Custom, Excise & Service Tax Tribunal
M/S. Birla Corporation Ltd vs Commr. Of Central Excise , Kolkata-Vii on 30 May, 2014
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EAST REGIONAL BENCH : KOLKATA
Excise Appeal No.-392/2011
(Arising out of the Order-in-Appeal No. 42/Kol-VII/2011 dated-24/02/2011 passed by the Commissioner (Appeal-I) Central Excise, Kolkata)
For approval and signature of:
DR. D.M. MISRA, HONBLE JUDICIAL MEMBER
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1. Whether Press Reporters may be allowed to see :
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 ?
3. Whether Their Lordships wish to see the fair copy :
of the Order?
4. Whether Order is to be circulated to the Departmental :
Authorities ?
M/s. Birla Corporation Ltd.
APPELLANT(S)
VERSUS
Commr. of Central Excise , Kolkata-VII
RESPONDENT(S)
APPEARANCE
Sri Chanchal Bhattacharjee, Advocate
FOR APPELLANTS
Sri S.P. Pal, Appraiser (A.R.)
FOR THE RESPONDENTS
CORAM:
DR. D.M. MISRA, HONBLE JUDICIAL MEMBER
DATE OF HEARING : 10.01.2014
DATE OF PRONOUNCEMENT: 30/5/2014
ORDER NO.FO/A/75335/14
Per DR. D.M. MISRA
This is an appeal filed against Order-in-Appeal No. 42/Kol-VII/2011 dated-24/02/2011 passed by the Commissioner of Central Excise (Appeals), Kolkata.
2. Briefly stated the facts of the case are that the appellants are engaged in the manufacture of Door Trims (Substrates) falling under Chapter 87 of CETA, 1985. During the relevant period i.e. from July, 1996 to March,2001, they had supplied these goods to M/s. General Motors of India, Gujarat. In the manufacture of these goods, they have used Moulds supplied free of cost by M/s. General Motors of India. The cost of the said free issue materials were not included in the value of finished goods.The Larger Bench of this Tribunal in the case of Mutual Industries Ltd. Vs. Collector of Central Excise, Mumbai reported in 2000 (117) E.L.T. 578 (Tribunal) has held that in the event Moulds were supplied free of cost by customers and used in the manufacture of finished goods, then proportionate cost of Moulds are to be included in the assessable value of finished goods. Consequently, the Appellant have recalculated the assessable value by including the amortization cost of moulds in the assessable value of the goods and paid the differential duty of Rs.9,54,129/- on 20th July, 2001 and Rs.5,865/- on 5th March, 2003 totalling to Rs.9,59,994/- on their own account. After two years they were issued with the Show Causecum-Demand Notice dated dated-28/7/2005 invoking extended period of time demanding duty of Rs.2,173/- and interest of Rs.4,04,477/- under Section 11AB of CEA, 1944. Consequently, the demand notice is adjudicated and the duty already paid have been appropriated and the interest was confirmed. Besides, penalty of Rs.5.00 Lakhs was imposed under Section 11AC of CEA, 1944. Aggrieved by the said order, they filed an appeal before the Ld. Commissioner (Appeals), who, in turn, upheld the order of the adjudicating authority and rejected the appeal. Hence, the present appeal.
3. The Ld. Advocate Shri Chanchal Bhattacharjee, Advocate for the appellant submits that in the present appeal, they have challenged the correctness of levy of interest and imposition of penalty. He submits that Section 11AB in its present form introduced w.e.f. 11/5/2001 and in view of the judgment of the Larger Bench in the case of 2005 (68) RLT 122 (CESTAT-LB), interest cannot be demanded prior to the said date. Further, he has referred to the Division Bench judgment of this Tribunal in the case of Godrej & Boyce Mfg. Co. Ltd. Vs. Commr. of Central Excise , Mumbai-II reported in 2010 (262) ELT 286 (Tri-Mumbai) wherein it has been laid down that interest under Sub-Section(1) of Section 11AA or under Section 11 AB of CEA, 1944 in the amended form cannot be charged before the said date. Further, he has submitted that inclusion of the value of moulds supplied free of cost by the customers, in the value of finished goods has been interpreted differently by different Benches of the Tribunal and the law was not settled in this regard. The dispute was finally set at rest by the Larger Bench of the Tribunal in 2001 in the case of Mutual Industries Ltd. case (supra). Therefore, no penalty could be imposed on them under Section 11AC of CEA,1994 as there has been no suppression of facts nor any mis-declaration. In support he has referred to the judgment of this Tribunal in the case of Anil Polymers Pvt. Ltd. Vs. CCE reported in 2009 (237) ELT 358 (Tri-Mumbai).
4. Per contra, the Ld. A.R. for the Revenue submitted that as per CBEC Circular dated- 26/06/2002, interest is payable in respect of clearances effected after 28/09/1996 under Section 11AB. Further he has referred to the judgment of Honble Supreme Court in the case of SKF (India Ltd.) Vs. reported in 2009 (239) ELT 385 (SC) and also M/s. International Auto Ltd. reported in 2010 (250) ELT 3 (SC) in advancing his submission that interest under Section 11AB becomes payable on the differential duty due on the price increase and the issue of supplementary invoice being for short payment of duty on the date of removal of the goods. Further, he has referred to the judgment of Honble Delhi High Court in the case of Hindustan Insecticides Ltd. Vs. Commissioner of Central Excise , LTU reported in 2013 (297) ELT 332 (Delhi) wherein it is held that interest under Section 11AB is payable for past clearances but notice for demand has to be within the period of limitation prescribed under Section 11A of the CEA, 1944. He submits that the present SCN dated 28/7/2005 had been issued demanding interest for short levy of duty for clearances during 27/7/1996 to 28th March, 2001. Accordingly, the demand of interest for the period after 28/7/2000 covered under extended period of limitation on the ground of suppression of facts.
5. Heard both sides and perused the records. The short question needs to be determined is whether interest under Section 11AB of CEA, 1944 is attracted on account of the major portion of differential duty paid in July, 2001 and balance in March, 2003 for the clearances effected during July, 1996 to March, 2001. Undisputedly, the differential duty becomes payable as the value of free issue moulds were not included in the value of manufactured finished goods supplied by the appellant to General Motors India Ltd. The contention of the appellant is that the liability to interest under Section 11AB would be restricted for the period after 11/05/2001 in view of the amendment to Section 11AB of CEA, 1944.In contrast, the Revenue issued demand notice calculating interest from July, 1996 to July, 2001 for the amount of Rs.9,54,129/- paid on 20.07.2001 and Rs.5,865/- paid on 5/3/2003. In support of their contention, the Ld. Advocate for the appellant referred to the judgment of the Larger Bench of this Tribunal in the case of Ramkumar Mills (supra) and also the Division Bench judgment in the case of Godrej and Boyce Manufacturing Co. Ltd. (supra). I find that the Division Bench of this Tribunal in Godrej Boyce Manufacturing Co. Ltd.s case (supra) after analyzing the interest provision viz. Section 11AA & Section 11AB of CEA at para 5 has held as under:
Under sub-section (1) of Sec. 11AA of the Act, as this provision stood at the material time, an assesse who fails to pay the duty determined under sub-section (2) of Section 11AA of the Act, within 3 months from the date of determined of duty is bound to pay interest at the prescribed rate for the period of delay. Sub-section (2) says that sub-section (1) is not applicable where the duty became payable on or after the date on which the Finance Act, 2001 received Presidential assent. It was on 11/5/2001 that the Finance Act, 2001 came into force. In this scenario, there can be no levy of interest under sub-section (1) of Section 11AA on the amount of duty paid by the assesse for the period upto 10th of May, 2001. In respect of the amount of duty paid for the period from 11/5/2001, interest on duty is leviable under Section 11AB of the Act in as much as sub-section (1) of Section 11AA opens with the clause subject to the provision of Section 11AB. In the result, interest can be levied on that part of the amount of duty which pertains to the period from 11/5/2001 to 30/6//2001. This liability, obviously, is unaffected by the fact that such duty was paid within the period of 3 months prescribed under Section 11AA (1). It is, therefore, held that the appellant is liable to pay interest under Section 11AB of the Act on that part of the amount of duty which pertains to the period from 11/5/01 to 30/6/01 and such interest shall be paid for the period from the due date to the date of payment (20/4/02).
6. This decision has been followed in the subsequent case of Godrej & Boyce Mfg. Co. Ltd. (supra). Similarly, the Tribunal in the case of Choice Apparels Vs. Commr. of C.Ex. , Bangalore-III reported in 2008 (229) E.L.T. 153 (Tri.-Bang.) and at para 5 held as under:
The learned Advocate clarified the point. He stated that earlier before 2001 the interest provision was applicable only when the demand is on account of the suppression of facts, fraud, etc. when longer period was invoked. However, consequent to the amendment in 2001, the interest became payable in respect of all demands. It was pointed out in the present case, in view of the clear findings of the Tribunal, no penalty has been imposed. In such cases, interest would not be leviable prior to the date on which the Finance Bill, 2001 received the assent of the President. In the present case, it is not in dispute that the Central Excise Duty on the goods procured indigenously became payable prior to 2001. Precisely, the date is 11/5/2001, because the amendment provisions of Section 11AB came into effect only with effect from 11/5/2001. As the duty involved in this case is prior to that, this provision cannot be made applicable. Moreover, the appellant had stated that in the show cause notice there was no demand of interest. We do not feel that it is necessary to go into that aspect. What is important is that legally interests could not have been demanded in respect of demands arising prior to 11/5/2001. Therefore, the demand of interest in the impugned order is not in accordance with the law. Hence, we set aside the demand of interest. Thus, the appeal is allowed in the above terms.
7. On the other hand, the Ld. A.R. for the Revenue referred to the recent decision of the Honble Supreme Court judgment in the case of Commr. of Central Excise, Pune Vs. SKF India Ltd. (Supra) and International Auto Ltd. (Supra). On careful analysis of the said decisions, I find that the question of levy of interest involved in those cases relates to the demands payable for the period after 11/05/2001 and the issue was not whether interest would be charged for the period prior to 11/05/2001 or thereafter ,the ratio of the above decisions are not applicable to the facts of the present case.
8. Regarding the penalty imposed under Section 11AC of CEA, 1944, I find that the issue of inclusion of value of Moulds supplied free of cost in the value of the finished goods, during the relevant period was unsettled due to conflicting views/decisions on the subject. The said issue got settled only after the Larger Bench decision in the case of Mutual Industries Ltd. (supra). In view of the judgment in Anil Polymers case (supra), I find merit in the submission of the Ld. Advocate for the applicant on the issue of allegation suppression and consequent imposition of penalty.Thus, the penalty imposed on the appellant is not sustainable and accordingly, the same is set aside.
9. In the result, the appellant is liable to pay interest on the differential duty amount paid for the period after 11/05/2001. Accordingly, the matter is remanded to the adjudicating authority for calculation of interest for the differential amount paid for the period after 11.5.2001, till the date of payment of the differential duty. Appeal is partly allowed to the extent above.
(Pronounced on 30/5/2014 ) Sd/- 30/5/2014 (DR. D.M. MISRA) JUDICIAL MEMBER k.b/-
Excise Appeal No.-392/2011 2