2004 (97) ECC 294 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

South Zonal Bench -- Chennai

Shri P.G. Chacko, Member (J) and Shri Jeet Ram Kait, Member (T)

Tyrolit Sak Ltd.

Versus

Commissioner of Central Excise, Chennai

E/EH/199/2004, E/PD/027/2004 in E/57/2004

Misc. Order No. 343/2004
Stay Order No. 234/2004, dt. 25.5.2004, Certified on 18.6.2004

Waiver of Pre-deposit

Demand raised in show cause notice beyond the normal period of limitation -- Suppression of facts based of evidence is missing -- Appellant has strong case against penalty -- Sections 11A, 11AC, 35F of Central Excise Act.

Application allowed

PRESENT :

Shri R. Swaminathan, Adv. for the appellant.

Smt. R. Bhagya Devi, SDR for the respondent.

Case Cited :

AKG Acoustics (India) Ltd. v. Commissioner, 2000 (125) ELT 713......................... [Para 3]

Per : P.G. Chacko (Oral)

There is a demand of Rs. 29,59,416 as duty of excise on the appellants in respect of Tungsten Carbide Brazed Tools for the period 31.5.1997 to 31.12.2001. The demand was confirmed by the lower authority in adjudication of a Show-cause Notice dated 29.5.2002, which had invoked the extended period of limitation under the Proviso to Section 11A(1) of the Central Excise Act, 1944. A major part of the demand is on account of enhancement of value of the goods and the remaining part (amounting to Rs. 1.6 lakhs) on account of denial of SSI exemption. There is also a penalty of equal amount on the appellants under Section 11AC of the Act, which is based on a finding of suppression of facts.

2. We have heard both sides. It appears from the records and submissions that the demand is on the goods cleared by the appellants to M/s Widia (India) Ltd., (M/s WIL). The tool tips required for the manufacture of the final product (tools) had been supplied by M/s WIL and, in that transaction, a discount to the extent of 58% was allowed by them. It appears that M/s WIL were supplying such tool tips to other buyers at a lower discount (24%). The entire quantity of tools manufactured by the appellants out of the tool tips supplied by M/s WIL were cleared to the latter, on payment of duty on an assessable value which did not include the differential discount (58%-24%). The department adopted the sale price charged by M/s WIL to the other buyers, for the purpose of computing the assessable value of the goods cleared by the appellants. The demand is on the differential value.

3. Ld. Counsel for the appellants submits that the Commissioner of Central Excise has treated the appellants and M/s WIL as related persons under Section 4(4) (c)of the Central Excise Act, and, on this basis, the value of the goods has been enhanced and the demand confirmed. Counsel submits that the finding of the Commissioner as to the alleged relationship between the appellants and M/s WIL is not sustainable on facts. He cites the case of M/s. AKG Acoustics (India) Ltd. v. Commissioner, 2000 (125) ELT 713 which, it is claimed, involves a similar set of facts. According to the Counsel, there is a clear analogy between the instant case and that of AKG Acoustics (Supra). He has drawn the analogy between the 2 cases in the following manner:

AKG/VERSAT WIDIA/APPELLANTS

Microphone capsules sold by AKG to Versat Tool tips sold by Widia to appellants

Price charged by AKG to Versat is much lower as compared to the price charged to wholesale buyer (i.e., one fifth of the price) Price charged by Widia to the appellants is lower. (To others 24% discount and to the appellants 58% discount).

Versat manufactured Microphones using the "Microphone capsules" purchased from AKG. Appellants manufactured Brazed Tools using the "Tool tips" purchased from Widia.

Microphones were manufactured with the brand name of AKG. Brazed tools were manufactured with the brand name of Widia.

Alleged that Versat supplied Microphones at a depressed value to AKG in view of purchase of "mocrophone capsules" from AKG. Alleged that appellants supplied Brazed Tools at a depressed value to Widia in view of purchase of "Tool tips" from Widia.

Duty demanded on the sale price of Microphones by AKG in the market. Duty demanded on the sale price of tools by Widia in the market.

Ld. SDR seeks to distinguish the instant case from that of AKG Acoustics (supra), by submitting that, in the latter case, there is a clear finding that the buyer of the goods is an industrial consumer, whereas a similar finding is not forthcoming in the Commissioner's order impugned in the instant case. We have examined these submissions. The Counsel's analogy tabulated above is not seriously contested. What has been stated by Ld. SDR is that the Ld. Commissioner, in the instant case, has not expressly accepted M/s TSL as an industrial consumer. But, from the facts of the case, it is possible to find that the appellants were an industrial consumer vis-a-vis the tool tip supplied to them by M/s WIL. We have also heard both sides on the limitation question. The demand of duty for the period 1997-2001 was raised in a Show-cause Notice dated 29.5.2002, beyond the normal period of limitation. The Commissioner has upheld the allegation of suppression of facts and confirmed the demand of duty by invoking the extended period of limitation. Counsel has submitted that `suppression of facts by the appellants with intent to evade payment of duty' is not anything found by the Commissioner with adequate reasoning based on sufficient evidence. On a perusal of the impugned order, we have not been able to discern as to what was suppressed by the appellants and, if so, how? The necessary finding of suppression of facts, based on evidence and reasoning, is conspicuously missing in the impugned order. On account of this, a major part of the demand of duty prima facie appears to be hit by time bar. For the same reason, the appellants seem to have a strong case against penalty as well inasmuch as the penalty of equal amount imposed under Section 11AC is also squarely based on suppression.

4. In the result, the appellants have established a strong prima facie case warranting full waiver of predeposit and stay of recovery in respect of the penalty as well as the duty computed on the differential value of the goods. As far as the demand of duty based on denial of SSI exemption is concerned, Ld. Counsel, fairly, has not pressed the challenge. He has, however, hastened to add that the amount of about Rs. 1.75 lacs has already been paid by the party against the demand of Rs. 1.60 lakhs. This factual claim is not contested. Therefore, insofar as the demand of duty based on denial of SSI exemption is concerned, the question of waiver of predeposit and stay of recovery does not arise, in view of the payment already made.

5. Waiver of predeposit and stay of recovery are, therefore, allowed as prayed for. Since we have already disposed of the stay application, the other application seeking early hearing of the stay application is infructuous and is rejected.

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