2004 (96) ECC 478 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

New Delhi -- Bench-NB(A)

Shri V.K. Agrawal, Member (T) and Shri P.G. Chacko, Member (J)

Metzeller Automotive Profiles India Pvt. Ltd.

Versus

CCE, Ghaziabad

Appeal No. E/3911/2003-NB(A)

[Arising out of Order-in-Appeal No 339/CE/CZB/2003 dated 22.9.2003 passed by the Commissioner of Customs & Central Excise (Appeals), Ghaziabad]

Final Order No. 170/2004-NB(A), dt. 5.3.2004, Certified on 19.3.2004

Refund

Natural Justice -- Denial -- Original Authority not stating any reason for rejecting the refund claim and, therefore, the Appellants had no opportunity before the Commissioner (Appeals) to set up defence against rejection of their refund claim on any ground relatable to Rule 173-B declaration -- To this extent the Commissioner (Appeals) also denied Natural Justice to the party -- Case remanded to Original Authority for de novo adjudication of the refund claim.

PRESENT :

Shri B.L. Narasimhan, Adv. for the appellants.

Shri S.C. Pushkarna, DR for the respondent.

Case Cited :

Elcon Clipsal India Ltd. v. CCE, Ahmedabad, 2002 (53) RLT 554 (CEGAT)............ [Para 3]

JUDGMENT

The appellants are engaged in the manufacture of Weather Strips and Anti-Vibration System falling under Chapter 40 of the CETA Schedule, which are supplied to manufacturers of motor vehicles. M/s Tata Engineering & Locomotive Company Ltd, Pune were among their customers. Under a contract entered into by the appellants with TELCO in December 1998, the appellants had received an amount of Rs. 639.14 lakhs from TELCO for design and development of tools required for the manufacture of motor vehicle parts (MV parts, for short) to be supplied to them. The appellants developed tools within their factory and used the same for the manufacture of MV parts ordered by TELCO. They had not paid duty of excise on the tool design/development charges.

2. Later on, sometime in June 1999, officers of Central Excise visited their factory and collected documentary and oral evidences of duty having not been paid on the above charges on the tools captively developed and used by the appellants. The appellants paid Rs. 65 lakhs towards duty on the said charges at the instance of the officers. Subsequently, however, the filed a claim for refund of this amount of Rs. 65 lakhs on the ground that the tools were wholly exempt from duty under Notification No. 67/95-CE dated 16.3.95 (as amended). The jurisdictional Deputy Commissioner of Central Excise, without issuing any show- cause notice or giving the party any opportunity of being heard, decided that the refund claim was not maintainable. This decision was communicated to the party in letter dated 29.12.99. The decision of the Deputy Commissioner was challenged before the Commissioner (Appeals) on merits as well as on the ground of violation of natural justice. The appellate authority rejected the appeal. Hence, the appeal before us.

3. Heard both the sides. The learned Counsel for the appellants submitted that they had since amortized the value of the tools (for design and development of which they had received an amount of over Rs. 639 lakhs from TELCO) and included the amortized value in the assessable value of MV parts cleared to TELCO for the past period; that they had paid the differential duty on the differential value of such MV parts; that for the subsequent period also, they were including the amortized value of tools in the assessable value of MV parts supplied to TELCO on a regular basis and were paying duty accordingly; that no duty of excise over and above what was paid on the amortized value of tools was leviable from the appellants in respect of the tools which, being capital goods developed and captively used within the factory of production of final products (MV parts), were wholly exempt from duty of excise under Notification No. 67/95-CE (as amended); that the amount of Rs. 65 lakhs collected by the department on the value addition made to MV parts on account of costing on the goods was liable to be refunded to the appellants, who had already paid duty of excise on the amortized value of tools in respect of the clearances of MV parts made to TELCO; that none of the lower authorities had examined this ground of refund application in the correct perspective; that even the plea of violation of natural justice raised before the lower appellate authority had been ignored; that the appellants were entitled to refund of the amount of Rs. 65 lakhs on the strength of the Exemption Notification. Counsel relied on the Tribunal's decision in Elcon Clipsal India Ltd. v. CCE Ahmedabad, 2002 (53) RLT 554 (CEGAT) wherein the benefit of exemption under the same Notification had been granted to the assessee is respect of the moulds, dies and press tools which were manufactured by them and used within their factory for manufacture of final products which were sold to a customer at whose expense the said moulds, dies and press tools had been manufactured. The DR reiterated the findings of the Commissioner (Appeals).

4. It is not in dispute that the refund claim was disposed of by the original authority without observing the principles of natural justice. It is, again, not in dispute that this grievance of the party was not heeded by the lower appellate authority. Having carefully examined the case on its merits, we notice that both the lower authorities have treated the payment of Rs. 65 lakhs as a payment of duty of excise on the motor vehicle components cleared by the appellants to TELCO. It appears from the letter dated 29.12.99 of the Deputy Commissioner that the above amount was collected from the appellants by the department as duty of excise on the design and development charges incurred by TELCO for the tools. The lower authorities recorded findings to the effect that the entire amount received by the appellants from TELCO towards designing and developing charges for tools was includible in the assessable value of the MV components cleared to the latter. The appellants have contended that it is only the amortized value of the tools that should have been included in the assessable value of MV components supplied to TELCO. It has also been stated by them that they have already included the amortized value in the assessable value of such MV components for the entire period of dispute. This fact was clearly pleaded by the appellants before the first appellate authority but that authority has not examined it. The Commissioner (Appeals) has taken the view that the appellants are not entitled to the benefit of Notification No. 67/95 dated 16.3.95 (as amended) as the designing and developing cost of the tools was paid by the buyer. Thus, obviously, the question considered by the Commissioner (Appeals) was whether the benefit of the Notification was available to the assessee in respect of capital goods manufactured at the cost of the buyer and captively used in the factory of production of the final product cleared to the buyer. The question has been answered in the negative by the Commissioner (Appeals) who has also held that the benefit of the Notification, not claimed in the classification declaration filed under Rule 173-B, cannot be claimed afterwards. However, the original authority had not stated this as a reason for rejecting the refund claim and, therefore, the appellants had no opportunity before the Commissioner (Appeals) to set up defence against rejection of their refund claim on any ground relatable to Rule 173-B declaration. To this extent, the Commissioner (Appeals) also denied natural justice to the party.

5. It has been submitted by the Counsel that the department has since accepted the includibility of amortized value of the tools, for which designing and developing charges are paid by the customer, in the assessable value of MV components supplied to them by the appellants and has, accordingly, issued a show-cause notice to the appellants for appropriating the amount already paid by them towards duty of excise on the amortized value of the tools (used for the manufacture of MV components supplied to TELCO). This submission has not been contested.

6. Having regard to the undisputed fact that the original authority rejected the refund claim in gross violation of principles of natural justice as also to the fact that the Commissioner (Appeals) denied natural justice to the party to the extent of raising an additional ground for rejecting the refund claim without notice to them, we are unable to sustain their proceedings. We would remand the case to the original authority for de novo adjudication of the refund claim. Accordingly, the orders of both the lower authorities are set aside and this appeal is allowed by way of remand. The original authority is directed to frame the issue correctly and decide thereon afresh in accordance with law as well as the principles of natural justice.

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