Custom, Excise & Service Tax Tribunal
The Commissioner Of Central Excise vs Supreme Petrochem Ltd on 17 November, 2009
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No.II APPEAL No.E/2324/03 & E/925/08 (Arising out of Order-in-Appeal No.RJB/M-III/202-203/2003 dated 09/05/2003 passed by Commissioner of Central Excise (Appeals), Mumbai-III) For approval and signature: Honble Mr. P. G. Chacko, Member (Judicial) Honble Mr. B. S. V. Murthy, Member (Technical) ====================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
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of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
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The Commissioner of Central Excise,
Mumbai-III Appellants
Vs.
Supreme Petrochem Ltd., Respondents
Appearance:
Shri.K. Lal, SDR for the Appellants
Shri.M.H.Patil, Advocate for the Respondents
CORAM:
Honble Mr.P.G.Chacko, Member (Judicial)
Honble Mr.B.S.V. Murthy, Member (Technical)
Date of hearing : 17/11/2009
Date of decision : 17/11/2009
O R D E R No:..
Per: Mr. P.G. Chacko
1. In these appeals filed by the department, a valuation dispute is mainly involved. The period of dispute covered by two show-cause notices is April 1996 to November 2001. The first show-cause notice was issued on 03/05/2001 for the period April 1996 to January 2001 demanding differential duty from the assessee by invoking the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act. The second show-cause notice was issued on 21/01/2002 for the period February to November 2001 demanding differential duty from the assessee. The demand of duty raised in both the show-cause notices was based on the departments view that the cost of loading of finished goods within the factory for its transportation to the buyers premises was includable in the assessable value of the goods. The extended period of limitation was invoked by the department alleging that the assessee had willfully suppressed the non-inclusion of the above expenses in the assessable value of the goods, with intent to evade payment of duty. On the same ground, the first show-cause notice proposed to impose penalty on the assessee under Section 11AC of the Act, and/or Rule 173Q of Central Excise Rules, 1944. The second show-cause notice also invoked both the penal provisions, though it did not invoke the extended period of limitation. This notice demanded duty for the normal period. The proposals were contested. In adjudication of the dispute, the original authority confirmed against the assessee the demands of duty and penalties were imposed on them. Aggrieved by the same, the assessee preferred appeals to the Commissioner (Appeals) and the latter allowed the same. Hence, the present appeals of the Revenue.
2. When the case was heard by the regular Bench, in the first instance, the valuation issue was debated with reference to the Honble Supreme Courts judgment in Indian Oxygen Ltd., Vs CCE, (1988 (36) ELT 723 (SC). The rival arguments put forth before that Bench prompted the Bench to consider the above issue prior to, and on 01/07/2000 distinctly. Ultimately, the matter ended up in a conflict of views between the co-ordinate Benches of the Tribunal and consequently the issue came to be referred to the Larger Bench. The Larger Bench vide order No.M/616-617/09/EB/C-I dated 12/06/2009 held that, pre-01/07/2000, the expenses of loading of goods within the factory for clearance to a buyer were liable to be included in the assessable value of the goods as held by the Honble Supreme Court in the Indian Oxygen Ltd., (1988 (36) ELT 723 (SC) and, for the period from 01/07/2000 also, it was liable to be included in the assessable value of the goods unless it was proved by the assessee that the burden of such expenses was not borne by them. The records have been placed before this Bench for final disposal of the appeals in the light of the Larger Benchs decision. Hence, the present proceedings.
3. Insofar as the period prior to 01/07/2000 is concerned, the valuation dispute stands settled by the Larger Bench. Accordingly, for that period, the respondent is liable to include in the assessable value of the goods, the expenses of loading of the goods within the factory for clearance to their buyers, in terms of the Honble Supreme Courts ruling in Indian Oxygen case. As regards the subsequent period, such expenses are liable to be included in the assessable value of the goods unless it is proved by the assessee that the burden of such expenses was not borne by them. After examining the records and hearing both sides, we find that the includability or otherwise of the expenses of loading of the goods within the factory in the assessable value of the goods for the period from 01/07/2000 would depend on who incurred such expenses. The burden of proof is on the assessee as per the ruling of the Larger Bench. The learned Counsel has, in this connection, invited our attention to the relevant pleadings in the show-cause notice. The first show-cause notice, in para 2 thereof, stated thus: on enquiry it was given to understand that these loading charges/labour charges are paid to the Hamals by the transporter engaged by the buyers/distributors of the Noticee and these charges get included in transportation charges which are paid by the buyers or distributors directly to transporter and , therefore, does not include in the invoice price charged by the Noticee. The learned Counsel has also referred to the relevant findings recorded in the orders of adjudication. For instance, one of the orders-in-original observed thus: these loading charges paid by way of Hamali charges are negotiated by the transporter with the Hamal society and paid directly to Hamals. Such charges are thereafter recovered by the transporter from the customers. The learned Counsel has also invited our attention to the relevant finding contained in the impugned order, which reads thus: Since the appellants have not collected anything from the buyers, the allegation in the show-cause notice that the loading charges incurred on the Hamals by the transporter on behalf of the buyers/distributors cannot be added in the assessable value though the goods have been loaded in the factory premises. The learned Counsel has also taken advantage of one of the grounds raised by the Revenue, which reads thus: the issue involved in the present case is whether the cost of loading incurred within the factory by the buyer of the goods is required to be added to the value. As rightly pointed out by the counsel, it is not in dispute at this stage that the cost of loading of the goods was incurred by the buyer of the goods. If that be so, in terms of the Larger Benchs decision, the loading charges for the period from 01/07/2000 cannot be included in the assessable value of the goods. It would follow that the demand of differential duty for the period from 01/07/2000 cannot be sustained. To this extent, the view taken by the lower appellate authority is correct. For the period prior to 01/07/2000, for the reasons already recorded by us, the demand of differential duty has to be honoured by the assessee, subject, of course, to our decision on the next issue.
4. The next issue pertains to limitation. The first show-cause notice invoked the extended period of limitation on the ground of suppression of material fact. The show-cause notice alleged that the assessee never disclosed to the department, the fact that they were not taking into account the loading charges while determining the assessable value of the goods. According to the department, they suppressed the said fact with intent to evade payment of duty. In this connection, the learned SDR has invoked the relevant findings of the original authority. He has also claimed support from the Supreme Courts judgement in Jaishree Engineering Co. (P) Ltd., Vs. Collector of Central Excise 1989 (40) ELT 214 (SC) wherein, on the facts of the case, it was held that suppression was established and, hence, the extended period of limitation under the proviso to Section 11A(1) of the Act, was invocable. The learned SDR further submits that the ruling of the apex Court in Indian Oxygen case was very much available during the material period and that, as per that ruling, loading charges irrespective of who paid or incurred the same were includable in the assessable value of the goods. It is argued that the assessee could not have pleaded ignorance of the binding case law. In such circumstance, they should be held to have suppressed the material fact before the department with a view to evading payment of differential duty. On the other hand, the learned Counsel for the respondent submits that this Tribunal had been consistently holding the view that the cost of loading of goods for its transportation out of the factory, which was incurred by the buyer, was not to be included in the assessable value of the goods. In this connection, the learned Counsel has referred to the Tribunals decision in the case of Albright & Wilson Chemicals India Ltd., Vs. CCE 2007 (214) ELT 313 (Tri-Mum, Popular Gases Vs. CCE, Calicut - 2006 (205) ELT 472 and Southern Power Equipment Co. Pvt. Ltd., Vs. CCE, Bangalore-III .- 2007 (214) ELT 53. It is submitted that the legal position expounded by the Tribunal from time-to-time was in favour of the assessee in the present case and, therefore, it was justifiable for them to maintain a bonafide belief that the aforesaid expenses were not to be included in the assessable value of the goods. It is also pointed out that the very issue came to be raised before a Larger Bench of this Tribunal. The Larger Benchs decision only could erase the doubt from the mind of the respondent. In this scenario, according to the learned Counsel, any duty for the extended period of limitation could not be demanded from the respondent on the ground of suppression of facts. The assessee never had any intention to evade payment of duty.
5. In support of the above submissions, the learned Counsel has also relied on the Supreme Courts judgements in Continental Foundation Jt. Venture Vs. CCE, Chandigarh-I 2007 (216) ELT 177 (SC) and Jaiprakash Industries Ltd., Vs. CCE, Chandigarh 2002 (146) ELT 481 (SC). It is argued that these decisions of the apex Court, are squarely applicable to the facts and circumstances of the present case.
6. After giving careful consideration to the submissions, we have found a valid point in the submissions made by the learned Counsel. Though, in the case of Indian Oxygen Ltd., the Supreme Court had, as early as in 1988, held that the cost of loading of goods within the factory was to be included in the assessable value of the goods, different Benches of this Tribunal were consistently holding that the said decision of the apex Court was not applicable where the cost of loading was incurred by the buyer. In the instant case also, undisputedly, the cost of loading of goods was incurred by the buyer. In the circumstances, when it is claimed that the assessee was under the impression that the loading expenses were not includable in the assessable value of the goods, we find hardly any reason to doubt the bonafides of the plea. That the issue ultimately came up before a Larger Bench of this Tribunal, of late, is a well known fact. The learned Counsel has claimed that the assessees belief stands corrected only with the decision of the Larger Bench. In the case of Continental Foundation Jt. Venture (supra), it was held that the extended period of limitation was not invocable against an assessee, who had genuine doubts in his mind regarding duty liability. In the case of Jaiprakash Industries (supra), it was held that, where there was bonafide doubt as to non-exciseability of a commodity due to divergent views held by the High Courts, extended period of limitation was not invocable. The case law cited by the learned Counsel, is by and large, in support of the assessees plea that the extended period of limitation was not liable to be invoked in this case.
7. Many arguments were advanced by both sides with reference to Rule 173C of the Central Excise Rules, 1944. According to the learned SDR, the assessee was liable to declare the correct price of the goods under Rule 173C. On the other hand, according to the learned Counsel, this requirement was applicable only to certain specified categories of manufacturers named in the second proviso to sub rule (1) of Rule 173C. It is submitted that the respondent was not one of them and, therefore, they had no liability to file any declaration of price. According to the learned Counsel, the only obligation was to declare their marketing pattern, discount structure, etc., under sub-rule (3A) of the Rule.
8. We have considered these submissions also. Under Rule 173C (1), as these provisions stood during the material period, every assessee, who manufactured excisable goods should declare its value under Section 4 of the Act, in sales invoices, invoice-cum-challan or like documents used by them for sale or removal of goods and such documents should indicate separately the value of the goods and the duty paid in terms of Section 12A of the Act. Such documents should also contain a declaration of the price. The learned SDR has relied on these provisions. On the other hand, in respect of certain specified categories of assessees, there was a requirement of filing with the proper officer, a declaration in the prescribed format declaring the value of the goods under Section 4 of the Act, the duty and other elements constituting price of such goods. The question which we have considered in this case pertains to includability or otherwise of loading charges within the factory. It appears, according to the Revenue, these charges are one of the elements constituting the price of the goods. If that be the case, we must hold that the respondent was not liable to file a declaration with the proper officer, inasmuch as they were not one of the specified categories of assessees named in the second proviso to sub- rule-1. Further, it appears from the above provisions that all assessees were liable to declare the value of the goods in sales invoice or like documents used by them for sale or removal of goods. Any amount declared in the invoice or other document issued to a buyer is an amount recoverable from the buyer by the assessee. In the present case, it is admitted fact that the loading expenses were incurred by the buyer. In other words, such expenses were not recoverable by the assessee from the buyer and, hence, it was not required for the assessee to mention such amounts in the invoice. On the same footing, we also find that the respondent was not liable to make any declaration under the second proviso to sub-rule (1) of Rule 173C. They were only liable to declare the value of the goods in sales invoice, which they did. They were also required to declare their marketing pattern, discount structure to the proper officer under sub-rule 3 (a). It appears from the records that the assessee has done this as well. By no stretch of imagination can it be held that they suppressed anything with intent to evade payment of duty. In the result, any differential duty for the period beyond the normal period of limitation cannot be demanded or recovered from the respondent. They are only liable to pay differential duty on the goods cleared within the normal period of limitation. The impugned order shall stand modified accordingly.
9. A direct off shoot of our decision is that there can be no penalty on the respondent under Section 11AC. This however, does not mean that they have no penal liability under Rule 173Q. The show-cause notices invoked both the provisions. We find that Rule 173Q was invocable in the normal period as well. The show-cause notices alleged that the assessee had contravened various rules with intent to evade payment of duty. Under sub-rule (1) of Rule 173Q, any manufacturer who is found to have removed any excisable goods in contravention of any of the provisions of the rules is liable to be penalized. Removal of excisable goods without payment of duty is a removal in contravention of provisions of Central Excise Rules. On the same reasoning, removal of excisable goods on short payment of duty is also in contravention of the law. To this extent, the conduct of the respondent would attract sub-rule (1) of Rule 173Q, but their penal liability would be circumscribed by provisions of limitation. In other words, insofar as the normal period of limitation is concerned, the assessee by short paying duty on their products invited the penal provisions of Rule 173Q. Under these provisions, a penalty can be imposed in appropriate case up to the amount of duty. However, the amount of duty for the normal period remains to be quantified and, therefore, the amount of penalty to be imposed on the assessee under Rule 173Q is also determinable at that stage. Accordingly, after holding the assessee liable to pay duty (with interest in accordance with law) for the normal period of limitation, we direct the original authority to quantify the duty as also to determine the amount of penalty, which could be imposed on them, in the facts and circumstances of this case. The adjudicating authority shall pass a speaking order on the penalty related issue in a just and fair manner, after giving the assessee a reasonable opportunity of being heard. The appeals are disposed of in above terms.
(Dictated in Court) (B.S.V. Murthy) Member (Technical) (P.G.Chacko) Member (Judicial) pj 1 11 2