2005 (98) ECC 15 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

South Zonal Bench : Bangalore

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

Sri Sarvaraya Sugars Ltd.

Versus

Commissioner of Central Excise, Visakhapatnam

AND

Commissioner of Central Excise, Visakhapatnam

Versus

Sri Sarvaraya Sugars Ltd.

Appeals No. E/778/2002, E/618/2003

[Arising out of Order-in-Original No. 1/2002-03-SCC dated 3.4.2002 passed by the Commissioner of Central Excise, Visakhapatnam]

Final Order No. 1222 & 1223/2004, dt. 13.7.2004, Certified on 16.7.2004

Demand (C. Excise)

Limitation -- Invasion -- Appellants had not included the value of denaturants in the assessable value which is liable to be included for arriving at the correct assessable value of denatured spirit and not intimate/inform the department about the receipt of denaturants free of cost from their customers. This shows an intention to evade payment of duty and it clearly attracts proviso to Sec. 11A (1). Hence, extended period invocable -- Penalty u/Section 11AC is set aside and u/Rule 173Q is reduced.

Confiscation and Redemption fine (C. Excise)

The appellant has given the invoice-wise statement of the denaturant of the rectified spirit and came to the correct value which is to be added in the assessable value in determining the duty. Such are the authenticated documents and the Commissioner has correctly taken it into consideration. There was no allegation for confiscation, the confiscation of the goods and imposition of redemption fine is not according to law. Therefore, there was no reason for confiscation the goods -- Set aside -- Sec. 34 of CEA.

PRESENT :

Shri Ramesh Ananthan, Adv. for Sri Sarvaraya Sugars Ltd.

Shri P.M. Saleem, SDR for Revenue.

Case Cited :

Sangamner Bhag SSK Ltd v. CCE Aurangabad 2002 (143) ELT 385(T).................. [Para 7]

Per : K.C. Mamgain

These two appeals are against Order-in-Original No. 1/2-2003 SCC dated 3.4.2002 passed by the Commissioner of Central Excise Visak.

Appeal No. E/778/02 is filed by M/s Shri Sarvaraya Sugars Ltd. wherein they have contested the demand of duty and imposition of penalty. Appeal No. E/618/03 is filed by the Commissioner of Central Excise Visak on the ground that the value of the denatured spirit cleared from the factory to bulk buyers has not been correctly determined by the adjudicating authority.

2. M/s. Shri Sarvaraya Sugars Ltd., are manufacturers of Sugar, Molasses, rectified spirit and denatured spirit. Denatured spirit is manufactured out of rectified spirit by adding the required quantity of denaturant. They are clearing the denatured spirit in bulk and in small quantities on payment of central excise duty after filing price declarations under Rule 173-C of Central Excise Rules. During the audit of the accounts of Shri Sarvaraya Sugars Ltd., and on enquiry it was found that denaturant required for manufacture of denatured spirit was supplied to the appellants free of cost by the buyers and its value was not included in the assessable value of denatured spirit cleared to bulk buyers. Show cause notice was therefore issued to the appellants demanding the differential duty in respect of denatured spirit cleared from factory to bulk buyers during the period from 1.1.95 to 30.9.99. Penalty was also proposed under Section 11 AC and Rule 173 Q. On adjudication, the Commissioner came to the conclusion that the appellants received denaturant free of cost from the buyers hence the value of denaturants is to be added to invoice value for demanding central excise duty. He also found that extended period is applicable under Section 11 A for recovery of duty as the appellants did not inform the receipt of denaturants free of cost from their customers. He accordingly confirmed duty of Rs. 97,358 being the differential central excise duty element on the value of denatured spirit after including the cost of denaturants received free of cost by Shri Sarvaraya Sugars from their buyers during the period from 17.2.95 to 18.4.99. He also imposed equivalent penalty under Section 11 AC besides demanding interest and confiscating the goods but giving them an option to pay fine of Rs. 97,358 in lieu of confiscation. He also imposed penalty of Rs. 1,00,000 under Rule 173 Q.

3. Shri Ramesh Ananthan learned advocate appearing for Shri Sarvaraya Sugar Mills Ltd. has no dispute that the value of denaturant has to be added to determine the assessable value of denatured spirit. He only requested that extended period should not be made applicable as the appellants were showing the value of denaturants separately in the invoices as is apparent from para 15 of the impugned order.

4. Shri P.M. Saleem learned SDR appearing for the revenue has said that for the denatured spirit supplied in bulk the appellants have not given the value of denaturant in any of the invoices as it was supplied to them by the customers free of cost. Whereas in the supplies made to retail customers the value of denaturant was shown separately and it was included in payment of Central Excise duty in the assessable value of denatured spirit. The Commissioner has accepted the data furnished by the appellants and demanded duty on the same data. He stated that the duty has been correctly demanded by application of extended period as the appellants had never disclosed to the department that value of denaturants has not been added in the assessable value of denatured spirit. Therefore, extended period was correctly applied and penalty was correctly imposed.

5. In the departmental appeal, it is pleaded that the adjudicating authority while determining the value of denaturant has merely relied on the values furnished in the statement submitted by M/s Sarvaraya at the time of personal hearing on 19.2.02. In the said statement M/s Sarvaraya had shown the value of denaturants as Rs. 12 for the year 94-95 Rs. 11 for 95-96, Rs. 15 for 96-97 and Rs. 25 for 97-98 to 99-2000 whereas in reply to show cause notice the value of denaturant was ranging from Rs. 9.5 to Rs. 26.51 per BL. Thus there is inconsistency in the value of denaturants shown in both the statements. The Commissioner has adopted the figure on lower side without any reasoning. The Commissioner has also ordered for confiscation of goods cleared under various invoices with an option to pay redemption fine of Rs. 97,358. Show cause notice did not seek to confiscate any goods. Therefore, Commissioner erred in partially dropping the demand.

6. In their cross objections, Shri Sarvaraya Sugar mills pleaded that the revenue in their grounds of appeal has mentioned that the cost of denaturant was shown by them ranging from Rs. 9.51 to Rs. 26.51 per BL in their reply dated 21.5.2000 whereas they have shown the value of denaturant ranging from Rs. 11 to Rs. 25 in their letter dated 27.2.2002 and shows inconsistency. They said that the allegation is totally mis-conceived. Adjudicating authority adopted the rates for denaturant from Rs. 11 to Rs. 25 per BL. depending upon average cost of each financial year. The statements showing the cost of rectified spirt, cost of denatured spirit included in the assessable value was shown by them in their reply dated 25.1.2000. In this statement actual cost of denaturant added to cost of rectified spirit to arrive at the assessable value of the denatured spirit is shown. Hence there is neither short payment of duty nor the alleged non-inclusion of cost of material supplied by buyer to the assessable value shown in the invoice. The processing of denatured spirit takes place at the distillery only under the provisions of AP Denatured Spirit and Denatured Spirituous Preparation Rules, 1971 so as to make the rectified spirit supplied unfit for human consumption.

7. We have carefully considered the submissions made by both the sides. We find that there is no dispute on the issue t hat the value of denaturant has to be added in the value of rectified spirit to arrive at the assessable value of denatured spirit which is chargeable to central excise duty. This issue has already been decided in case of Sangamner Bhag SSK Ltd v. CCE Aurangabad, 2002 (143) ELT 385(T).

8. In Appeal No. E/778/2002, the appellant's only plea is that extended period is not applicable for demand of duty and imposition of penalty. We find that this plea of the appellant has been rightly rejected by the Commissioner on the ground that it is the responsibility of the assessee to intimate/inform the department about the receipt of denaturants free of cost from their customers which they failed to do. The appellants had not included the value of denaturants in the assessable value which is liable to be included for arriving at the correct assessable value of denatured spirit. Therefore, we find that this has not been shown by the appellant with an intention to evade payment of duty and it clearly attracts proviso to Section 11A (I). Therefore extended period for demanding duty and imposition of penalty has been correctly invoked. We find that the appellants have also contested imposition of penalty. We find that the penalty under Section 11 AC has already been imposed on the appellants for the period prior to 28.9.96. This is not correct in law. We also find that penalty imposed under Rule 173 Q is quite high and we, therefore reduce the penalty imposed under Rule 173 Q of the Central Excise Rules to Rs. ten thousand and set aside penalty under Section 11 AC and direct the Commissioner to redetermine the penalty under Section 11AC of the Act for the duty short paid after 28.9.96.

9. Appeal of the department E/618/2003 is on the ground that the value of the denaturant was not correctly taken by the adjudicating authority. We do not find any justification in the said claim of the department. The appellant has given the invoice-wise statement of the denaturant of the rectified spirit and came to the correct value which is to be added in the assessable value in determining the duty. The claim of the department is not justified simply on the ground that in their letter dated 21.5.2002 value ranging from Rs. 9.51 to Rs. 26.51 was given, whereas in the statement submitted to the Commissioner, at the time of hearing it is from Rs. 11 to Rs. 26. We find that what was submitted in reply to the show-cause notice was a general statement whereas what was submitted before the Commissioner was the invoice-wise details. Therefore invoice-wise detail submitted by the appellants before the Commissioner (Appeals) are the authenticated documents and the Commissioner has correctly taken it into consideration. We find that no allegation was their in the show cause notice for confiscation of the goods. Therefore there was no reason for confiscating the goods. We find that when there was no allegation for confiscation, the confiscation of the goods and imposition of redemption fine of Rs. 97,358 is not according to law. We therefore set aside the fine imposed in view of confiscation and also the order of confiscation for which there was no proposal in the show-cause notice.

9. Both the appeals are disposed of in the above said manner. Ordered accordingly.

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