2004 (97) ECC 574 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

South Zonal Bench : Bangalore

Dr. S.L. Peeran, Member (J) and Shri K.C. Mamgain, Member (T)

Svictor Multicore Solder Pvt. Ltd., Bangalore

Versus

Commissioner of Central Excise, Bangalore

Appeal No. E/318/2001

[Arising out of Order-in-Original No. 08/2001 dated 29.6.2001 passed by the Commissioner of Central Excise, Bangalore]

Final Order No. 1213/2004, dt. 13.7.2004, Certified on 14.7.2004

Demand and Penalty (C. Excise)

Evasion of duty -- Limitation -- Appellant did not file declaration to the Department as required under Notification No. 111/78. The new allegation about the demand is beyond 5 years cannot be raised again as the adjudication order has dropped the demand prior to 1.2.81. Therefore, raising the issue now that there was no suppression of the facts and hence penalty cannot be imposed, is not correct. The intention to evade duty was quite clear as Range Officer has regularly demanded duty in the RT 12 return and the appellants were not honouring the demand and continue to pay duty on lower price than the actual price of the goods. The goods were removed by them without payment of appropriate duty as required under Rule 9, from the place of manufacture. Therefore, imposition of penalty is correct in law. However, penalty reduced.

Appeal rejected

PRESENT :

Shri Rajesh Chander Kumar, Adv. for the appellant.

Shri P.M. Saleem, SDR for the respondent.

Cases Cited :

1. Narendera Engineer Works v. Union of India, 1981 (8) ELT 859......................... [Para 3]

2. Ujagar Prints v. Union of India & Ors., 1988 (18) ECC 435 (SC)......................... [Para 3]

Per : K.C. Mamgain

This appeal is against the Order-in-Original No. 8/2001 dated 29.6.2001, passed by the Commissioner of Central Excise, Bangalore.

2. Shri Rajesh Chander Kumar, Ld. Advocate appearing for the appellants pleaded that he is only contesting the penalty imposed on the appellants.

3. The appellant's Company being a S.S.I unit also undertake job works from various concerns including M/s Bharat Electronics Ltd. (M/s B.E.L.) and M/s Indian Telephone Industries (M/s I.T.I.). The Central Excise Officers of Bangalore visited the premises of the appellants on 28.2.85 and effected seizure of documents from the appellants. The Officers also came across another entity M/s C.G.S. Alloys, the proprietor of which is Mrs. Girija Sinnas who is one of the Directors of the appellant's Company. The Officers sought to construe M/s C.G.S. Alloys as a non-existent entity and clubbed the clearances with those of the appellant's Company. Accordingly a Show Cause Notice was issued to the appellants on 8.1.86 demanding excise duty of Rs. 10,38,006.36 for the period from 1.4.80 to 28.2.85 on the value of clearances including the clearance of M/s C.G.S. Alloys, besides imposition of penalty on the Managing Director Mr. Claude Sinnas and M/s C.G.S. Alloys. The then Collector of Central Excise passed an Order No. 15/86 dated 24.7.86 confirming the demand and imposing penalty of Rs. 5 lakhs on the appellants. Rs. 1000 on M/s C.G.S. Alloys and Rs. 2 lakhs on Shri Claude Sinnas, Managing Director of the appellant's Company. On appeal, the CEGAT, Madras under its Order Nos. 808 to 810/98 dated 22.4.98 confirmed imposition of penalty of Rs. 1,000 on M/s C.G.S. Alloys and set aside the penalty imposed on Shri Claude Sinnas. The adjudication order which confirmed the demand of duty and penalty on the appellants was remanded to the adjudicating authority for fresh disposal on various issues namely--

(i) Whether benefit of Notification No. 187/84 dated 1.8.94 can be denied to the appellants or not.

(ii) To reconsider the plea of the appellants regarding valuation to be adopted in respect of job works carried by the appellants for supply of raw material made to M/s B.E.L.

(iii) To consider the valuation of job works and benefit of Rule 56C of the CER, in view of the ratio of the Judgment in the case of South India Structural Corporation v. CCE.

(iv) Whether demand is time barred or not?

(v) To consider the imposition of penalty on the Company and the Managing Director in the light of Judgment stated by the Advocate.

The Commissioner in the impugned order allowed the benefit of Notification No. 187/84 with effect from 1.8.94 and held the notice for the period from 1.4.80 to 31.1.81 as time barred. He demanded duty of Rs. 8,32,582 and imposed penalty of Rs. 3 lakhs on the appellants under Rules 9, 173Q and 226 of the Central Excise Rules, 1944. The learned Advocate pleaded that the imposition of penalty is not justified as the demand confirmed relates to for the period 1981-85. At that time the appellants were not including the value of the material supply free of charge for payment of duty on the goods manufactured on job works basis in view of the decision of Bombay High Court in the case of Narendera Engineer Works v. Union of India, 1981 (8) ELT 859. He stated that the issue whether the value of the raw materials supplied free of charge to the job worker was to be taken into consideration or not for payment of duty on the goods manufactured on job works basis was in dispute and finally it was decided by the Supreme Court in 1988 only, in the case of Ujagar Prints v. Union of India & Ors., 1988 (18) ECC 435 (SC) : 1988 (38) ELT 535 (SC). He stated that the extended period for demanding duty was not applicable as the appellants were filing the RT 12 returns regularly and continued to pay duty on job charges. Thus, it was within the knowledge of the department that they are paying duty on job charges and there cannot be suppression of facts in such a situation. Therefore, Proviso to Section 11A of the Act cannot be invoked.

4. Shri P.M. Saleem, Ld. SDR appearing for the Revenue pleaded that the Range Officer was pointing out the short levy in RT 12 Returns stating that value of raw material has not been included in the assessable value which should have been included but the appellants, despite pointing out the facts, were not including the value of raw material and were not honouring the demand raised in the RT-12 returns but continued to discharge the duty only on job charges. He stated that the short levy which were being pointed out in RT 12 returns from April 1980 was not being honoured by the appellants. There was no protest or representation on this issue. Therefore, the extended period of demanding duty by issue of show cause notice is properly invocable as the Tribunal in several cases held that if the assessee intentionally continued to pay lower duty, extended time is invocable.

5. We have carefully considered the submissions made by both the sides. We find that from the Final Order Nos. 808 to 810/98 dated 22.4.98 in Para 7, it was mentioned that --

".....He submits that the demand in the SCN has been raised beyond the period of 5 years and such demand is not sustainable. He submits that duty to that extent will be brought down by Rs. 70,000."

The show cause notice was correctly issued for the extended period as the appellants have adopted and devised a modus operandi by floating a unit in the name of M/s CGS Alloys which was not in existence and cleared the goods manufactured by the appellants under the invoices and delivery Challans of the said dummy unit. They did not file declaration to the Department as required under Notification No. 111/78. It was not a dispute earlier that the demand within 5 years is bad in law. It was only pleaded at the first time before the Tribunal that demand is beyond 5 years. Therefore, the Tribunal has remanded back the matter to the Commissioner and the Commissioner in the adjudication order has dropped the demand prior to 1.2.81. Therefore, raising the issue now that there was no suppression of the facts and hence penalty cannot be imposed, is not correct. The intention to evade duty was quite clear as Range Office has regularly demanded duty in the RT 12 return and the appellants were not honouring the demand and continue to pay duty on lower price than the actual price of the goods. The goods were removed by them without payment of appropriate duty as required under Rule 9, from the place of manufacture. Therefore, imposition of penalty is correct in law. However, considering the facts and circumstances of the case we reduce the penalty to Rs. 2 lakhs (Rupees two lakhs only). The appeal is otherwise rejected.

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