TaxTMI 
TaxTMI 
2018 (9) TMI 1948
X X X X Extracts X X X X
X X X X Extracts X X X X
....cise Act, 1944 for settlement of their case arising out of the Show Cause Notice SCN No. 34/ATT/ADC/B.1/2016 (C. No. IV/06/38/2015-16 HPU B-I (PF)), dated 27-4-2016 issued by the Additional Commissioner of Central Excise, Bangalore-I Commissionerate, inter alia, demanding Central Excise duty to the tune of Rs. 31,00,460/- (Rs. 17,92,936/- + Rs. 13,07,524/-) along with interest. Penal action was also proposed under the Section 11AC of the Central Excise Act, 1944 and personal penalty was also proposed under Rule 26 of the Central Excise Rules, 2002 on the co-applicants. 1.2 The applicant were engaged in the manufacture of Double/Triple Axle Articulated Trailers, Tippers, General Cargo Bodies, Bulk Semi Trailers, etc. falling under Chapter 87 of the Central Excise Tariff Act, 1985. Based on the specific intelligence to the effect that the applicant were evading payment of Central Excise duty by resorting to undervaluation in respect of the Double/Triple Axle Articulated Trailers manufactured and cleared by them, simultaneous searches were conducted by the officers of the HQRS Preventive Unit, Bangalore-I Commissionerate at their factory premises and the residential premise of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ngaged in the manufacture of Trailers, Tippers, General Cargo Bodies, Bulkers & Storage Tanks and General Fabrication; • Being the Managing Partner, he is taking care of the day-to-day activities of the firm, which includes production, marketing and general administration and one Shri Velmurugan who looks after the manufacturing activity, • As per the requirement of their client the design department prepares the design of the bodies/trailers and accordingly Bill of Material will be prepared and thereafter, the required material will be purchased and manufacturing activity would be launched; • With respect to the Tipper, the input materials are steel, hydraulic kit, machined component, paints and consumable; with respect to trailers, steel axle and suspension kit, break kit, tyres and paints and consumables; • In either case, they receive the chassis for tipper/Cargo bodies and in case of trailers, they receive prime movers; • 'Tyres' are indispensable to any trailer. Manufacture of trailer would not be complete without tyres. However, in this case where they had billed with the remark, 'without tyres', the tyres are ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l Reddy stated, inter alia, that : • He is in agreement that, whenever the tyres were brought in to their premises and fitted within their factory premises, the value of the tyres would have to be necessarily included to the assessable value as per the terms of Section 2(f)(i) of the Central Excise Act, 1944; • They had claimed Nil rate of duty in terms of Sl. No. 276 of Notification No. 12/2012-C.E., dated 17-3-2012 (Condition 27) in respect of Tippers/Load Bodies/Bulkers, • Their customers do not supply them any of the input like steel, consumable, paint and other components for fabrication; • The tippers/load bodies were fabricated as per the specification of the customers with the material that is procured by their unit only; • However, the customers supply them Chassis, on which they do not avail any Cenvat credit, • The practice of non-reversal of Cenvat credit on the value claimed as 'Labour Charges' followed by them is incorrect; • He admitted that they had under-invoiced the actual cost of the Trailers manufactured and removed to their clients and thereby, knowingly evaded the paymen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tial Central Excise duty payable on account of suppression of the actual assessable value of the Articulated (Triple Axle) Trailers manufactured and removed during the period from 1-4-2011 to 31-3-2015 with deliberate intent to evade payment of Central Excise duty (as detailed in the worksheets marked as Annexures-8, 9, 10 and 11) should not be demanded and recovered from the applicant under the proviso to sub-section (1) of Section 11A/sub-section (4) of Section 11A of the Central Excise Act, 1944; (ii) an amount of Rs. 13,07,524/- being the differential amount payable on account of suppression of the actual value in terms of Rule 6(3) of Cenvat Credit Rules, 2004, in respect of Tippers/Load bodies/Bulkers manufactured and removed during the years 2012-13, 2013-14, 2014-15 and 2015-16 claiming exemption in terms of Notification No. 12/2012-C.E., dated 17-3-2012 under Sl. No. 276 (Condition 27) (as detailed in the Annexures 12, 13, 14 & 15 to the SCN) should not be demanded and recovered from them under the proviso to sub-section (1) of Section 11A/sub-section (4) of Section 11A of the Central Excise Act, 1944, (iii) Appropriate inter....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ubmitted that they had not received any additional consideration from their buyers on account of the tyres fitted to the trailers, which were supplied by the customers themselves. • However, on being enlightened about the definition of 'manufacture' in terms of the Central Excise Act, the applicant were agreeable to pay the differential Central Excise duty on such removals, which could not be collected from their customers, along with the applicant interest. • The applicant have paid the admitted amount of Rs. 16,05,691/- towards differential duty involved in respect of the clearance of the excisable goods viz. Double/triple Axle Articulated Trailers, Tippers, General Cargo bodies, Bulk Semi-Trailers, etc. falling under Chapter 87 of the CETA, 1985 during the period from 2011-12 to 2014-15 and an amount of Rs. 13,15,449/- towards interest under Section 11AB/Section 11AA of the Central Excise Act, 1944; 2.2 The applicant humbly requested the Hon'ble Settlement Commission to kindly and carefully examine their submissions and settle the case to the extent of the admitted duty liability and drop the proceedings in respect of the alleged incorrect adopt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed above. • The applicant has been resorting to undervaluation of trailers since a long time as seen from the investigations. The applicant have not disputed the findings of the investigations and have admitted the evasion of duty due to undervaluation. • But for the specific intelligence and thorough investigations by the department, the evasion of the Central Excise duty could be unearthed. Otherwise the applicant would have continued to evade the duty due to Government. In view of this, the settlement commission may be requested not to grant waiver of penalty to the applicant. This view is supported by the Hon'ble Supreme Court's decision in the case of Union of India v. Dharamendra Textile Processors [2008-TIOL-192-SC-CX-LB = 2008 (231) E.L.T. 3 (S.C.)], and also in the case of Union of India v. Rajasthan Spinning and Weaving Mills Ltd., vide Order dated 12-5-2009 [2009 (328) E.L.T. 3 (S.C.)]. • The partners Sri Gopala Reddy and Sri Ramesha K. who were in full control of the affairs of the applicant firm have resorted to evasion of duty and have admitted that they have done so owing to tough marketing compulsions and competitions. In view ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed in respect of the finished goods and also by non-adoption of correct and complete value in terms of Rule 6(3) of the Cenvat Credit Rules, 2004. The applicant, despite being a registered Central Excise Assessee, failed to reverse the Cenvat credit in terms of Rule 6(3) of the Cenvat Credit Rules, 2004. Accordingly, a demand of Central Excise duty of Rs. 17,92,936/- for the period from 2011-12 to 2014-15 on account of undervaluation and Rs. 13,07,524/- on account of incorrect adoption of value in respect of Removals under Notification No. 12/2012, dated 17-3-2012 have been raised wherein they have claimed Nil rate of duty in terms of Sl. No. 276 of the impugned Notification in respect of the said goods. 5.3 The Learned Advocate submitted that the applicant has accepted a differential Central Excise duty of Rs. 16,05,691/- towards undervaluation, as against the amount of Rs. 31,00,460/- demanded in the show cause notice; they admitted the clearances of excisable goods without adopting correct assessable value during the period 2011-12 to 31-3-2016; the applicant does not dispute the quantification in respect of the alleged clearances, however, they are eligible for cum-duty....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... impugned excisable goods, deliberately suppressed the actual value in respect of the finished goods and further resorted to non-adoption of correct and complete value in terms of Rule 6(3) of the Cenvat Credit Rules, 2004. They have sought to evade Central Excise duty by means of the above modus operandi. Also the fact that being a registered Central Excise duty assessee, they failed to reverse the Cenvat credit, in terms of Rule 6(3) of the Cenvat Credit Rules. 5.8 The above facts and further deposition made by the various transporters who procured the impugned goods from the applicant firm, copies of records/documents retrieved from the applicant and statements recorded from various senior functionaries corroborates the failure of the applicant, as narrated above. Accordingly, they are liable for penalty. Findings of the Bench 6.1 The Bench had carefully gone through the case and taken note of the submissions made on behalf of the applicant and the Revenue. Duty and Interest 6.2 This is a case where the applicant who was engaged in the manufacture of excisable goods such as Double/Triple Axle Articulated Trailers, Tippers, General Cargo Bodies, Bulk....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n such value. 6.7 On the above claim of the applicant, the Revenue vide report dated 13-8-2018 have stated that verification of the documents revealed that the applicant had made payment of Service Tax in respect of 'Labour Charges' at applicable rates. The worksheets provided by the applicant was verified with the ER-1 and ST-3 Returns of the assessee. In the report, the Revenue has no objection to consider the applicant's request to adjust the payment made as Service Tax against the demand of 6% of differential Central Excise duty. During the hearing, the counsel of the applicant while praying for grant of immunity from penalty and prosecution also stated that they will not seek any refund on account of payment of Service Tax @ 12.36% instead of Central Excise duty @ 6%. 6.8 The Bench also noted that on the same issue of payment of Service Tax @ 12.36% on labour charges instead of Central Excise duty @ 6% in the case of M/s. Aditya Auto Engineering Ltd. wherein the co-applicant in the instant case is the Managing Director, an order was already passed by this Bench vide Order No. 12-13/2017-C.EX., dated 29-5-2017 based on the report of the Principal Commissioner of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rector and (ii) Shri K. Ramesha the other partner of the applicant firm for their involvement to evade payment of Central Excise duty in the instant case. Shri Gopala Reddy B., the Managing Director of M/s. Aditya Industries was also a co-applicant in the case of M/s. Aditya Auto Engineering Pvt. Ltd. filed before this Bench on 2-1-2017, for which he was penalized vide Final Order Nos. 12-13/2017, dated 29-5-2017. However, in the reply dated 28-3-2018 to the first notice on the application filed by the co-applicant, as to whether the same falls under Section 32-O of the Central Excise Act, 1944 that bars one from filing subsequent application before the Settlement Commission, the co-applicant has not provided any comments but has only remarked as 'Not applicable'. 6.13 On the above issue of filing subsequent application before the Settlement Commission again by the co-applicant, was examined by the Bench and the Bench has come to the conclusion that penalty was proposed to be imposed on Shri Gopala Reddy B., the Managing Director of the applicant company under Rule 26 of the Central Excise Rules, 2002 and not on the ground of concealment of particulars of his own duty liabi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or of M/s. Aditya Industries. 6.16 Shri Gopala Reddy B., Managing Director and one of the partners of the applicant firm in his statement dated 21-3-2016 has stated that the applicant company is a partnership firm with Shri K. Ramesha as the other partner. In his statement Shri Gopala Reddy B. has also admitted that as a Managing Director he was in direct control of the day to day activities of the firm, he was directly responsible for the purchases, production, marketing, removal and sales activities of the applicant firm. He admitted that they had to resort to such practice owing to tough competition from the unorganized sector and undertook not to repeat such mistakes in future. Further, while admitting the practice of non-reversal of Cenvat credit on the value claimed as 'Labour charges' followed by them as incorrect, he undertook to rectify the mistake in respect of such clearances immediately. 6.17 From the case records it is ascertained that both the partners of the applicant firm, Shri Gopala Reddy B. and Shri K. Ramesha were the key persons fully involved in the day to day activities of the firm and had masterminded the modus operandi to evade payment of Ex....