TaxTMI 
TaxTMI 
2011 (9) TMI 779
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.... 25,000 1.3 887/2008 M.P. Krishnamachari, G.M., MM Cylinders (P) Ltd. 25,000 1.4 888/2008 M. Muruganandam, MD, MM Cylinders 6,00,000 1.5 889/2008 R. Ravi Verma, Director, M.M. Cylinders (P) Ltd. 1,00,000 1.6 890/2008 K. Subramaniam, C.A. 10,000 1.7 876/2008 Sri Mehala Transport 4,00,000 1.8 877/2008 M. Muthuramalingam, Partner, Sri Mehala Transport 50,000 2. The seven (07) appeals listed in S. No. 2.1 to 2.7 arise out of common order of the Commissioner of Central Excise, Customs & Service Tax, Tirupathi Adjudication Order No. 12, 13 & 14/2008, dated 28-8-2008 by which Commissioner confirmed demand of duty along with interest against M/s. GDR Cylinders (P) Ltd. and imposed penalties on GDR Cylinders (P) Ltd. and others as detailed below : Sl. No. Appeal No. Party's name Period Duty Penalty (Rs.) 2.1 878/2008 GDR Cylinders P. Ltd. 17-9-01 to 12/2006 70,77,117 + Interest 7077,117 2.2 879/2008 R. Ravi Verma, Dir, GDR Cylinders P. Ltd. &....
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....tices, Commissioner issued the impugned orders demanding duties and imposing penalties as mentioned above. 5. The learned Advocate assailed the orders of Commissioner on the following grounds : (a) Sri Mehala Transport (SMT for short) though a partnership concern consisting of the Directors and their relatives and employees of appellant companies as partners is an independent concern and is neither a dummy unit of the appellant companies nor a front of the appellant companies. SMT consists of 15 partners each of whom contributed Rs. 1,00,000/- towards capital and the firm came into existence as per partnership deal dated 1-4-2001. They are Income Tax assessees. The partnership deal could not be produced at the time of investigation as the same was not readily available. The hiring of vehicles by SMT, from the Directors cannot lead to a conclusion that the said firm is not independent. (b) The financial transactions between the appellant-companies and SMT are at arms length and in the normal course of business. The appellant-companies were meeting the fuel expenses and other expenses for running the vehicle at the time of booking its....
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.... (a) As per Rule 5 of the Central Excise Valuation (Determination of Price of Excisable Goods), Rules, 2000 read with Section 4(1)(a) of the Central Excise Act, 1944, the value of excisable goods shall be deemed to be the transaction value, excluding the cost of transportation from the place of removal up to the place of delivery of such excisable goods. Thus the freight/transportation charges are eligible for deduction in determining the assessable value if the actual charges has been shown in the invoice separately in terms of Board's Circular M.F. (D.R.) F. No. 354/81/2000-TRU dated 30-6-2000. (b) With the change in the pricing pattern from August 2001, the employees of appellant-companies including the Managing Director and the Director adopted a modus operandi of starting a transport company under the name of M/s. Sri Mehala Transports (SMT) and engaging the same for the transportation of cylinders for delivery to the oil companies. The freight charges were inflated abnormally and were claimed as deduction from Gross Delivery Price fixed by the purchasing oil companies and thereby reducing the assessable value of the cylinders for disc....
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....t would be appropriate to discuss the merits of the case before taking the issue of limitation. 7.2 It is not in dispute that the value of excisable goods shall be deemed to be transaction value, excluding the cost of transportation from the place of removal to the place of delivery of such excisable goods in terms of Section 4(1)(a) of Central Excise Act, 1944 read with Rule 5 of the Central Excise Valuation (Determination of Price of Goods), Rules 2000. 7.3 However, the above legal position does not permit an assessee to deliberately suppress the assessable value by inflating the cost of transportation. 7.4 In the light of the above legal position, the facts of the present cases require to be analyzed to see whether the findings of the Commissioner that the two appellant-companies have deliberately reduced the assessable value by inflating the cost of transportation are correct or not. 8. The following are relevant - (a) The appellant-companies are supplying to the oil companies the empty LPG cylinders. For the period prior to August 2001, the oil companies were paying the appellant-companies towards freight amounts limited to ....
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....rom Rs. 163 in November 2001 to 301 in Jan 2003 to 327 in November 2003, Rs. 439 in Jun 2004, etc. as detailed in para 40 of the impugned order. (e) In other words, the cost of the main raw material was increasing and the composite sale price remained the same and the assessable value was getting reduced and the deduction towards freight charges claimed was getting inflated clearly with an intention to evade duties. (f) The fact that the recipient companies may be eligible for CENVAT credit cannot absolve them of the consequences of manipulations by the appellant-companies with the intention to evade duty. 9.1 It is the case of the department that the appellant-companies used the transport firm SMT to suit their convenience to inflate the claims towards freight charges and reduce the assessable value within the overall composite price paid by the oil companies. On the other hand, the case of the appellant-companies is that the firm SMT though a partnership firm with the Directors, relatives and employees of the appellant-companies as partners, the same was independent. The vehicles used by SMT were specially designed and were dedica....
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....se that the appellant-companies who were claiming their business transactions with SMT as if in the normal course of business, could afford to pay amounts of freight in excess ranging from 69% to 258% as detailed in para 10.8. It would have been advisable that they have used third party transporter and saved lots of money if they were to do business in the normal course. 9.4 Without going to the controversy as to whether SMT is a dummy or front unit, it is clear that the appellant-companies have clearly used SMT to claim inflated freight charges and consequently to reduce the assessable value and the same have happened in spite of substantial increase in prices of major inputs, namely HR sheets as already discussed. In such a scenario, the case laws relied by them have no application to the facts of their cases. Limitation 10.1 The appellant-companies are challenging the demand raised invoking the extended period of limitation. It is submitted that, in both cases, show cause notices dated 1-9-2006 were issued demanding duties relating to the period July 2001 to January 2002 and, therefore, subsequent show cause notices dated 27-2-2007 and 8-5-2007, in both cases,....
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.... of the above facts, it was held that - "As earlier proceedings in respect of same subject matter was pending adjudication it could be said that there was any suppression and the extended period under Section 11A was not available." (c) Gautami Textile Industries & Sales Corporation In the said case, the issue involved was whether the processing of cotton fabrics was with the aid of power or not. After appreciating the facts that the very same issue was there in earlier proceedings it was held that - "As the department had full knowledge of the activities of the Respondents in view of the earlier proceedings against them, we agree with the contention of the learned Advocate that there is no justification for invoking the extended period." (d) Frick India Ltd. In the said case, considering the facts of the case, it has been held that on same set of facts demand cannot be raised alleging suppression of facts when earlier show cause notice has been issued on same issue and on same set of facts. (e) Tuni Textile Mills Ltd. In the said case, it was held that invoking extended period of limitation in the "second notice" when the same was issued on t....
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....ally and steeply enhanced the amount of freight charges so that the assessable values were reduced. The department has undertaken painstaking investigation even after the issue of first set of show-cause notices, to unearth the various dimensions of the manipulations undertaken by the appellant-companies. Therefore, extended period of limitation have rightly been invoked in the subsequent set of show cause notices issued to the appellant-companies. 10.5 In the case of M.M. Cylinders (P) Ltd., it has been claimed that audit has taken place during July-Augusi 2004 and a letter was issued by Superintendent of Central Excise, vide O.C. No. 425 of 2004 dated 6-8-2004. When investigations were going on till December 2006, no claim has been made on behalf of the appellant, that any such communication has been issued by the jurisdiction Supdt. Even in the reply to the show-cause notice, it has not been claimed that such a communication has been received from the Superintendent of Central Excise and that the appellant-company has given any reply to the said communication. Under these circumstances, the claim before the Tribunal that there was such a communication by the Superintende....