C.C.E.,Visakhapatnam vs M/S.Mehta & Co

2. The present appeal filed by the appellant - Commissioner of

Central Excise, Visakhapatnam arises out of an order dated

28.07.2008 passed by the Customs, Excise & Service Tax

Appellate Tribunal, South Zonal Bench at Bangalore (hereinafter

referred

to as `the

Tribunal')

in appeal

No.

E/132/2005.

3. Two primary issues fall for consideration in this appeal. The

first issue is, as to whether or not the demand for payment of duty

is barred by limitation, whereas the second issue is whether the

items like chairs, beds, tables, desks, etc., affixed to the ground

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could be said to be immoveable assets and not liable to excise

duty. The aforesaid two issues have arisen in the light of the rival

submissions made on the basic facts of this appeal which are

hereinafter being set out.

4. M/s. Mehta & Company, Mumbai (the "assessee") are

engaged in the business of interior decoration. The assessee

provides

composite

services

including

woodwork, furniture items etc. They entered into contracts with

customers for doing these works as per their requirement and also

carry out these works at their customer's premises.

5. On gathering specific intelligence that the assesses have

undertaken the manufacture of articles of wood, furniture, etc. in

the premises of Hotel Grand Bay, Vishakhapatnam and removed

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the same without payment of duty of excise, the officers of Head

Quarters Preventive unit inquired and investigated the matter.

6. It was found that the assessee along with M/s

Chandrasekhar Architects Pvt. Ltd., Mumbai entered into an

agreement with M/s. Adyar Gate Hotel Ltd., Chennai (now M/s

Welcome Group) on 30.08.1995 for carrying out the renovation of

the existing structure in their hotel at Nowroji Road,

Maharanipeta, Visakhapatnam. The scope of this agreement was

further modified by another agreement dated 18.10.1995. As seen

by the final bills dated 31.03.1997, raised by the assessee on Hotel

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Grand Bay, it was observed that the assessee, inter alia,

manufactured and cleared furniture, falling under chapter sub-

heading Nos. 9401.00 & 9403.00, 4410.11, 8302.00 and 7610.90

respectively, of the Schedule to the Central Excise Tariff Act, 1985.

As per the agreement the assessee quoted prices which included

sales tax, excise duty, octroi etc.

7. It

appears

that the

assessee

manufactured goods covered under different chapter headings at

the customer's site and removed them without payment of proper

duty of excise with an intention to evade payment of duty. The

contract between the assessee and M/s Adyar Gate Hotel Ltd.,

clearly mentions that the assessee has quoted rates which include

the excise duty and it had been made in the contract that the

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contractor would not have any claim subsequently after execution

of the work for excise duty, sales tax etc. from M/s. Adyar Gate

Hotels Limited.

8. A show cause notice under the Central Excise Act, 1944 [for

short "the Act"] dated 15.05.2000 was issued to the respondent -

M/s. Mehta & Company to show cause as to why: -

1 (i) Duty of excise amounting to Rs.

62,94,910/- should not be demanded from

them on the goods manufactured and

cleared under Rule 9(2) of the Rules read

with the proviso to section 11A (1) of the Act;

2 1 (ii) The amount of Rs. 10,00,000/- already

paid under protest towards the duty of

excise should not be adjusted towards the

payment of duty demanded in (i) above;

7 1 (iii) Penalty should not be imposed on them

under Rule 9(2), Rule 52A and Rule 173Q of

the Rules;

1 (iv) Penalty equal to the duty demanded in (i)

above should not be imposed on them under

Section 11AC of the Act;

1 (v) Interest @ 24% p.a. from the first day of

the month succeeding the month in which

the duty ought to have been paid, till the

date of payment of such duty should not be

demanded from them under section 11 AB

of the Act; and

1 (vi) The goods involved should not be

confiscated under Rule 173Q (1) of the

Rules.

8 9. M/s. Grand Bay Hotel, Beach Road, Visakhapatnam was also

asked to show cause as to why penalty should not be imposed

under Rule 209A of the Rules for purchase and possession of the

excisable goods on which duty of excise had not been paid.

10. The respondent - M/s. Mehta & Co. and M/s. Grand Bay

Hotel

submitted

their

respective

replies.

The

Commissioner of Central Excise vide order dated 31.12.2002

confirmed the demand of Rs. 43,59,710/- out of the proposed

demand of Rs. 62,94,910/- under Rule 9(2) along with penalty of

equal amount i.e. Rs. 43,59,710/- and directed the redemption of

the confiscated goods after the payment of a fine of Rs. 1,00,000/-

plus the duty and penalty adjudged.

9 11. Aggrieved thereby, the respondent filed an appeal before the

CESTAT, Bangalore, which allowed the appeal and remanded the

matter to the concerned adjudicating authority to examine the

matter afresh and to pass an appropriate order in accordance with

law by providing an effective hearing to the parties. Thereupon, the

Commissioner, Central Excise & Customs, Visakhapatnam vide

order

dated

22.10.2003 confirmed the demand of Rs. 14,94,656/- with penalty

of Rs. 7,47,328/- with interest as per Section 11 AB of the Central

Excise Act, 1944 (for short "the Act") and also imposed a penalty of

Rs. 5,00,000/- under Rule 173Q. Aggrieved thereby the

respondent filed an appeal before the Tribunal and vide order dt.

28.7.2008 the Tribunal allowed the appeal and set aside the order

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of the Commissioner, Central Excise & Customs, Visakhapatnam

under the impugned judgment and order as against which the

present appeal was filed.

12. We heard the learned counsel appearing for the parties at

length who had taken us through all the orders which gave rise to

the aforesaid two issues which fall for our consideration in the

present

appeal.

13. The

learned

counsel

appearing

for the

appellant

submitted before us that so far as the issue with regard to the

limitation is concerned, the same was not urged before the

Commissioner when he was hearing the matter after the order of

remand by the Tribunal and in that view of the matter, the

Tribunal could not have decided the said issue against the

appellant. It was further submitted that in any case proviso to

11 Section 11A of the Act is attracted to the facts and circumstances

of the present case, and therefore, the show cause notice was

issued by the appellant within the period of limitation as

prescribed under the proviso to Section 11A of the Act and that

the Tribunal was wrong in holding that the demand was beyond

the period of limitation. It was further submitted that the Tribunal

erred in

holding

that all

the items

manufactured by the assessee are exempted from demand of

excise duty.

14. Per contra, the learned counsel appearing for the respondent,

however, refuted the aforesaid submissions and submitted that

the appellant never had any intention to evade excise duty and

there is no finding to that effect and therefore no such duty is

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leviable particularly when it is barred by limitation. It was also

submitted that the pre-conditions for attracting the provisions of

proviso is not satisfied in the present case, and therefore, it cannot

be submitted that the demand is not barred by limitation.

15. We have considered the aforesaid submissions of the learned

counsel appearing for the parties in the light of the records placed

before us.

So far as

the issue

with

regard to

limitation

is

concerned, since that goes to the root of the demand made, it is

appropriate to deal with the same before we go into the second

issue.

16. Section 11A of the Act empowers the Authority to demand

excise duty in terms of the conditions laid down in the said

provision as and when the pre-conditions mentioned therein are

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satisfied.

17. There is no dispute with regard to the fact that issuance of a

notice for invoking the provisions of Section 11A of the Act is a

condition precedent for a demand to be made under Section 11A of

the Act. However, in the present case, a show cause notice was

issued to the respondent herein making it a specific case that the

respondent manufactured excisable goods as mentioned in the

notice and covered under different chapter headings at the site of

the customer and removed the same without payment of duty of

excise with an intention to evade payment of duty when the

contract clause between the respondent and M/s. Adyar Gate

Hotel Ltd. clearly mentioned that the contractors quoted rate shall

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also include the excise duty. It was also mentioned that such

conscious action on the part of the contractor has clearly

established the intention to evade payment of duty of excise and

consequently proviso to Section 11A of the Act could be invoked in

the present case.

18. In the reply submitted by the respondent, it was stated that a

proforma

was

enclosed

to the

show

cause

notice

and also

the summons. The hotel furnished the details of work done by the

respondent and that the Central Excise Department was informed

that the work order was to carry out job on the turn key basis and

not for any furniture as such.

19. As stated hereinbefore, after the order of remand was passed

15

by the Tribunal, the Commissioner considered the issue with

regard to the liability of payment of excise duty at length and held

that the respondent is liable to pay central excise duty for the

items as specifically mentioned in the said order passed.

20. A perusal of the said order would also indicate that no issue

with regard to the demand raised by the appellant as time barred

was either

raised or

discussed

by the

Commissioner.

21. Being aggrieved by the aforesaid order passed by the

Commissioner, an appeal was filed before the Tribunal. The

Tribunal, however, held that the items fabricated by the

respondent herein are permanently fixed to the walls and ground

of the room and the same could not be removed from one place to

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another without causing much damage to them and without

cannibalizations and consequently the said items cannot be

considered as furniture in the light of the decision of this Court in

the case of Craft Interiors Pvt. Ltd. vs. CCE, Bangalore reported

in (2006 (203) ELT 529 (SC)]. It was, however, held that the

case of the appellant is weak not only on merits, but also in any

case the

entire

demand

is also hit

by time

bar as

there is

no

justification for invocation of the longer period. Thus, findings

which are recorded appear to be abrupt and without recording any

reasons.

22. Consequently, we propose to look into the first issue in the

light of the background facts as stated hereinbefore. The specific

case of the appellant is that the respondent having manufactured

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the excisable goods covered under different chapter headings,

removed them without payment of proper duty of excise and that

from the aforesaid action it is explicit that there was an intention

on the part of the respondent to evade payment of duty

particularly when the contract clause between the respondent and

M/s. Adyar Gate Hotel Ltd. clearly mentioned that the contractors

quoted

rate

would

also

include

excise

duty.

23.

Although, the respondent has pleaded that it was done out of

ignorance, but in our considered opinion there appears to be an

intention to evade excise duty and contravention of the provisions

of the Act. Therefore, proviso of Section 11A (i) of the Act would

get attracted to the facts and circumstances of the present case.

18 24. The cause of action, i.e., date of knowledge could be

attributed to the appellant in the year 1997 when in compliance of

the memo issued by the appellant and also the summons issued,

the hotel furnished its reply setting out the details of the work

done by the appellant amounting to Rs. 991.66 lakhs and at that

stage only

the

department came to know that the work order was to carry out the

job for furniture also. A bare perusal of the records shows that the

aforesaid reply was sent by the respondent on receipt of a letter

issued by the Commissioner of Central Excise on 27.2.1997. If

the period of limitation of five years is computed from the aforesaid

date, the show cause notice having been issued on 15.5.2000, the

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demand made was clearly within the period of limitation as

prescribed, which is five years.

25. So far as the second issue is concerned, we fail to appreciate

as to how the Tribunal could come to a finding, as recorded in the

impugned judgment and order in view of the proposition of law

already settled by this Court in the decision of Craft Interiors

(supra).

26. The

decision

in Craft

Interiors

(supra)

has

clearly

laid down that ordinarily furniture refers to moveable items such

as desk, tables, chairs required for use or ornamentation in a

house or office. So, therefore, the furniture could not have been

held to be immoveable property.

27. A perusal of the records would also indicate that the

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Commissioner in his order has listed out various items which were

held as furniture and while doing so, he has scrutinized the

records to determine the immovability or movability of the items.

A bare perusal of the said order would also indicate that he has

given deductions for the items held as immovable. He has

prepared Annexures 1,2, 3 and 4 and the items mentioned in

Annexures 1 and 2 have been held as `furniture' after proper

examination of the records whereas he has held items in

Annexures 3 and 4 as immovable and has allowed deduction.

28. So far as the items such as chairs, tables etc. listed in

Annexure 5 is concerned, the same admitted to be furniture by the

assessee himself. The Commissioner having considered the

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aforesaid issue carefully and after proper scrutiny, the Tribunal

was not justified in rejecting the said findings by mere conclusion

and without trying to meet the findings recorded by the

Commissioner.

29.

Accordingly, we allow this appeal and set aside the order passed

by the Tribunal and restore the order passed by the

Commissioner. However, there shall be no order as to costs.

..........................................,

J

(DR. MUKUNDAKAM SHARMA)

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...........................................,J

(ANIL R. DAVE)

NEW DELHI;

FEBRUARY 10, 2011.