2004 (97) ECC 55 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

West Regional Bench -- Mumbai

Shri S.S. Sekhon, Member (T) and Shri T. Anjeneyulu, Member (J)

O.N.G.C. Ltd.

Versus

Commissioner of Central Excise, Mumbai VII

Appeal No. E/53/01-Mum

[Arising out of Order-in-Original No. 07/2000 dated 29.9.2000 passed by the Commissioner of Central Excise & Customs, Mumbai VII]

Order No. A/336/WZB/2004-C-II, dt. 28.5.2004, Certified on 2.6.2004

Duty demand (C. Excise)

Under valuation of C203 (Ethane/Propane) manufactured and cleared by the assessee -- Since the issue of liability of duty on merits was not pressed, no findings are arrived as regards the liability to pay the duty.

[Paras 2, 4, 5]

Penalty (C. Excise)

Under Section 11AC and Rule 173Q -- The failure to comply with provisional assessment procedure as found by the adjudicator does not materially effect the position, since there is no duty found to be barred by limitation or and loss to revenue on that account. Penalty under section 11 AC is not called for in facts of this case. The same is set aside. As regard penalty under Rule 173Q, since the ONGC declared whatever was the approved price as per the Ministry of Petroleum and cleared goods at these rates, there is no contravention of any rule. Penalty under Rule 173Q is therefore to be set aside.

[Para 5]

Interest (C. Excise)

Under Section 11AB -- The liability to pay interest will start for the first day of the month, immediately after the month in which the duty ought to have been paid by the manufacturer and sub-section (2) declares the same not to be retrospective. Interest therefore has to be computed as per laws.

[Para 6]

Appeal is allowed accordingly

PRESENT :

Shri J.J. Bhatt, Sr. Adv. for the appellants.

Shri R.K. Pardeshi, JDR for the respondent.

Per : S. S. Sekhon

A demand of duty was confirmed on the ground of under-valuation of C203 (Ethane/Propane) manufactured and cleared by the assessee during the period impugned herein since duty was discharged on the ratio of Rs. 3,300 PMT for the product while the Ministry of Petroleum Central Government had re-fixed the prices for the different period and assessable value were to be re-determined. The duty demand worked out as per revised Assessable Value due to re-fixation of the prices by Ministry of Petroleum have been discharged. The Ld. Sr. Advocate does not press on merits of the demand of duty so made and paid except that they had sold the products on actual basis of price of Rs. 3300 P.M.T during the said period and no amounts in excess thereof have been received/recovered from the buyers. The delay, if any, in discharge of the duty at prices fixed by the Ministry of Petroleum is due to late receipt of the re-fixation decision. After receipt of the decision no delay on part of ONGC, his clients in discharging the liabilities of duty at higher levels of assessable value is found. The Ld. Senior Advocate submits that there was no mala fides and or intention to evade or short pay the liability of duty by the Public Sector organization and stressed the mandatory penalty on this case under Section 11 AC is not called for. Nor is the interest liability required to be worked out and imposed under Section 11 AB.

2. The Ld. DR relies on para 37 of the order in original to support the levy of penalty interest and duty in the facts of this case. The para reads as under:

"The assessee never disclosed their endeavour to get the price revised to the department. Therefore the assessee was liable to pay differential duty under the provisions of Rule 9(2) of Central Excise Rules, 1944 read with sub-section (1) of Section 11A of the Central Excise Act, 1944, including proviso thereto. Assessee have neither discharged duty correctly nor resorted to provisional assessment as required under Rule 9B of the Central Excise, therefore that are also liable to penalty under Rules 9(2), 52A, 173Q and 226 of the Central Excise Rules, 1944 and the provision of Section 11AC of the Central Excise Act, 1944. Assessee is also liable to pay interest under 11AB. The assessee argument regarding the penalty under Section 11AC only after enactment is acceptable. Since the notices has already paid duty amount voluntarily, I take a lenient view while imposing penalty under Rule 173Q."

3. The following show cause notices were issued denying duties

Date of Notice | Period | Amounts in Rs.
(i) 5.4.99 | 4/99 to 12/98 | 88,11,86,469
(ii) 9.6.98 | 1/99 to 5/99 | 8,24,82,373
(iii) 15.10.99 | 6/99 to 9/99 | 5,73,67,945
(iv) 22.3.2000 | 10/99 to 1/2000 | 1,73,13,241
(v) 16.11.98 | 5/98 to 10/98 | 1,33,76,269

The Commissioner has adjudicated all the notices by the order now impugned. Confirmed the demand of duty as per on notices at Sl. No. II to V above after dropping the bulk of the demand of Rs. 88 crores as per notice as Sl. No. 1 above. A penalty of Rs. 15,22,57,210 equivalent to the demand of duty arrived was imposed under Section 11 AC and for the quantum of goods cleared after enactment of Section 11 AC and Rs. 20 lakhs was imposed on M/s ONGC under Rule 173Q for failing to follow correct procedure and for failing to determine the correct duty payable. However he refrained from ordering confiscation under Rule 173 Q(2) and ordered the interest.

4. Since the issue of liability of duty on merits was not pressed, no findings are arrived as regards the liability to pay the duty.

5. As regards penalty under Section 11AC, the Commissioner's finding as per para 37 of the impugned order, as relied by the learned DR, extracted in esctensio (sic) herein above, will not cause and call for upholding a mandatory penalty under Section 11 AC of the Act for the entire quantum of goods cleared after its enactment. There is no element of the short payment to be due to a fraud, collusion or any wilful misstatement or intention on part of the assessee which he was required to make or suppression of fact which the assessee was to disclose. The Commissioner has held "assessee have neither discharged duty correctly nor resorted to provisional assessment" and therefore liable for provision of section, 11AC. The assessee, from the admitted facts on both sides, paid duties as per the prices fixed by Ministry of Petroleum Government of India and also took up the matter with the said Ministry to enhance the prices so fixed and documents to that effect are relied by Revenue. Therefore, they discharged duties on whatever prices the Ministry of Petroleum fixed, and even have the conduct to have paid the differential duty without any demur on receipt of higher price fixation/intimations/approval of Ministry of Petroleum would surely be a conduct by this Public Sector Commission following the Ministry of Petroleum price fixations which cannot be considered to be a deliberate attempt to short pay duty to call for a visit of the onerous penalty under Section 11 AC. Their attempts to get the prices raised and then pay duty demands at such higher prices is to be looked at attempts to free commercial realities. Their inability and for non-disclosure of attempt to get prices re-fixed from the controlling Ministry, as arrived by Commissioner cannot be a cause for penalty. There was no requirement of disclosure or an effort to conceal this attempt of seeking revision since the documents were shown to officers when they visited. The failure to comply with provisional assessment procedure as found by the adjudicator does not materially effect the position, since there is no duty found to be barred by limitation or and loss to revenue on that account. Penalty under section 11 AC is not called for in facts of this case. The same is set aside. As regard penalty under Rule 173Q, since the ONGC declared whatever was the approved price as per the Ministry of Petroleum and cleared goods at these rates, there is no contravention of any rule. Penalty under Rule 173Q is therefore to be set aside.

6. As regards interest, Section 11AB as arrived at, the liability to pay interest will start for the first day of the month, immediately after the month in which the duty ought to have been paid by the manufacturer and sub-section (2) declares the same not to be retrospective. Interest therefore has to be computed as per laws.

7. Appeal as regards penalty under Section 11AC and Rule 173Q allowed.

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