G. Nandagopal, Proprietor vs Commissioner Of Central Excise, ...

[Arising out of Order-in-Appeal No. 130/2006 dated 26/03/2007 passed by the Commissioner of Central Excise, Customs & Service Tax, Visakhapatnam] [Arising out of Order-in-Appeal No. 131/2006 dated 26/03/2007 passed by the Commissioner of Central Excise, Customs & Service Tax, Visakhapatnam]

For approval and signature:

HON'BLE MR. JUSTICE G. RAGHURAM, PRESIDENT HON'BLE MR. B.S.V. MURTHY, TECHNICAL MEMBER

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3 Whether Their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes

G. Nandagopal, Proprietor, Talupula Industries, Narasingapalli (Po), Via: Yelamanchili, Visakhapatnam Dist.  531 055 Appellant(s)

Versus Commissioner of Central Excise, Service Tax and Customs Visakhapatnam-II Central Excise Building, Port Area, Visakhapatnam  530 035 Andhra Pradesh Respondent(s)

Appearance:

Mr. G.P. Sastry, Advocate G.R. Kumar And Co.

No.9, Merry Life Apartments, Doctor's Colony, Peda Waltair, Visakhapatnam  530 017 Andhra Pradesh For the Appellant

Mr. G. Shiril Saroj, AR For the Respondent

Date of Hearing: 25/05/2015 Date of Decision: 25/05/2015 CORAM:

HON'BLE MR. JUSTICE G. RAGHURAM, PRESIDENT HON'BLE MR. B.S.V. MURTHY, TECHNICAL MEMBER

Final Order Nos. 21296-21297 / 2015

Per: B.S.V. MURTHY

1.1. M/s. Talupula Industries, Narsingapalli, and Shri Nanda Gopala Gandham, Proprietor of M/s. Talupula Industries have filed these appeals.

1.2. The impugned order demanded Rs. 12,26,471/-(Rupees Twelve Lakhs Twenty Six Thousand Four Hundred and Seventy One only) being the differential duty on the finished goods cleared during the period from February, 2000 to March, 2004 under Proviso to Section 11A of Central Excise Act, 1944, confirmed interest under Section 11AB, imposed penalty of Rs. 12,26,471/- (Rupees Twelve Lakhs Twenty Six Thousand Four Hundred and Seventy One only) under Section 11AC ibid and imposed personal penalty of Rs. 1,00,000/- (Rupees One Lakh only) under Rule 209A of Central Excise Rules, 1944 and Rule 26 of Central Excise (No. 2) Rules, 2001 and Rule 26 of Central Excise Rules, 2002 on Shri Nanda Gopal Gandham, Proprietor of M/s. Talupula Industries.

1.3. On scrutiny and verification of records, it was observed that the appellants are availing SSI exemption and clearing the goods to M/s. Talupula Engineering Company (TEC) having their registered office at New Delhi as per the value indicated in the purchase order placed on the appellants by M/s. TEC. The investigation by the Departmental Officers revealed that both Talupula Industries and Talupula Engineering Company are proprietary concerns owned by Shri Nanda Gopal Gandham, and that M/s. TEC is engaged in the execution of Railway Electrification Works as per the contract awarded by the Indian Railways; Talupula Industries was floated for manufacture of galvanized steel products required for the execution of contracts by TEC; M/s. TEC was receiving orders for supply and erection of various galvanized steel products and the Railways were paying erection charges separately as indicated in the purchase orders. M/s. TEC is placing the Purchase orders on the appellants for the manufacture and supply of the said items and the appellants paid the Central Excise duty on the basis of purchase order values of M/s. TEC. The impugned order held that Shri Nanda Gopal Gandham is the sole proprietor of both M/s. Talupula Industries and M/s. Talupula Engineering Company and is directly involved in the under valuation of goods manufactured and sold to the related firm viz., M/s. TEC which is his own contract executing firm thereby resulting in short payment of Central Excise Duty.

2. In this case TEC is receiving orders for supply and erection of various galvanized steel products and Railways are paying the erection charges separately. It is the stand of the department that the value of galvanized steel products manufactured by Talupula Industries and supplied to the firm owned by the same proprietor has to be based on the value of the materials as per the purchase orders issued by Railways. It was submitted that the contract entered into between Railways and the appellants bifurcates the value for the supply and erection handled for the purpose of broad categorization of the contract value. It was submitted that if the value of the goods adopted by the appellant is compared with the cost analysis method, the value adopted will be much more than 115% of the cost of production and therefore there is no undervaluation at all. It was admitted that both the units involved are owned by the same proprietor and it was submitted that there cannot be a sale between the two firms owned by the same persons and therefore the concept of related person cannot be invoked for demanding differential duty. It was submitted that since the same person owned both the units, in the absence of any sale of the products except its use in the execution of works contract, the procedure for valuation adopted by the appellants is correct. It was also submitted that separate penalty on the proprietor could not have been imposed.

3. We have considered the submissions made by both the sides. Admittedly both the units belong to the same person. The original authority did not examine the contract between the railways and the appellant since the appellant had not appeared for personal hearing. The appellate authority relied upon the conclusions of the original authority. It has been the claim of the appellant that the bifurcation of value of materials and labour is only for convenience and not based on actuals. This claim has not been verified with reference to the contract. When it was a sale by the appellants second unit to the railways, VAT would have been charged on the same separately and shown separately. Whether this is the case is not coming out clearly. Both the units have been held to be related person. The question once again arises whether the same person can be considered as related to each other. This needs more detailed consideration. Further the claim of the appellant that they have paid central excise duty adopting a value which is more than 115% has also not been examined. Annexures C & D to the show-cause notice have been mentioned in the show-cause notice as the ones giving the details of basis for demand of duty. These annexures were not available when we heard the matter. The table in the order-in-original indicates differential value and assessable value. In the column for assessable value it is not written as differential assessable value. Therefore we do not know whether the duty paid by the assessee has been taken into account or not. Moreover for limitation purpose also there is a need to examine whether under these circumstances appellant could have entertained a bona fide belief or not.

4. In view of the above discussion we consider that matter needs a more detailed re-consideration in the hands of original adjudicating authority. Accordingly we set aside the impugned order and remand both the matters to the original adjudicating authority for fresh adjudication. Needless to say the appellant shall be given reasonable opportunity to present their case before coming to the conclusion.

(Order pronounced in open court)

(JUSTICE G. RAGHURAM) PRESIDENT

(B.S.V. MURTHY) TECHNICAL MEMBER

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