goods. In the present case, it is evident from the records that some of the goods stock-transferred from the appellant-Unit to the Hosur Unit were sold by the latter in the spares market at a higher price and therefore that price would be the normal price under Section 4(1)(a) of the Central Excise Act for the purpose of determination of the assessable vale of the stock-transferred goods. Learned Commissioner has done the valuation correctly. The challenge against the demand of duty fails on merits.
3. Learned consultant submitted that the plea of limitation raised by the appellants against the demand of duty was not appropriately considered by the Commissioner. It was submitted that, as whatever differential duty paid by the appellant-Unit would be available as Modvat credit to the sister unit, it was not correct to allege that the appellant-Unit had intention to evade payment of duty. In the revenue-neutral situation, the extended period of limitation was not invocable. In this connection, learned consultant relied on the following decisions of the Tribunal:
• Kitply Industries Ltd. v. CCE • PTC Industries Ltd. v. CCE • Deckon Enterprises Pvt. Ltd. v. CCE • Indian Aluminium Company Ltd. v. CCE 2006 (198) ELT 67 He also claimed support from the Supreme Court's judgments in the cases of Commissioner v. Mahindra & Mahindra Ltd. and Commissioner v. Narayan Polyplast 2005 (179) ELT 20 (SC). We find that learned Commissioner invoked the extended period of limitation for demanding duty from the appellants by holding that they had suppressed vital information with the intention to evade payment of duty. Apparently, the aspect of revenue neutrality was not considered while recording, against the party, intention to evade payment of duty. We are of the view that learned Commissioner has to consider this aspect also. As the quantification of duty would depend on fresh decision on the limitation issue, the question whether any penalty is imposable on the party under Section 11AC and, if so, to what extent will also have to be determined afresh by the Commissioner. We find that the impugned order does not mention any reason for imposing a separate penalty of Rs. 1.00 lakh on the party under Rule 173Q. On our own, we have not found any good reason for such a penalty either. In the result, we sustain the demand of duty on merits and direct the Commissioner to decide afresh as to whether the extended period of limitation is invocable for recovering the duty, after giving the assessee a reasonable opportunity of being heard on the limitation issue. It will also be upto the Commissioner to take a fresh decision on the question whether any penalty under Section 11AC is liable to be imposed on the assessee, depending on his decision on invocability of the proviso to Section 11A(1) of the Act. However, it will not be open to learned Commissioner to impose any penalty on the assessee under Rule 173Q. Appeal No. E/ 1067/99 is disposed of in these terms.
4. The remaining appeal is against a demand of duty of Rs. 8,78,212/- for the period April 1998 to March 1999. It appears from the records that the original authority had demanded differential duty of over Rs. 48.00 lakhs from the assessee by finalizing provisional assessments for the period from the March 1994 to February 2000 and that the first appellate authority set aside a major part of this demand and sustained demand of duty to the extent of Rs. 8,78,212/- only. It further appears that, out of this amount of duty demanded by the appellate authority, duty of Rs. 6,49,079/- was demanded in the same manner as duly was demanded by the Commissioner (Adjudication) for the prior period (January 1997 to March 1998). Therefore, we have to sustain this demand of duty for the reasons noted by us in respect of Appeal No. 1067/99. As it is not in dispute that the assessments were provisional till finalization by the original authority, there is no question of the demand of duty being barred by limitation. A demand of duty to the tune of Rs. 2,29,133/-sustained by the lower appellate authority for the period of dispute is by way of refusal of permission to the assessee to avail Modvat credit of Special Excise Duty (SED) for payment of Basic Excise Duty (BED). In the present appeal, the only challenge pressed by learned consultant is against this refusal of permission to the assessee for utilization of SED credit for payment of BED. Learned consultant relied on Sub-rule (8) of Rule 57F (as amended by Notification No. 8/93-CE (NT) dated 2.11.93) of the Central Excise Rules, 1944, which reads as under:
(8) The credit of Special duty of excise paid on inputs on or prior to 28th day of February, 1993 may be utilized towards payment of duty on final products cleared subsequent to 28th day of February, 1993 but prior to 31st day of March, 1994 for the manufacture of which such inputs were permitted to be brought into the factory.
Learned SDR submitted that the above provision did not permit the assessee to utilize the credit of SED paid on inputs for payment of BED on final product removed after 31.3.1994. This objection was sought to be got over by learned consultant by relying on Board's Circular No. 4/93 CX.8 dated 23.4.1993, which reads as under:
Government of India Central Board of Excise & Customs New Delhi Subject: Central Excise - Transfer of credit balance lying in RG 23A under one minor head to another minor head: Regarding.
I am directed to say that the Board has examined the question of utilization of credit balance of Special Excise Duty (SED) lying unutilized in RG 23A Part II, consequent to the abolition of SED vide Notification No. 75/93, dated 28.2.1993.
2. It is observed that Rule 57A and Notification 17/86-CE issued thereunder provide for utilization of credit of any of the duties of excise paid on inputs for the payment of any duty of excise leviable on final product. This clarification had earlier been conveyed vide Board's Circular No. 20/89, dated 26.6.1989, wherein it had been clarified that the credit of specified duty can be utilized for payment of any one of the specified duties. It is only for convenience that the duties are credited in the register under separate heads. The facility to transfer the balance from the Special Excise Duty Head to the Basic Excise Duty Head in the account maintained under Rule 57A may be allowed on an application submitted by a manufacturer. While granting this permission, Chief Accounts Officer may be kept suitably informed.
3. The field formations may be informed accordingly.
4. A suitable trade notice may be issued for information of the Trade.
5. The receipt of this circular may please be acknowledged.
It appear from the records that the above claim of the assessee was not considered by the lower authorities. Therefore, after holding that duty of Rs. 6,49,079/- is recoverable from the assessee without time bar, we set aside the demand of duty of Rs. 2,29,133/- and direct the original authority to take a fresh decision on the availability of SED credit on inputs for payment of BED on final product in the light of the Board's Circular No. 4/93 dated 23.4.1993 ibid, after giving the assessee a reasonable opportunity of being heard. Appeal No. E/545/2003 is disposed of on these terms.
(Operative portion of the order was pronounced in open court on 10.8.2006)