Customs, Excise and Gold Tribunal - Delhi
Ester Industries Limited vs Collector Of Central Excise on 30 October, 1995
Equivalent citations: 1996(81)ELT260(TRI-DEL)
ORDER G.R. Sharma, Member (T)
1. The captioned appeal is directed against the order-in-original passed by the Collector, Central Excise. In the impugned order, the learned Collector had held :
"13. Further, the party have submitted that they have been submitting all the requisite information in the RT-12 returns. But on going through the same and all the concerned Range records, I find that the RT-12 returns for the relevant period have been waiting finalisation but for the information in respect of the insurance and freight. Party's defence, inter alia, is that the demand is time barred for the reason that the RT-12 and the Gate Passes have been scrutinised by the Department and that in the gate passes mention of destination of the goods at their Depot at NOIDA has been made. They, therefore, have tried to say that the Department was aware of the system of transport and sales of the goods from NOIDA and nothing has been concealed. It is an admitted fact that the party had made misdeclaration in part-I price list regarding the sales at the factory gate in respect of certain varieties of films. They had declared in the price lists in a very clear term that the sales are made at the factory gate whereas the sales were not made from the factory gate. Thus, the allegation regarding misdeclaration against the party is proved. In the gate passes the name of the consignee viz. Ester Industries NOIDA was given. If there was clear mention that the goods were consigned to the Depot of the party at NOIDA, the intention should have been made clear in each of the Gate Passes and against the name of the consignee they should have rather indicated as 'SELF DEPOT, NOIDA'. Had this been done, the misdeclaration made by the party in the price lists would have been caught by the Departmental Officers. Moreover, as stated above once, the RT-12 for want of details of freight, insurance etc. had been kept pending when the show cause notice was issued, there might have been no occasion for the Range Staff to go through the details given in the Gate Passes regarding the names of the consignees. Once the price list was got approved in Part-I for factory gate sales the Range Staff had no reason to question the bona fides and intention of the party though the trust reposed was found to have been badly betrayed. The charges of suppression of facts and misdeclaration are thus amply proved and the demand is not hit by time bar and I find, in the result, that the demand of duty amounting to Rs. 15,48,196.96, (Rs. 14,46,991.46 BED + Rs. 1,01,205.00 SED including Rs. 99,186.96 BED and Rs. 7628.37 SED) is confirmable under proviso to Section 11A of the Act and the party have themselves made liable for penal action for evasion of Central Excise Duty under Rule 173Q of the Central Excise Rules, 1944.
14. Accordingly, I pass the following order :-
ORDER 1 I confirm the demand of Rs. 15,48,196.46 on the party as duty short paid under proviso to Section 11A of the Central Excises and Salt Act, 1944.
2. I impose a penalty of Rs. 1,50,000.00 under Rule 9(2) and Rule 173Q of Central Excise Rules, 1944."
2. Briefly stated, the facts of the case are that the appellants are engaged in the manufacture of different varieties of Polyester Films. When the Central Excise officers visited the premises of the appellants' factory at Khatima, Distt. Nainital and Sales Godown at Noida, Distt. Ghaziabad, they varified the finished excisable goods in the factory premises and found certain shortages and some excesses in the stock. The appellants filed price lists in respect of polyester films as well as in Part-II. On a scrutiny of the records resumed, it was noticed by the officers that the appellants had generally been transferring their stock of varieties of polyester films to the Sales Godown at Noida. It was also noticed that in the case of stock transfers, the assessable value of Part-I price list was not representating the real assessable value inasmuch as the assessable value indicated in Part-II of the price lists was much higher than the assessable value for the same product shown in Part-I. Further, it was also noticed that though the prices were got approved in Part-I proforma of price list yet there was hardly any sale of certain polyester films at the factory gate. The Department was of the view that the assessable value of such varieties of polyester films should have been determined on the basis of wholesale ex-depot price after allowing deduction on account of freight, insurance etc. in accordance with law. Accordingly, a show cause notice was issued to the appellants asking them to explain as to why the sales price from the depot at Noida minus the admissible deduction should not be taken as assessable value in respect of such polyester films for which there was no clearance at the factory gate to independent buyers and why the differential duty in respect of those varieties of polyester films in Part-I at factory gate did not exist should not be demanded. It was also alleged that the appellants were charging higher price in their invoices during the year 1991-92. The appellants were therefore, asked to explain as to why the duty should not be levied and collected on the higher price. It was also alleged that the appellants were selling the Off-Grade variety of polyester films from the sales depot at a much higher price than the price at which same goods were cleared at the factory gate. The appellants were therefore, asked to explain as to why the differential duty should not be demanded from them and why penalty should not be imposed on them. The appellants submitted in reply to the show cause notice that the price list in Part-I and Part-II had been filed which had been approved by the Assistant Collector concerned in accordance with Section 4(1)(a) of the Central Excises and Salt Act, 1944; that separate price list in Part-I for wholesale sales at the factory gate to the dealers and not Part-II for sales to actual users were submitted and approved by the Department; that there was no dispute pending on this issue; that the only dispute was about returnable packing material which was finally decided by the CEGAT. The appellants also contended during the course of personal hearing before the adjudicating authority that the excise duty was duly paid at the rates applicable in terms of the approved price lists; that as the goods were duty paid, there should have been no dispute whatsoever in regard to the transfer of goods by way of stock transfer from the factory to godown. It was also argued that once the price for the factory gate was known and the same was wholesale cash price as approved and accepted by the Department, the price at which the goods sold from the godown becomes wholly irrelevant for purpose of Central Excise Duty; that it was admitted in the show cause notice that the goods had been removed from the factory on payment of duty on the basis of the approved price lists; that the variation in the price subsequent to the removal from the factory depends upon a variety of causes and business exigencies for which neither the assessee nor the Revenue can fit it with certainty. It was also argued that in case the wholesale cash price at the factory gate was not available, it should be arrived at in terms of Section 4(l)(b); that by adopting the prices for sale from depot/godown is wholly unauthorised by law.
3. The Collector after hearing the various submissions of the appellants and written submissions made as well as reply to the show cause notice held against the appellants and therefore, the appellants have come up in appeal before us.
4. Shri R. Santhanam, the learned Advocate appearing for the appellants submitted that price lists in the instant case have been approved. RT-12 returns have been duly assessed and the issue concerning the determination of assessable value has been finally decided by CEGAT and therefore, there was nothing left for further determination; that in any case, the extended period of limitation should not be invoked having regard to the facts and circumstances of the case that there was no misstatement, suppression, fraud or collusion. The learned Counsel argued that the appellants had a normal price at the factory gate approved and therefore, there was no question of having different price for the same product being taken up as the assessable value; that the factory of the appellants was located at a remote place and to save time and distance, the appellants had perforce to carry the same goods to its godown for the convenience of its customers; that once the factory gate sales for polyester films for different varieties are available, there is no question of any other price being approved as an assessable value for such sale; that if certain customers have a few varieties of polyester films preferred to make purchases of small quantity from the depots, the price variation for such sales cannot be the basis of levy of duty of excise; that the Excise Law does not require the assessee to identify each variety of polyester film and force the sale of such films at the factory gate at the price declared by the assessee; that the assessee only filed price lists and made clearance in pursuance thereof; that it was the free choice of the purchasers whether to purchase the film at the factory gate on the normal price so approved by the Department or at higher price from the sale depot of the appellants. It was argued by the learned Counsel that the Collector ignored all the relevant case law and relied upon only a few cases which were never referred to ; that the statements of Shri Vinod Sethi and Shri K.K. Mangal were taken under coercion and duress and were retracted subsequently, and the same should have been ignored by the Collector at the time of adjudicating the case which he did not.
5. On the question of determination of freight, insurance charges, the learned counsel submitted that all the records were resumed by the Directorate of Revenue Intelligence. Whatever the records including the balance sheet was available with the appellants was submitted to the Department. The ld. counsel therefore, submitted that the finding of the Collector that the assessee had not furnished the full details, was wrong; that in the balance sheet, the figures of transport charges have been duly verified and audited on the basis of vouchers etc., the Collector should have accepted these figures which he did not do and that on imaginary basis he assumed the notional figures of freight etc. of Polyplex Corporation Ltd. The ld. Counsel therefore, submitted that the method adopted by the learned Collector was illegal and arbitrary. It was also argued by the learned Counsel that the learned Collector did not allow the appellants to cross-examine the officers of the Department who conducted search and seizures; that the Collector ignored the facts that the distance between Khatima and Noida was so long that the cost of transport by truck/road of the polyester film is quite high and the figures accepted by him was imaginary and was totally unsustainable; that the Department had not raised similar issues against other producers of identical goods who are following the same pattern of sale as the appellants; that the Department was fully aware about the production of polyester film in the factory and sale from depots etc. Therefore, the learned Counsel submitted that the Department cannot say that there was suppression or misstatement on the part of the assessee. In support of his contention, the ld. Counsel cited and relied upon the ratio of the decisions in the case of :
1. Essel Packaging Ltd. reported in 1990 (50) E.L.T. 430.
2. Lubri-chem Industries Ltd. reported in 1994 (73) E.L.T. 257.
3. Chemicals and Plastics India Ltd. reported in 1994 (74) E.L.T. 549.
4. Mitter Sen Industries reported in 1994 (74) E.L.T. 563.
5. Rainbow Industries Ltd. reported in 1994 (74) E.L.T. 3.
6. Prolite Engineering Co. reported in 1995 (75) E.L.T. 257.
7. Cosmic Dye Chemicals reported in 1995 (75) E.L.T. 721.
8. Window Glass Industries Ltd. reported in 1988 (37) E.L.T. 544
9. ITC Ltd. reported in 1992 (62) E.L.T. 604.
10. Upper Doab Sugar Mills repored in 1987 (32) E.L.T. 124.
Concluding his arguments, the learned Counsel submitted that both on merits as well as on limitation, the case is squarely covered in favour of the appellants and therefore, prayed that the impugned order may be set aside and consequential relief may be granted to the appellants.
6. Shri A.K. Singhal, the ld. JDR submitted that the appellants were selling the goods to consumers at a higher price than the price at which they were selling the polyester films to wholesale buyers at the factory gate; that this was a strange phenomenon which gave rise to the suspicion that everything was not well with the company. Normally, the learned JDR submitted that Part-II prices are lower than Part-I prices whereas the position with the appellants was the opposite. The ld. DR submitted that there was no doubt that a normal price was available at the factory gate but at the same time the appellants were transferring the same goods to their depots at Noida and were charging much higher price for the same goods. The ld. DR also submitted that there were certain varieties of polyester films for which there was no sale at the factory gate yet they were being cleared on the basis of price lists in Part-I and such polyester films were being taken to the sale depot at Noida and they were being sold at a much higher price. The ld. DR therefore, submitted that as there was no wholesale market at the place of manufacture and at the time of removal of this particular type of polyester films, the price of these films was to be determined on the basis of the price charged for such films at the depot after allowing certain deductions admissible in law. The ld. DR therefore, submitted that the Department was right in demanding the duty on such films after allowing admissible deductions from the price charged for such films at the depot. On the question of limitation, the ld. DR submitted that the fact remains that the appellants did not declare the price of certain varieties of polyester films manufactured by them. There was no factory gate sale and therefore, the price declared for such films in Part-I was not the price for purpose of assessment. To that extent, the ld. DR submitted that there was suppression and misstatement. The ld. DR therefore, submitted that even on limitation, the appellants have no case. The ld. DR also submitted that only Off standard polyester films were being sold at factory gate at a much lower price whereas the standard films polyester were being sold from the depot at a much higher price. Having regard to the submissions and the findings of the Collector, the ld. DR submitted that the duty has rightly been demanded by the lower authorities and the penalty is also justified in the circumstances.
7. Heard the submissions of both sides and considered them. We find that a number of issues have been raised. For some of the issues are not relevant as they have been decided by the various Courts. Let us first take those issues which have been decided by the Court yet are the subject-matter of the present case. One of the issues is that when there is a normal price at the factory gate for identical goods whether higher price charged for same goods for sale from the depot has any relevance. We find that the Hon'ble Supreme Court in the case of Indian Oxygen Ltd. reported in 1988 (36) E.L.T. 723 had held - "The appellants are selling the goods from the factory at Visakhapatnam and also from their service centre at various places. The goods also sold at DGS & D rate contract. Since the ex-factory price is ascertainable, such ex-factory price shall be the basis for determination of value Under Section 4 of the Central Excises and Salt Act, 1944 and the question of transportation charges become irrelevant." The Hon'ble Supreme Court also held - "If the ex-factory price is ascertainable, the issue of deduction from the ex-depot prices does not arise. But if the ex-factory prices are not ascertainable and goods are to be assessed at ex-depot, then it is for the manufacturer to claim on the actual evidence of the admissible deductions from the price list." We find that for certain varieties of polyester films, there was a normal price for sale at the factory gate and therefore, even if identical goods were being sold at a higher price from the depot, that higher price becomes irrelevant for purpose of assessment of duty.
8. On the question that Part-II prices were higher than Part-I prices, we find that a number of factors and commercial exigencies are determinative of these prices. Therefore, simply because higher price exists for consumers of a particular class of goods will not vitiate the acceptance of the lower price for identical goods as wholesale price at the factory gate unless there is an allegation and documentary evidence to prove that there was an extra consideration flowing back from the purchaser to the manufacturer or the buyer was a related person.
9. On the question that some off-grade films were being sold at the factory gate and few buyers buying at a lower price whereas the standard polyester films or identical goods were being sold at a much higher price from the depot. From the records placed before us, we do not find any evidence to show that the goods sold at the factory gate were of sub-standard and that the goods sold from the depot were of standard quality. In the absence of detailed particulars on the subject, we cannot conclude that the goods sold at the factory gate at a lower price were sub-standard and hence we do not agree on this count with the finding of the ld. Collector. Therefore, the demands on that count are not sustainable.
10. We now come to the question of determination of assessable value in respect of films which were not sold at the factory gate. The argument adduced by the learned Counsel that the prices for such goods were declared in the price lists in Part-I and price lists were being approved by the Department. Therefore, even in respect of such polyester films, there is no question of determination of the assessable value in terms of the price at which these goods are sold from the godown. We are not impressed by this argument. Admittedly, there was no wholesale market for such films at the factory gate. The Collector in his findings has held that RT-12 returns were awaiting finalisation in respect of such goods in so far as freight or insurance was concerned. In this view of the matter, we find that there is force in the argument of the learned Departmental Represenative; that we shall have to determine the price for such films on the basis of the prices charged from the depot after giving normal deductions. We find that the question of allowing the deduction from the depot price was finally settled by the Hon'ble Supreme Court in the case of Madras Rubber Factory reported in 1995 (77) E.L.T. 433. We find that the question of determination of value in respect of such goods, the dispute centres round the determination of transport charges. The Collector in his findings in the order-in-original had held that the appellants did not produce any evidence to show the exact expenditure incurred by the appellants. The contention of the appellants had been that all documents were seized by the Directorate of Revenue Intelligence and therefore, the evidence was already available with the adjudicating authority. The learned Counsel also submitted that the balance sheet which was in possession of the appellants was submitted to the adjudicating authority who did not care to look into it and accepted the transport cost of other firm which was similarly located. It was further argued before us that this decision of the Collector was illegal, arbitrary and not sustainable in law. We find that the Hon'ble Supreme Court had held that actual expenses incurred as transport charges of the goods in case a wholesale market does not exist at the factory gate, shall be deductible from the price. We observe that the deductions are claimed by the appellants. It is for the claimant to establish his claim by providing cogent evidence. In the absence of such evidence, the question of allowing any deduction does not arise. In the instant case, the claim has been made by the appellants. The appellants had not furnished any such particulars of actual transport charges. They simply forwarded the balance sheet. But the balance sheet could not indicate the actual transport cost because the transport cost shown in the balance sheet might or might not be covering the transport cost of films in dispute. We therefore, do not have any hesitation in agreeing with the findings of the ld. Collector that the appellants did not establish their claim of deduction of actual transport cost. However, we find that the ld. Collector was most reasonable when he accepted the identical transport cost calculated on the basis of Chartered Accountant's Certificate and allowed the deductions thereof to the appellants. On this count, we therefoe, hold that the plea of the appellants also fails. In the circumstances, the demand for differential duty on polyester films which was not sold at the factory gate is legal and justifiable and we hold accordingly.
11. On the question of limitation, a lot of case law was cited and relied upon by the appellants. We find that the appellants have not been able to bring any record to our notice by which it can be said that there were certain varieties of polyester films for which there was no market at the factory gate but were sold only from the depots. We observe that the appellants did not disclose this fact, on the contrary, they argued that the prices were declared in respect of the polyester films in Part-I which were approved by the Department and therefore, they had complied with their responsibility and it was for the Department to verify the facts further. We observe that this contention of the appellants is not sustainable. We also observe that the Collector in his findings has held that "I find that RT-12 returns for the relevant peirod have been waiting finalization, but for the information in respect of insurance and freight". This clearly shows that the appellants were holding back some information which made the RT-12 returns incomplete and not finalized. As the appellants are required to intimate their sales organisation and as the appellants had not disclosed their sales organisation nor did they indicate that certain varieties of polyester films they were selling only through their depots, we find that there was suppression. On the question of limitation, a lot of case law was cited. We have perused all the case law cited and relied upon by the appellants. We have analysed all the evidence on record in detail and have come to the conclusion that there was wilful misstatement and suppression of facts. The question whether this has been done with an intent to evade payment of duty has to be seen in the light of the evidence on record. Whether any intention to evade payment of duty can be attributed to the appellants, we find that the appellants were beneficiaries and therefore, on account of payment of lower amount of duty they knew that the position indicated by them in the price lists submitted in Part-I was not correct. The intention to evade payment of duty is proved beyond doubt. We therefore, hold that insofar as the demand for differential duty on the varieties of films which did not have any market at the factory gate is fully covered by the proviso to Section 11A.
13. On the question of imposition of penalty, it was argued by the learned Counsel that there was no case made out by the Department for imposition of penalty inasmuch as the price lists were approved for goods being removed to the Noida Depot on the strength of approved price lists. There was no intention of evading payment of duty as duty was being paid on the prices approved from time to time. The learned DR supporting the imposition of penalty submitted that the appellants knew full well that there were certain plastic films for which there was no market at the factory gate and they were being sold at a much higher price from their sales depot at Noida. Thus, the intention to evade payment of duty was clear, argued the ld. DR. The ld. DR therefore, submitted that the imposition of penalty was justifiable in law. We observe that in the instant case, the entire issue boils down to confirmation of demand on the plastic films which did not have any market at the factory gate but were sold from the depot and differential duty only on this aspect has been confirmed. However, having regard to the fact that the appellants knew that there was no market at the factory gate and even then they were declaring the price as if there was a market for this variety of this polyester films at the factory gate and were getting such prices approved. This cannot be said to have been done for any consideration other than the consideration of paying a less amount of duty. Thus, the intention to evade payment of duty is clear. We therefore, hold that the penalty was imposable and justly so. We however, find that the quantum of penalty is on the higher side. Having regard to the facts and circumstances of the case as discussed in the preceding paragraphs, we reduce the quantum of penalty from Rs. 1.50 lacs to Rs. 75,000/- (Rupees Seventy five thousand only).
14. In view of the above findings, the impugned order is modified to the extent stated above and the appeal is disposed of accordingly.