Customs, Excise and Gold Tribunal - Tamil Nadu
Commissioner Of Central Excise, ... vs Decent Enterprises on 5 October, 2001
Equivalent citations: 2002(147)ELT520(TRI-CHENNAI)
JUDGMENT S.L. Peeran, Member (J)
1. This is a revenue appeal against order-in-original No. 66/96 dated 17.12.1996 passed by the Commissioner of Central Excise, Hyderabad upholding the assessee's plea that the demands raised in the show cause notice are hit by time bar as there was no suppression in the matter and also there was no intention in the part of the assessee to evade payment of duty. He followed the citations of the Apex Court in this regard. He has also upheld their alternative contention that they are entitled for modvat credit in respect of duty and inputs in the light of the judgment noted by him. The findings recorded by the Commissioner in para 9 to 15 are noted below:
"In most of the cases, the judgments of the Hon'ble Supreme Court of India in CCE, Hyderabad v. Camphar Drugs and Laminents 1989 : (21) ECR 182 (SC) = 1989 (40) ELT 276 (SC): has been referred to wherein the Hon'ble Supreme Court of India has made the following significant observations:
"In order to make the demand for excise duty sustainable beyond a period of six months and upto a period of five years under Section 11A of the CE and Salt Act, 1944, it has to be established that the excise duty had not been short levied or paid by reason of fraud or collusion of wilful misstatement or suppression of facts or contravention of any provisions of the Act or the Rules with intent to evade payment of duty, something more positive than mere inaction or failure of the part of the manufacturer or producer, deliberate withholding of information when the manufacturer knew otherwise was required before the assessee could be saddled with any liability beyond the period of six months"
In the case of Tamilnadu Housing Board v. CCE, Madras and Anr. : 1994 (55) ECR 7 (SC): the Hon'ble Supreme Court of India observed that when the law requires an intention to evade payment of duty then it is not mere failure to pay duty but it must be something more. They further observed that the assessee must be aware that the duty was leviable and be must deliberately avoid paying it. The relevant portion of the said judgment is reproduced below for ready reference:
"A bare reading of the proviso indicates that it is in nature of an exception to the principal clause. Therefore, its exercise is hedge on one hand with existence of such situations as have been visualised by the proviso by using such strong expression as fraud, collusion, etc. and on the other hand it must have been with intention to evade payment of duty. Both must concur to enable the exercise officer to proceed under this proviso and invoke the exceptional power. Since the proviso extends the period of limitation from six months to five years ti has to be construed strictly. The initial burden is on the department to prove that the situations visualised by the proviso existed. But once the department is able to bring on record material. But once the department is able to bring on record material to show that the appellant was guilty of any of those situations which are visualised by the section, the burden shifts and then applicability of the proviso has to be construed liberally. When the law requires an intention to evade payment of duty then it is not mere failure to pay duty. It must be something more. That is, the assessee must be aware that the duty was leviable and it must be deliberately avoided paying it. The word 'evade' in the context means defeating the provision of the law paying duty. It is made more stringent by use of the word 'intent'. In other words, the assessee must deliberately avoid payment of duty which is payable in accordance with law".
In the instant case, Decent Enterprises is a job worker who undertook the manufacture of polythene film by conversion of the LDP and HDPE granules supplied by the APDDCF, Decent Enterprises has been under the category of the SSI. They were to take out a Central Excise licence during the relevant period only when they crossed the exemption limit. It is on record that they had shown the value of clearances as Rs. 60,000/- which represented only the job charges and not the actual value of the goods manufactured and cleared. They contended that they were under the bonafide belief that they were to indicate only the value as figuring in their invoices as the invoices were being prepared only for the job charges received by them. They further contended that on coming to know that for the purpose of valuation the cost of raw materials also should be added to the job charges, they immediately took out registration and started paying duty. If they had known the real position, like other manufacturers, they would have taken Modvat Credit in respect of the duty paid on the granules and would have discharged the duty liability on the polythene film. They pointed out that the Modvat Credit admissible in respect of granules was more than sufficient to discharge that duty liability on the film. They, therefore, vehemently argued that there was no motive on their part to evade payment of duty.
On careful consideration of the case records, I am convinced that the department has not let in any evidence to substantiate the allegations of deliberate suppression of production of value with an intent to evade payment of duty so as to invoke the proviso to Sub-section (1) of Section 11a of the CE Act, 1944. As per the above cited judgments of the Hon'ble Supreme Court, it is incumben on the part of the department to bring out in clear terms 'intention' on the part of Decent Enterprises to evade payment of duty. To substantiate the allegation of suppression of facts and misdeclaration as to the value of the subject goods, the department should get at the evidence which reveals 'a positive action' on the part of Decent Enterprises and not mere failure to pay duty. No doubt Decent Enterprises were aware that they should take out a Central Excise licence after crossing the value limit of Rs. 15 lakhs in respect of clearances and pay duty on the clearances exceeding the said limit. But there is nothing on record to show that Decent Enterprises had deliberately exhibited the job charges only in the relevant column of the declaration filed before taking out the Central Excise licence. It also cannot be said that they had intention to evade payment of duty by such alleged misdeclaration of the value of clearances in the said declaration. As mentioned above, Decent Enterprises contended that the absence of any such intention was clear from the fact that the Modvat Credit, if availed by them, would have been more than sufficient to pay the duty on finished goods. In view thereof, I am of the view that Decent Enterprises being a small scale unit and a job worker were unaware of the requirement of inclusion of the value of the raw materials supplied by the APDDCF in the assessable value. For this reason, I am inclined to believe that the entire demand is barred by time limitation because the demand covers the period from September 1991 to January 1993 whereas the show cause notice was issued on 7.4.1994 which is clearly beyond six months period.
Decent Enterprises had made an alternative argument to the effect that they were entitled to the benefit of Modvat credit in respect of the duty paid on the inputs and in the even of rejection of their argument on time limitation, they might be allowed to avail the said modvat credit for the relevant period based on the ratio of the decision in the undermentioned case law:
(a) Chamundi Steels Re-rolling Mills v. CCE, Bangalore 1995 (56) ECR 271 (Tribunal)
(b) Vivek Re-rolling Mills and Ors. v. CCE Chandigarh 1994 (55) ECR 562 (T) and
(c) Hindustan Lever Ltd. v. CCE, Bombay-III 1995 (76) ELT 65 (T) Since I have already held that the demand is hit by time bar, there is no need to examine this aspect. I, therefore, refrain from commenting on it.
In view of the foregoing, there is no warrant to take penal action either against Decent Enterprises or against its Managing Partner Shri Babu Miya. I, therefore, propose to withdraw the proceedings initiated against them.
Having regard to the facts and circumstances of the case, I pass the following order. I hereby drop the proceedings initiated against Decent Enterprises and its Managing Partner Shri Babu Miya."
2. On the basis of the above finding he has dropped the proceedings and hence this appeal has been filed by the Revenue. It is contended in the ground that they ought to have declared all the figures in the declarations filed for the years 1991-92, 1992-93 pertaining to the turn over and the value of the inputs used in the manufacture of final product namely polythene sheet and polythene film. It is stated that a statutory duty is cast upon them to furnish the figures of the value of the goods that they have declared for the preceding financial years. It is their contention that the Department had also not advised them to include the value material in the furnished goods is not acceptable and this ground should not have been accepted by the Ld. Commissioner and should have not allowed their appeal on time bar. It is stated that the judgment cited by him does not apply, as they could have established the positive action on their part and also about their intention not to evade payment of duty. It is stated that the act of filing declaration with irreconciliable figures is definitely "malafide and mens rea in this case is beyond doubt. Hence Revenue seeks for confirmation of demand by setting aside the impugned order.
3. The assessee has filed a cross-application stating that the Department itself was unaware about the fact of the job workers disclosing the value of raw materials used in the manufacture of final product till the issue was contested in Ujjagar Prince Ltd. They contend that were doing job work for A.P. Dairy Development Co-operative Federation Ltd. (APDDCF Ltd.) and in terms of the contract they were to pay the duty. They were also to get the modvat credit which was substantial to the duty required to be paid. Therefore, they cannot bear any malafide intention to evade duty. They held bonafide belief that they are required to file only declaration and there was no statutory duty cost on them to declare the value of the inputs or raw materials used in the manufacture of final product. So the Department also did not call upon them to give the figures. Every year they were filing the declaration and there was no intention to evade payment of duty as they would not be required to pay form their side. Therefore, they submit that the Commissioner has rightly held that there was no intention to evade duty and time bar. They contend that the Commissioner was right in granting benefit of modvat credit in terms of the judgment noted by him. They relied on the following judgments also:
CITATIONS IN SUPPORT FOR GRANTING MODVAT CREDIT
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1. 94 (73) ELT 660 MODVAT CREDIT NOT VIVEK RE-ROLLING MILLS DENIABLE FOR NON-
v. FILING OF
COMMISSIONER OF CENTRAL EXCISE DECLARATION AND
CHANDIGARH NON MAINTENANCE OF
(PARA 16) RG 23A WHERE
DEMAND FASTENED
FOR PAST PERIOD.
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2. 96 (81) ELT 563 (T) CHAMUNDI STEEL RE-ROLLING MODVAT CREDIT NOT MILLS DENIABLE FOR NON-
v. FILING OF
COMMISSIONER OF CE., BANGALORE DECLARATION
(PARA 4)
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3. 95 (80) ELT 368-LARGER BENCH WHEN DEMANDING APEX STEELS (P) LTD MODVAT ON ELIGIBLE v. IMPUTS TO BE GIVEN COMMISSIONER OF CE., EVEN THOUGH [PARA 36 IV)] PROCEDURES WERE NOT FOLLOWED.
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4. 96 (84) ELT 331 MODVAT CREDIT SAPHIRE STEELS AVAILABLE EVEN IF v. DECLARATION OT COMMISSIONER OF CE., FILED (PARA 10)
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5. 98 (102) ELT 663 MODVAT AVAILABLE AGARWAL METAL INDUSTRIES IF DUTY DEMANDED v. SUBSEQUENTLY.
COMMISSIONER OF CE., BANGALORE
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6. 1995 (77) ELT 511 (S.C.) PROFORMA CREDIT FORMICA INDIA DIVISION CANNOT BE DENIED ON v. TECHNICAL GROUNDS COLLECTOR OF CENTRAL EXCISE. OF NON-COMPLIANCE.
(PARA 2)
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4. We have heard Shri A. Jayachandran, DR for Revenue and Smt. K.A. Natrajan, Advocate for the assessee and perused the ground made in the appeal and in the cross-objections. We have also perused all the judgments noted by the Commissioner and also relied by the assessee which is noted above.
5. On a careful perusal of the submission and the judgments, we are satisfied with the order passed by the Commissioner is correct in law in terms of ratio laid down by the Apex Court with regard to invoking of larger period. In order to upheld the charge of suppression of facts, it is to be shown by the revenue that the appellants had an intention to evade duty and that they did not hold any bonafide belief. The Commissioner has noted the Apex Court judgments which clearly states that in order to extend larger period, it is not enough that there was failure on the assessee's part in performing the act but there has to be intention to evade duty and there has to be something more positive than mere inaction or failure on the part of the manufacturer or producer by deliberate withholding of information when the manufacturer knew otherwise when it was required to have been disclosed to the revenue. This has been so held in the case of CC, Hyderabad v. Chemphar Drugs and Liniments as reported in 1989 (40) ELT. The Apex Court further reiterated the view in the case of Tamilnadu Housing Board v. CCE, Madras as reported in 1994 (55) ECR (SC). These views have been again confirmed in the case of CCE v. HMM Ltd. as reported in 1995 (76) ELT 497. The appellant had filed regularly the declaration which they have explained that they were not used to or anything as the duty element could have been reimbursed by the APDDCF Ltd. on behalf of manufacturing the final product on job work basis. The inference to draw bonafide belief is on these basis and also on the basis that they would have got modvat credit which would have been more than the duty liability to be paid by them. The Commissioner has clearly stated the facts and have also noted that in the event of grant of modvat credit it would have wiped out the duty liability. Therefore, the finding recorded by the Ld. Commissioner was after detailed scrutiny of the fact clearly disclosed by the assessee and the same were within the parameters of the ratio of the Apex Court judgments. The ground made out in this case by the Revenue is that they had disclosed the value of the inputs or raw materials used in the final product, then the value of clearance would have crossed Rs. 30 lakhs. However, this failure of the appellant/assessee's part was not a result of any intention to evade duty as noted by the Commissioner as they would have got the relief from their principal namely APDDCF Ltd. and also would have got the modvat credit. Therefore, once it is established that they had bonafide belief and had no intention to evade duty, then it would have to be held that assessee's had not suppressed of facts with an intent to evade duty or wilfully mis-stated or committed fraud or collusion for extending the larger period. In this case the only ground raised is about the suppression of fact in as much as they had not disclosed in the entire details of clearances in the declaration filed. However, the Apex Court has clearly noted in the case of CCE v. Chemphar Drugs and Liniments that there has to be something more positive than mere inaction or failure on the part of the manufacture or producer by deliberate withholding of the information when the manufacturer knew otherwise. In this case, the bonafides has been established and information has not been withheld deliberately. Therefore, the Commissioner's finding of facts is required to be accepted as there is no infirmity in the impugned order. With regard to finding on the ground of grant of benefit of modvat credit, it is seen that revenue has not taken any ground on the availability of modvat credit in the appeal memo. Therefore even otherwise the appellants would have got the benefit of modvat credit which would have wiped out the duty liability. Therefore, there is no merit in this appeal and hence the same is rejected.
(Order pronounced in the open court on 5.10.01)