TaxTMI 
TaxTMI 
2006 (8) TMI 461
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....5 and it commenced its production w.e.f. August, 1998. M/s. JPOCL is clearing about 95% of its production to M/s. JVSL. The remaining 5% is cleared to M/s. Praxair India Pvt. Ltd., a fully owned and 100% subsidiary of M/s. PPL. Revenue conducted certain investigations into the affairs of the appellant-unit and came to the conclusion that they were indulging in undervaluation of their final products. Show Cause Notice dated 1-8-2000 was issued for demand of duty to the tune of Rs. 14,63,51,143/- in the following manner :- (i) Differential duty as a result of revision of gas prices during the period from 6/99 to 2/2000 (Annexure I & II) Rs. 5,22,47,703.00/- (ii) On account of receipt of additional consideration in the form of power free of cost/at concessional rate etc. during 5/99 to 2/2000 (Annexure III & IIIA) Rs. 8,64,68,553.00/- (iii) On account of receipt of additional consideration in the form of MTOP during the period from 10/99 to 2/2000 (Annexure IV) Rs. 76,34,887.00/- Total: Rs. 14,63,51,143.00/- The extended period under proviso to Section 11A was invoked in the Show Cause Notice. After considering the submissions of the appel....
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....the maximum instaneous production rate as defined in Article 2.1: Rs. 1.22/Nm^3 (ii) For all Liquid Oxygen and Liquid Nitrogen: Rs. 2.30/Nm^3 (iii) For all Gaseous Argon and Liquid Argon: Rs. 30.0/Nm^3 Article 8.3 of PISA provided for revision of prices of Gaseous Oxygen and Liquid Nitrogen on account of project cost variation. Article 8.6 of PISA envisages revision of prices of Liquid and Gaseous products (Oxygen and Nitrogen) for the variation on account of the following factors : (i) Cost of power (ii) Wholesale price index; and (iii) Exchange rate (currency factor). Therefore, in the normal circumstances with increase in project cost or power cost or other factors, the sale price should have been revised. Investigations revealed that even though the actual cost of project was 283.12 crores as on 1-7-1999, the appellants have considered only Rs. 227.32 crores as Project Cost resulting in lowering of gas price calculations. Revenue contended that Article 8.3 of PISA provides that cost price will increase by Rs. 0.01/Nm^3 for each increase of Rs. 2.4 crores in the Project cost. The Project Cost increased to Rs. 283.12 crores....
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....B rate for industrial consumption as against Rs. 3.05/- and Rs. 2.65/- unit reimbursed to JVSL by the appellants. It was also submitted that KEB itself has accepted the power from JVSL at Rs. 2.60/ unit with the approval of Government of Karnataka." As regards the treatment of MTOP as additional consideration, the appellants argued vehemently citing various case-laws that they cannot be considered as additional consideration. This issue was also remanded to the Original authority for examination. The appellants contended that substantial portion of the demand was barred by time. In para 15 of his order, Shri Brahma Deva, has made the following observation : "15. It was also argued on behalf of the appellants that substantial portion of the demand was barred by time. Since we are remanding the matter to the concerned adjudicating authority, all the issues including limitation can be looked into by the adjudicating authority and to pass an appropriate order in accordance with law on providing an opportunity to the party. Thus these appeals are allowed by way of remand". Consequent to CEGAT's above mentioned order, the Adjudicating Authority passed the impugned order da....
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....,47,703/-. This is wrong. As per para 16(x) of the impugned order, the total cost recovery charges were admittedly Rs. 7.264 crores, the duty liability on which amounts to only Rs. 1,16,22,400/-, which itself was part of the admitted duty paid by the appellant vide PLA debit entry No. 1222 dated 27-3-2000 referred to in the said paragraph. Likewise, as per para 16 of the impugned order, the full duty on the aggregate amount of facility fees received by the appellant for the entire Show Cause Notice period was only Rs. 41,38,667/-, which was also paid by the appellant on various dates in December, 1999 and January to March, 2000. The aggregate duty on both counts was thus only Rs. 1,57,61,067/-, all of which was admittedly been paid long before the issue of the Show Cause Notice. The basis for demand of duty amounting to Rs. 5,22,47,703/- is patently erroneous and is liable to be set aside. (iv) In any event, the question of demanding duty on the cost recovery charges aforesaid does not arise under this item since the same duty on the cost recovery charges also forms part of the demand under the next item relating to power charges, as can be seen from column 5 of Annexure-I....
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....products actually supplied to JVSL. The MTOP payments are provided to compensate the assessee when the buyer fails to purchase the minimum quantity assured. This is because, in such circumstances, the assessee is not able to operate the plant at optimum level. The MTOP payment is in the nature of the commitment charge for product not lifted and cannot be treated as the price of the product actually lifted, as held by the Tribunal in many cases. The following case-laws were relied on :- (a) Bhartia Cutler Hammer Ltd. v. CCE, New Delhi - 1998 (99) E.L.T. 436 (Tribunal) (b) CCE, Jamshedpur v. Bhagwati Oxygen Ltd. - 2000 (117) E.L.T. 647 (T). (c) CCE, Chennai v. Hawk Engines - 2001 (134) E.L.T. 496 (Tri.-Chennai) (d) CCE v. Ram Decorative & Industries Ltd - 1998 (77) ECR 403 (T) (e) Inox Air Products Ltd. v. CCE, Nagpur & Mumbai-I - 2001 (134) E.L.T. 224 (Tri.-Mumbai). (f) Spring Fresh Drinks v. CCE - 1991 (54) E.L.T. 333 (Tribunal) (vii) Under Section 4 of the CE Act during the relevant period, the price to be taken was the normal price at which the goods would, in the normal course, be supplied between t....
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..... This position had earlier been upheld by the Tribunal, a fact that has been completely ignored by the Commissioner, thus vitiating his order. (ix) The Directors are sought to be penalized on the basis of decisions taken in Board Meetings attended by them. The proposition that any Director can be so penalized for approving the project cost of a plant as of completion of its construction or any contract amendments or price renegotiations at Board meetings is preposterous and misplaced and all the more so, since the CEGAT has held with respect to the order of the Commissioner's predecessor that the appellant and its Board were fully entitled to proceed as aforesaid. (x) The two employees sought to be penalized were not even on the rolls of the company at the original stage or when the decisions in question were made. (xi) The allegation that M/s. Sajjan Jindal, Indrajit Mookerjee, Raaj Kumar and V.S. Kumar were instrumental in any suppression of facts or misstatements or were involved in any transportation, removing, concealing or dealing with any goods which they had reason to believe were liable to confiscation is incorrect and is not supported by any ev....
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....ary. "Novation: Substitution of a new contract, debt, or obligation for an existing one, between the same or different parties. The substitution by mutual agreement or one debtor for another or of one creditor for another, whereby the old debt is extinguished. The requisites of a novation are a previous valid obligation, an agreement of all the parties to a new contract, the extinguishments of the old obligation, and the validity of the new one. A novation substitutes a new party and discharges one of the original parties to a contract by agreement of all three parties. A new contract is created with the same terms as the original one but only the parties are changed. " 6.1 The learned Advocates pointed out that the Commissioner has demanded Rs. 5,22,47,703/- on the cost recovery charges inclusive of facility charges. Our attention was drawn to para 16(x) on pg. 18 and pg. 25 of the OIO wherein it is on record that the appellant had already discharged the duty liability on cost recovery charges and facility charges. In these circumstances, the demand of Rs. 5,22,47,703/- on account of costrecovery charges and facility charges appears to be erroneous. The Commis....
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....ssessable value cannot include commitment charges since these charges are in the nature of liquidated damages for breach of contract. There are similar decisions of the Tribunal to support the above view. Therefore, we do not find any reason for inclusion of MTOP charges in the assessable value, as they cannot be considered as additional consideration for the goods supplied by the appellants to JVSL. Hence, the demand of Rs. 76,34,887/- is set aside. 6.3 A demand of Rs. 6,63,30,535/- has been made on the ground that the payment made by the appellants to JVSL for the power received by them from JTPCL does not represent the real cost and, therefore, the difference between the real cost and what has been paid by the appellants represents additional consideration. The CEGAT has actually remanded the matter to the Commissioner to examine the issue in the light of all the evidences produced by the appellant. The appellant has shown that the price paid by them to JVSL is in fact much higher than the price charged by KEB. The appellant has actually shown through documents that they had adopted the rate of Rs. 3.05 per unit for the period from 1-7-1999 to 5-1-2000 and Rs. 2.65 per uni....