TaxTMI 
TaxTMI 
2018 (8) TMI 76
X X X X Extracts X X X X
X X X X Extracts X X X X
....housand Six Hundred and Sixty One) used for doing the said job work was owned by their sister concern. As per the agreement 29.03.2000, the same has been installed in the premises of Appellant for processing of fabrics. After the expiry of the period of agreement period on 31.08.2001, the machinery continued to be installed in their premises. Initially the appellants made the free use of said machinery and thereafter purchased the same. In the financial records of the appellant the said amount of Rs. 1,62,28,661/- to be paid by them towards the purchase of the said machinery from their sister concern was shown outstanding even on 31.03.2003, and against the said outstanding amount no interest was also being paid or required to be paid. After protracted enquiries, appellant gave the information in respect of the said machinery as follows- i. free usage of machinery for the period from 01.09.2001 to 31.08.2002; ii. purchased by the appellant vide invoice no 1 dated 01.09.2002 and invoice no dated 1.12.2002 for an amount of Rs. 1,62,28,661/-; iii. payment against the said purchases made was done in thirteen installments and full payment being made on 31.03.2005; iv. no int....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ances to the department. He also contended against the imposition of penalty. The decisions relied upon by the appellant are as listed in table 1 below: Table 1: Decisions Relied by the Counsel for Appellant CCE Mumbai IV Vs Damnet Chemicals Pvt Limited 2007 (216) ELT 3 (SC) Pahwa Chemicals Pvt Ltd Vs CCE Delhi 2005 (189) ELT257 (SC) Guest Keen Williams Ltd Vs CCE Kolkata II 2007 (218) ELT596 (T) Ujjagar Prints Etc Vs Union of India 1989 (39) ELT 493 (SC) Mech Form Vs CCE Daman 2014 (309) ELT 493 (T) CCE Mumbai III Vs Paper Products Ltd 2009 (242) ELT 98 (T) CCE Mumbai III Vs ISPL Industries 2003 (154) ELT 3 (SC) CCE Coimbatore Vs Shanti Gears Ltd. 2007 (219) ELT 211 (T) Hindalco Industries Ltd Vs CCE Allahabad 2003(161) ELT 346 (T) Denso Kirloskar Industries Pvt Ltd Vs CCE Bangalore 2005(190)ELT204(T) Metachem Metal Industries Vs CCE Kolkata I 2005(191)ELT 392(T) Commissioner Vs Laxmi Precision Tools Ltd. 2004(163)ELTA65(SC) Motorola India (P) Ltd Vs CCE Bangalore 2007 (209) ELT 86 (T) Escorts JCB Ltd Vs CCE Delhi II 2002 (146) ELT 31 (SC) Commissioner Vs FAMM Ltd 2007(217)ELTA77 (SC) C....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... section 4 of the Act except the circumstance where the price is not the sole consideration for sale, the value of such goods shall be deemed to be the aggregate of such transaction value and the amount of money value of any additional consideration flowing directly or indirectly from the buyer to the assessee. Explanation 1 - For removal of doubts, it is hereby clarified that the value, apportioned as appropriate, of the following goods and services, whether supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale of such goods, to the extent that such value has not been included in the price actually paid or payable, shall be treated to be the amount of money value of additional consideration flowing directly or indirectly from the buyer to the assessee in relation to sale of the goods being valued and aggregated accordingly, namely : - (i) value of materials, components, parts and similar items relatable to such goods; (ii) value of tools, dies, moulds, drawings, blue prints, technical maps and charts and similar items used in the production of such goods; (iii) value of material consumed, inclu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndia Ltd Vs CCE [1995 SCC (2) 90] "10. So far as Contention 2 is concerned, it is true that Ponds (1) Limited was almost a wholesale buyer of the appellant's goods, namely, metal containers manufactured by it as it was lifting 90 per cent of the total production of the appellant. For that purpose huge amounts were being advanced free of interest by Ponds (1) Limited to the appellant. When Ponds (1) Limited was given 50 per cent discount from normal price then the material aspect that Ponds (1) Limited had advanced large amounts free of interest had necessarily entered into consideration between the parties. Therefore, special treatment was given by the assessee to Ponds (1) Limited. It has to be appreciated that if Ponds (1) Limited had not given these amounts, the appellants would have been required to borrow these amounts for purchasing raw materials and other accessories from outside like banks etc. and would have been required to pay large amounts of interest which naturally would have got reflected in the purchase price to be charged from the buyers as it would be a part of cost of production which was to be passed on to the customers of the appellant's goods. It....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of manufacture and sale price of the metal containers naturally increasing the concessional price charged from Ponds (1) Limited. 11. On the facts on record, therefore, it must be held that the Tribunal was perfectly justified in taking the view that charging a separate price for the metal containers supplied to M/s Ponds (1) Limited could not stand justified under Section 4(1)(a) proviso and, therefore, to that separate price charged from the Ponds (1) Limited, the extent of benefit obtained by the assessee on interest-free loan was required to be reloaded by hiking the price charged from M/s Ponds (1) Limited to that extent. Contention 2 also, therefore, fails and is rejected." ii. CCE Mumbai III Vs ISPL Industries [2003 (154) ELT 3 (SC)] "7. Shri R.P.Bhat, learned senior counsel appearing for the Revenue submits that amount of advance taken by a manufacturer from its customers free of interest and such money being utilized for the purposes of manufacture of the goods, entails profit to the manufacturer to the extent of interest which would have been paid by the manufacturer to the bank. The benefit which accrues to the manufacturer amounts to profit to him, liable to b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ermining the normal price of the goods." We therefore, find that the main basis of adding the notional interest in assessable value of goods was on account of interest free loan which factor was responsible for determination of price between the parties namely, discount of 50% i.e. the price other than the normal price. There came to be two prices one for those who may not have advanced any interest free loan to the manufacturer and the other for Ponds (I) Limited which was a bulk purchaser to the extent of nearly 90% of the production for which purpose advance was also made available to the manufacturer without interest. The fact of interest free loan, has direct nexus with price fixation at a lower amount than the normal price. 8. The other case on the point which has been relied upon by the learned counsel for the respondents is reported in 1998(2) SCC 24, VST Industries Ltd. Vs. Collector of Central Excise, Hyderabad. The appellant in that case carried on business of manufacture and sale of cigarettes exigable to excise duty. The goods manufactured by them were sold in wholesale. The main dealers would sell the cigarettes to the wholesalers. The appellants sold the goods ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... this judgment. Learned counsel for the appellant submits that all that the revenue has to show is that interest free advance has been made by the buyer to the manufacturer which would lead to a presumption that it is to the advantage of the manufacturer having influenced the fixation of price as well. We, however, fail to appreciate the submission made on behalf of the revenue for drawing a presumption that fixation of price is influenced by such an advance. In this connection, we may refer to the Board's circular of 1998 quoted earlier, clause (iii) of which clearly provides that if there is no difference in the selling price for both categories of the wholesale buyers and there is also "no proof" that on account of advance deposits taken from some buyers, the price charged from all buyers has been reduced, then element of notional interest on advance deposits, cannot be added. Obviously, where there are two prices, one for those who have made the advance and the other who have not, it would require no further proof of the lower price having been influenced by the interest free advance made by the buyer. But otherwise it would require proof and the proof for the purposes of holdi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd the subsequent interest free sale of such machinery by M/s Divya Textiles to the assessee as no interest had been charged towards delayed payment of such huge outstanding amount against the purchase of the said machines." 6.3 After consideration of the submissions made by the Appellant leaned adjudicating authority, found that "16. I find that assess has not submitted any evidence that their processing charges for Divya Textiles were not lower as compared to other. Thus this allegation in the show cause notice is correct." The appeal filed by the Appellant before Commissioner (Appeal) was dismissed by Commissioner (Appeal) for non compliance with the stay order asking appellants to pre-deposit 50% of duty deposit. 6.4 Against the said order of dismissal appellant filed the appeal bearing No E/868/08 along with stay application bearing No E/S/1422/08. The said stay application and appeal was disposed by this tribunal vide order 6/10/2018. While disposing of the appeal, asking appellants to make pre-deposit as ordered by the Commissioner (Appeal), Tribunal observed in para 8 "On perusal of the records, we find that the allegations in the show cause notice are that the applic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e payment of duty. Thus they challenged the finding of the Commissioner (Appeals) and Adjudicating Authority on this account. It is a fact on record that the matter came to light only when the unit was audited. Thereafter enquiries were made by the department from the appellant and as recorded in para 2 of the Show Cause Notice the entire details were made available only after protracted communications. 7.2 It is recorded in the show cause notice that "During the checking of the financial accounts of the assessee as on 31.03.2003 the amount of Rs. 1,62,28,661/- payable to M/s Divya Textiles on account of purchase of aforesaid machines remained outstanding against the assessee and no interest was paid by the assessee to M/s Divya Textiles for free use of the machines and subsequent delayed payment of the purchase price as mentioned above. Enquiry was therefore made and assessee was asked by the Range Supdt to furnish information about the free use and interest free purchase of the said machines, the details of the amount outstanding financial year wise against purchase of the said machines and the details of payment made for such purchase. Upon repeated requests and reminders, th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eriod of time to confirm the tax demand cannot be faulted at all and we hold accordingly. The Honourable High Court of Gujarat in Salasar Dyeing and Printing Mills P. Ltd. v. Commissioner of Central Excise and Customs, Surat-I [2013] 290 ELT 322 (Guj) has held that: "15. Upon reading the relevant provisions contained in section 11A of the Act, it becomes clear that in the case of duty which has not been levied or paid, or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion, wilful misstatement, suppression of facts, etc., period of service of notice on the person chargeable with such duty would be five years instead of one year provided in normal circumstances. Nowhere does this provision refer to the period of service of notice after fraud, collusion, wilful misstatement or suppression, etc., comes to the knowledge of the Department. In simple terms, the Department could recover unpaid duty up to a period of five years anterior to the date of service of notice when the case falls under the proviso to sub-section (1) and such omission is on account of fraud, collusion, wilful misstatement, etc." 7.5 Further Hon'ble Apex Court has in case ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al to the demand then there may not be the case of intention to evade payment of duty. In this connection, reliance was also placed on the judgments of this Court in Amco Batteries Ltd. v. Collector of Central Excise, Bangalore reported in 2003 (153) ELT 7; Padmini Products v. Collector of Central Excise reported in 1989 (43) ELT 195; and Formica India Division v. Collector of Central Excise reported in 1995 (77) ELT 511. We do not find merit in the above contentions. In this matter, we are concerned with the application of the above judgments to the facts of this case. The words "wilfulness" and "intent" in section 11A are expressions of mental state at the time of manufacture and clearance of the goods. The situs of the levy of central excise is on manufacture. Pricing and value of clearances are matters specially within the knowledge of the assessee. As stated above, the assessee herein was in the business of manufacture of chewing tobacco and its preparations for last couple of years. In the course of business, the assessee had dealt with similarly situated traders. It was fully aware that those traders who produced similar compounds had their units licensed or registered an....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Community. A disregard for the interest of the Community can be manifested only at the cost of forfeiting the trust and faith of the community in the system to administer justice in an even handed manner without fear of criticism from the quarters which view white collar crimes with a permissive eye, unmindful of the damage; done to the National Economy and National Interest, as was aptly stated in State of Gujarat v. Mohanlal Jitamalji Porwal and Anr., AIR (1987) 1321)". 9.2 Kerala High Court has in case of Assistant Commissioner of Central Excise Vs. Krishna Paduval 2006 (1) STR 185 (Ker) observed in para 11 as follows: "11. The penalty imposable under S. 76 is for failure to pay service tax by the person liable to pay the same in accordance with the provisions of S. 68 and the Rules made thereunder, whereas S. 78 relates to penalty for suppression of the value of taxable service. Of course these two offences may arise in the course of the same transaction, or from the same act of the person concerned. But we are of opinion that the incidents of imposition of penalty are distinct and separate and even if the offences are committed in the course of same transaction or arise....