Dewas Metal Sections Ltd vs Cce, Indore

[Arising out of Order-in-Appeal No.IND-I/25/2006 dated 18.01.2006 passed by the Commissioner, Central Excise (Appeals), Indore]

For approval and signature:

HONBLE MR. RAKESH KUMAR, MEMBER (TECHNICAL)

HONBLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)

1. Whether Press reporters may be allowed to see the

order for publication as per Rule 27 of the CESTAT

(Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the

CESTAT (Procedure) Rules, 1982 for publication in

any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy

of the Order?

4. Whether Order is to be circulated to the Departmental

authorities?

__________________________________________________

Dewas Metal Sections Ltd. Appellant

Vs.

CCE, Indore  Respondent

Present for the Appellant : Shri Priyanka Goel, Advocate

Present for the Respondent: Shri R. K. Grover, DR

Coram:HONBLE MR. RAKESH KUMAR, MEMBER (TECHNICAL)

HONBLE MR.S.K. MOHANTY, MEMBER (JUDICIAL)

Date of Hearing/Decision: 01/01/2015

FINAL ORDER NO. _______________

PER: RAKESH KUMAR

The appellants are manufacturers of the angles, shapes, sections and motor vehicle parts chargeable Central Excise duty under Chapter heading 72, 84 & 87 of the Central Excise Tariff. They manufactured certain automobile parts for M/s. Bajaj Tempo Ltd. in terms of supply agreement with them at a specified price. However, as per the understanding between the appellant and M/s.Bajaj Tempo Ltd., in order to ensure timely supply of the products, the appellant purchased their two years requirement of the raw-material at one time and since this involved extra carrying cost of the raw-material inventory, this extra carrying cost was recovered from M/s.Bajaj Tempo Ltd as interest on raw-material inventory under debit notes. The point of dispute is as to whether the amount charged by the appellant from M/s. Bajaj Tempo as extra carrying cost of the raw-material inventory would be includible in the assessable value of the goods. The lower authorities decided this issue against the appellant and have confirmed the duty demand of Rs.1,54,720/- against the appellant for the period 01.04.2002 to 31.03.2004 alongwith interest thereon under section 11A (1) and imposed penalty of equal amount on them under Rule 25 of Central Excise Act read with section 11AC of the Act. Against this order of the Commissioner (Appeals), this appeal has been filed.

2. Heard both the sides.

3. Ms. Priyanka Goyal, Advocate, the ld. Counsel for the appellant pleaded that the entire raw material requirement for two years had been purchased at a time to ensure timely supply of the finished product to the customer M/s.Bajaj Tempo. that since this involved extra carrying cost of the raw-material inventory, the same has been charged from M/s.Bajaj Tempo, under debit notes, that recovery of the extra inventory cost from M/s. Bajaj Tempo has not influenced supply price of the final price and the same cannot be treated as additional consideration, that the impugned order treating this amount as additional consideration and confirming duty demand on this ground is not correct, that in any case, there was no wilful misstatement suppression of fact etc. on the part of the appellant and hence there was no justification for invoking longer limitation period under provision to section 11 A (l) and hence the entire duty demand raised under SCN dated 29.06.2005 is time barred, that in this regard, she relies upon the Apex Courts judgement in the case of Uniworth Textile Ltd. Vs. CCE, Raipur reported in 2013 (288) ELT 161 (S.C.) wherein the Apex Court has held that mere non-payment of duties is not equivalent to fraud or wilful misstatement or suppression of fact etc., otherwise, there would be no situation for which the normal limitation period of six months would apply, that the ratio of this judgement of the Apex Court is squarely applicable to the facts of this case, that for the same reason there was no justification for imposition of equal penalty under section 11 AC and that in view of the submissions the impugned order is not correct.

4. Shri. R.K. Grover, the ld. DR, defended the impugned order by reiterating the findings of the Commissioner (Appeals) and pleaded that extended period of limitation has been correctly invoked and penalty under section 11 AC has been correctly imposed, as the appellants, in the ER-1 returns filed by them, has never disclosed the fact of charging of extra inventory cost from their customers under the debit note , that this fact came to the notice of the Department only during audit and thus the payment of duty is on account of wilful suppression of the fact by the assessee. He pleaded that the Apex Courts judgment in case of Uniworth Textiles Ltd. vs. CCE, Raipur (SC) (supra) cited by the ld. Counsel is not applicable to the facts of this case. He, therefore, pleaded that there is no infirmity in the impugned order.

5. We have considered the submissions from both the sides and perused the records. As regards the merits of the case, the point of dispute is as to whether the amount charged by the appellant from their customer - M/s. Bajaj Tempo under debit notes as interest on raw-material inventory, which was the cost of carrying additional raw-material inventory to ensure timely supply of the finished product to the M/s Bajaj Tempo, is to be included in the assessable value or not, in terms of the Apex Courts judgement in the case of Bombay Tyre International vs. Union of India reported in 1983 ELT 1896, the cost of carrying finished goods inventory is includible in the assessable value and no reduction of this account can be claimed by the appellant and in our view, the ratio of this judgment of the Apex Court would be applicable to the cost of raw material inventory also. It has, therefore, to be held that the amount charged from the customers as carrying cost of the extra raw materialinventory would be includible in the assessable value.

6. As regards the question of limitation and applicability of Section 11AC, the question to be decided is as to whether the short payment of duty was on account of wilful misstatement or suppression of fact or deliberate contravention to the provisions of Central Excise Act, 1944 or of the Rules made there under with intent to evade payment of duty. While deciding this question, it has to be kept in mind that during the period of dispute there was system of self assessment under which an assessee was required to self assesses his duty liability and file ER 1 return to the Jurisdictional Central Excise Officer. In our view, in terms of the system of the self assessment, an assessee was expected to disclose all the facts which were necessary to enable the assessing officer to verify as to whether the self-assessment tax is correct or not and failure to disclose any fact which was necessary to enable the assessing officer to ascertain the correctness of the self assessed tex would amount to suppression of the relevant facts. The suppression of fact or contravention of the Provisions of the Central Excise Act, 1944 or of the rules made there under with intent to evade the payment of duty is a state of mind which has to be ascertained from the circumstances of the case. In this case, since the fact of recovery of extra inventory cost from M/s Bajaj Auto under debit notes had not been disclosed in the ER-I returns, it has to be inferred that the short payment was on account of suppression of fact on the part of the assessee and, hence, the longer limitation period has been correctly invoked and penalty under section 11AC has been correctly imposed.

7. In view of the above discussions, we do not find any merit in this appeal. The same is dismissed.

[Dictated & Pronounced in the open Court].

(S.K.MOHANTY) (RAKESH KUMAR)

MEMBER (JUDICIAL) MEMBER (TECHNICAL)

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