TaxTMI 
TaxTMI 
2003 (6) TMI 367
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....le 57-I(2) read with proviso to Section 11A(1) of CE Act and imposed penalty of Rs. 1,00,000/- on the appellant company under Rule 173Q ibid besides adjusting an amount of Rs. 6,90,524.70 which the appellant had already paid and dropping the proceedings with regard to the demand of duty of Rs. 54,285.05 by extending the benefit of Notification No. 184/86-C.E. dated 1-3-86 in respect of rear flanges cleared by the appellant to M/s. HAL. 2. Briefly stated the facts of the case are that the appellant M/s. K.C.P. Ltd., Tiruvottiyur, Madras are manufacturers of Heavy Industrial Machines. On the basis of specific intelligence gathered that they have raised invoice for escalation charges and collected the same from the customers but have not paid the duty thereon to the Government, the officers of Headquarters Preventive, Chennai visited the said factory and office premises on 6-11-92 and found that no records were available at their corporate office at No. 2, Victorial Crescent Road, Madras-105. At the time of the Officer's visit to the factory situated at P.B. No. 2278, Tiruvottiyur, Madras-19, S/Shri V. Narayanaswamy, Sr. Accounts Officer and K. Rajagopalan, Assistant Manager, ....
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....f Rs. 5,28,467.24 payable on the goods cleared under Inter Unit Transfer Invoice, without payment of duty should not be demanded; (ii) excise duty of Rs. 1,62,056.96 payable on Modvat inputs cleared without payment of duty should not be demanded; (iii) excise duty of Rs. 33,08,213.09 (as per Annexure E to SCN) payable on the price escalation charges charged/collected from the customers should not be demanded; (iv) excise duty of Rs. 54,285.05 payable on rear flanges manufactured and cleared to M/s. HAL without payment of duty by incorrectly availing exemption Notification No. 184/86-C.E. dated 1-3-86 should not be demanded; (v) excise duty of Rs. 12,37,022.76 (as per Annexure G to SCN) already paid by them should not be confirmed and adjusted and (vi) a penalty should not be imposed on the appellant under Rule 173Q of Central Excise Rule, 1944. The appellant submitted their reply on 2-11-93 in which they contended that there was no suppression of facts and that they were fully complying with all Central Excise Rules; that their sister unit at Vuyyuru had all along been following Chapter X procedure and enjoying exemption under Notification No. 281/86; that they have not discharged ....
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..../SB/Stay/3367/95/MAS and the stay was allowed by granting waiver of pre-deposit of the amount involved and order-in-original was set aside and the appeal was remanded to the Commissioner vide order No. 49/1995 dated 16-6-1995 without expressing any opinion on the merits of the case for reconsideration of the issue in accordance with law. The Tribunal while remanding held that "it would be open to the adjudicating authority to take into consideration all the terms of the contract and also give his finding in regard to the plea of limitation urged before the Tribunal" as the Tribunal was left with no other alternative except to remand the matter in the absence of clear finding by the adjudicating authority on certain evidence". 5. This is the second round of appeal before the Tribunal. The adjudicating authority, on de novo consideration, granted personal hearing to the appellants on 19-2-97 and 15-3-97, and after taking into consideration all the facts, evidences and submissions made before him, has passed the following order : 37.1 I demand from M/s The K.C.P. Ltd., Chennai, an amount of Rs. 12,77,934/- (Rupees twelve lakhs seventy seven thousand nine hundred and th....
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.... : Name of the Customer Escalated value realised Rate of Duty Amount of duty CCI, Neemuch Rs. 1,20,00,000 15% BED Rs. 18,00,000 L & T, Powai Rs. 19,835.82 15 % BED 10% SED Rs. 3,273 TOTAL Rs. 18,03,273 27. The question that arises, among other things, for determination in this de novo adjudication is whether the demand for an amount of Rs. 18,00,000/- payable on the differential escalated value of Rs. 1.2 crores paid to the assessee by their buyers, CCI, is maintainable inasmuch as the said escalated value included the element of escalated value on bought out items which were supplied direct from the suppliers to CCI. 28. On the question whether the entire escalation price difference of Rs. 1.2 crores that KCP had received from the buyer, CCI, merit a levy of Central Excise duty @15%, in short, it is the case of KCP that Rs. 1.2 crores represented not only the escalated cost of their own manufactured products but also the escalated cost of their bought out items that were directly supplied from the suppliers of those bought out items to the site and not routed through the factory of KCP. As such, it is c....
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.... CCI. It has also been submitted that the total value of the bought out items works out to Rs. 18,75,23,479/-. They have not been able to produce all the invoices. However, they have produced at random some invoices pertaining to bought out items during the personal hearing. As it has been pointed out, it is not possible to apportion the escalation cost of bought out items and that of their manufactured products from the payment of Rs. 1.2 crores, it is for KCP to show separately the escalation cost of their own manufactured products in their claim bill/letter which they have not done. It is by now established that out of the amount of Rs.. 1.2 crores received by them, they have disbursed a total amount of Rs. 35,02,257/- only. Further, the balance amount was evidently absorbed by KCP and there is no reason why they should not be liable to pay the Central Excise duty on the balance amount. 31. I hold that the balance amount of Rs. 84,97,743/- should be subjected to Central Excise duty. The amount of Central Excise duty already paid by KCP should be adjusted with the amount that is payable and the balance amount shall be payable by KCP. 32. As regards the duty liabil....
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.... duty or without expunging the credit taken is also established. Even though KCP have since expunged the Modvat credit and paid duly on their manufactured products transferred from one unit to another and have partly paid duty on the escalation charges, offence committed is well established. In view of the above, KCP are liable to penalty under Rule 173Q of Central Excise Rules. Considering the facts and circumstances of the case and the nature of the offence committed, I impose a penalty of Rs. 1 lakh on KCP under Rule 173Q of Central Excise Rules over and above the duty payable on the escalated cost. 6. Arguing for the appellant Ld. Advocate Shri Venugopalan submitted that the learned Commissioner has erred in not appreciating full facts of the case before passing the order demanding Rs. 12,77,934/-. He submitted that duty demanded by the Commissioner on the bought-out goods also from the sub-suppliers, which had already suffered duty and became the second sale at the hands of the appellant is totally against the ratio given by the Apex Court in the case of Atic Industries reported in 1978 (2) E.L.T. (J 444) (S.C.), hence the impugned order is liable to be set aside. He f....
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....ut also the bought out items which had already suffered duty at the hands of the original manufacturers. Since the bought out items had already suffered duty, they cannot be subjected to further duty barring the six major original manufacturers (sub-suppliers) who claimed price escalation value for their goods which is under consideration by the appellant separately. He submitted that they cannot be subjected to any further excise duty as per the ratio in the case of Tata Robins Fraser v. CCE reported in 1990 (46) E.L.T. 562 (Trib.) and also the case law of Machine Products Pvt. Ltd., Ahmedabad v. CCE [1983 (14) E.L.T. 2480 (Trib.)] As the bought out goods were sold second time by the appellant by raising invoices separately, the original manufacturer is in no way connected to the buyer and the department cannot levy duty again on the increase value. It amounts to second sale of the bought out items by the appellant to their buyers which is a trading activity. He pointed out that as per the decision of the Apex Court in the case of Atic Industries Ltd., the department cannot levy duty second time on the increased value. It is further contended that mere raising a proforma invoice c....
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....ose due to non-renewal of L6 Licences by their sister units outside, as they were enjoying exemption from payment of duty. This clearly proved that there was no intention at all on the part of the appellant to evade duty on this count. He further pointed out that the very fact that the charge of non-duty payment of Rs. 54,285.05 on the goods supplied to HAL under exemption Notification was dropped by the Commissioner itself proved that the appellant had no intention to evade payment of duty. Even on the duty demanded on bought out items, he submitted that the correct amount worked out to Rs. 6,85,014/- and not Rs. 12,877,934/-, after adjusting the duty amount already paid, as confirmed by the Commissioner in his order. As the appellant have proved beyond doubt that there was no intention to evade duty or any suppression of facts from the department, he sought for setting aside the impugned order by allowing their appeal. In the written submission, the appellant has also prayed that the matter may be allowed to be kept pending till finalisation of Arbitration award so that appellant could pay the differential duty, if any, on their manufactured goods. 8. While reiterating an....
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.... determination of the escalated price by arbitration committee is not acceptable to us. Since this is a case of non disclosure or suppression of price from the department, the judgment rendered in the case of Hindustan Shipyard Ltd. v. CCE, Madras reported in [1987 (28) E.L.T. 586 (Tri.) = 1987 (9) ETR 457] is not applicable in view of the facts and circumstances of this case. The appellants paid the duty only when the Central Excise Intelligence Bureau of the Department of Revenue, New Delhi as early as 19-10-91 investigated about this and directed them to discharge the duty and they have paid the duty only after that investigation and detection of the case by the department. Therefore, the plea that there was no intention on their part to evade payment of duty and suppression of any facts, is not acceptable to us. Therefore, mala fide intention of the appellants is clearly established. The plea of the appellants that they had been enjoying the benefit of the Notification 120/75 for non filing of the price list and subsequently under Rule 173C, proviso (ii) also does not come to their rescue since benefit of Notification No. 120/75 for non filing of any price list is available wit....
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....receiving units for special industrial purpose, after the unit who are enjoying duty free clearances have obtained such statutory licence. In the present case, since the clearances were made clandestinely to their sister concern without payment of duty and the sister unit did not have L-6 licence and since the department did not have knowledge about the said clearance, suppression of facts is clearly established and they have to pay duty on such clandestine clearance. Further there was escalation clause in the contract and since the escalation clause was not made known to the department, the department cannot wait nor is the department legally supposed to wait till finalization of the arbitration on the escalated price on the duty payable and hence the duty has been rightly demanded by the learned Commissioner. In view of the above facts and circumstances of the case, we do not find any infirmity in the order in original No. 8/97 dated 5-3-97 of the learned Commissioner and therefore we confirm the same and reject the appeal. Ordered accordingly. Sd/- (Jeet Ram Kait) Member (T) 10. [Contra per : S.L. Peeran, Member (J) (Oral)] . - With due respect to my learned bro....
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..... I order accordingly. The second plea raised is that there is short levy also on the bought out items which is under challenge. It is contended that for the period 1988-93 they have also voluntarily paid duty on escalation clause on contract price. Therefore, the department cannot claim duty on this score, as there is no flow back of funds. It is also argued that the amount of Rs. 4,45,766/- has been fixed arbitrarily and that the same cannot be levied for the reason that there cannot be duty on bought out items. They also contended that duty was cum duty price and that demands raised are barred by time. 13. On a careful consideration of the submissions, I notice that the project contracts entered into with the parties involved design, supply, manufacture, erection and commissioning and appellant manufactured goods in their unit and cleared them on payment to site directly. In regard to items of electrical machinery and mechanical parts like electrical motors, control panels, instruments, industrial valves, pumps and structurals etc., appellant purchased them from outside and sent them over to site for assembly and erection purposes. This fact has been verified by the inve....
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....aside the demands raised and confirmed on the ground of limitation. For that reason stated above, the impugned order is set aside and appeal is allowed. Sd/- (S.L. Peeran) Member (J) POINTS OF DIFFERENCE In view of difference of opinion between the Members, the following question arises for reference to Third Member for answering the question :- "Whether the appeal is required to be rejected by confirming the impugned order as held by Learned Member (Technical) Shri Jeet Ram Kait; OR that the appeal is required to be allowed both on merits as well as on time bar as held by Learned Member (Judicial) Shri S.L. Peeran in his order." Sd/- (Jeet Ram Kait) Member (T) Sd/- (S.L. Peeran) Member (J) 15. [Order per : P.G. Chacko, Member (J)]. - Examined the records and heard both the sides. Ld. Counsel and Departmental Representative reiterated their respective arguments. 16. It appears from the record that the appellants were engaged in the manufacture of heavy industrial machines for cement/steel/sugar plants; that their activity under Project Contracts entered into with their customers, involved design, supply, manufactur....
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....,355.46) by way of debit entries in their RG-23A Part-II on 27-11-92; that the Commissioner appropriated the said payment towards the demand of duty of Rs.5,28,467.74 confirmed by him; that the appellants cleared machinery parts (modvatable goods) without payment of duty to their Vuyyuru unit during April to October 1992 and, in this case also, they paid the duty of Rs. 1,62,056.96 by way of debit in RG-23A Part-II on 27-11-92; and that the Commissioner appropriated this amount towards the confirmed demand of duty of Rs. 1,62,056.96. 18. It further appears that the appellants had cleared rear flanges to M/s. Hindustan Aeronautics Ltd. (for short, M/s. HAL) without payment of duty claiming exemption under Notification No. 184/86-C.E. dated 1-3-86; that the department contested the claim of exemption and demanded an amount of duty of Rs. 54,285.05 in respect of the rear flanges cleared to M/s. HAL; but the Commissioner accepted the appellant's claim and dropped the said demand. 19. The only surviving dispute in this case is in relation to the duty on the price escalation claim raised by the appellants on their customers through proforma invoices. It has been contended....