M/S Mahalaxmi Fabrics Mills Pvt.Ltd vs Commissioner, Central Excise & Service ...

Appeal No.E/539,961/2007 [Arising out of OIA No.66/2007(Ahd-I), dt.13.02.2007, passed by Commissioner (Appeals), Central Excise & Customs, Ahmedabad]

1. M/s Mahalaxmi Fabrics Mills Pvt.Ltd. 2. Commissioner, Central Excise & Service Tax, Ahmedabad-I Appellants

Vs

1. Commissioner, Central Excise & Service Tax, Ahmedabad-I 2. M/s Malaxmi Fabrics Mills Pvt.Ltd. Respondents

Represented by:

For Assessee: Shri Paritosh Gupta, Advocate For Revenue: Shri J. Nair, A.R.

For approval and signature:

Honble Mr. P.K. Das, Member (Judicial) Honble Mr. H.K. Thakur, Member (Technical)

1. Whether Press Reporters may be allowed to see the No Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair copy of Seen the order?

4. Whether order is to be circulated to the Departmental Yes authorities?

CORAM:

HONBLE MR. P.K. DAS, MEMBER (JUDICIAL) HONBLE MR. H.K. THAKUR, MEMBER (TECHNICAL)

Date of Hearing/Decision:28.04.2015

Order No.A/10503-10504/2015, dt.28.04.2015

Per: H.K. Thakur

1. These two appeals have been filed by the Revenue and M/s Mahalaxmi Fabrics Mills Ltd with respect to OIA No.61/2007(Ahd-I), dt.13.02.2007. Under this OIA dt.13.02.2007, the First Appellate Authority has held the demand to be time barred. However, demands of Rs.20,528.00 and Rs.919.00 were held by the First Appellate Authority to be within the period of limitation. The First Appellate Authority also set aside the equivalent penalty imposed upon M/s Mahalaxmi Fabrics Mills Ltd. Revenue has filed Appeal No.E/961/2007 with respect to setting aside of demand on time bar issue and also setting aside of the penalty. Appeal No.539/2007 has been filed by M/s Mahalaxmi Fabrics Mills Ltd on the ground that the demand is not sustainable on the ground that M/s Mahalaxmi Fabrics Mills Ltd and M/s Mahalaxmi Exports Ltd cannot be treated as related persons.

2. Shri J. Nair, learned Authorised Representative appearing on behalf of the Revenue argued that the extended period of demand is clearly applicable in the present proceedings as the first Show Cause Notice was issued on 30.11.2004 for the period 2003-2004 without invoking extended period. That only demand for the earlier period 2001-02 and 2002-03 was issued on 02.01.2006 by invoking extended period. It was his case that extended period was invoked by the Revenue only in the second Show Cause Notice for the earlier period when the first Show Cause Notice did not invoke extended period. It was also his case that the judgment of Honble Supreme Court in the case of M/s Nizam Sugar Factory [2006 (197) ELT 405 (SC)] will not be applicable to the facts of the present case. It was strongly argued by the learned Authorised Representative that extended period under Section 11A and penalties under Section 11AC of the Central Excise Act, 1944, read with Rule 25 of Central Excise Rules, 2002, are invocable in this case.

3. Shri Paritosh Gupta, learned Advocate appearing on behalf of the Appellant M/s Mahalaxmi Fabrics Mills Ltd also filed written submissions and argued that his client as well as M/s Mahalaxmi Exports Ltd should not be considered as related persons as mutuality of interest is not established in the present proceedings as required under Section 4 of the Central Excise Act, 1944. It was further argued by the learned Advocate that any excess duty paid by his client would have been admissible as CENVAT credit to M/s Mahalaxmi Exports Ltd who are exporting the goods. That M/s Mahalaxmi Exports Ltd are also availing rebate facility in addition to being entitled to deemed credit on the grey fabrics. It was his case that his client would have gained much more in terms of credit and rebate and there cannot be any intention to evade payment of duty as argued by the Revenue in this appeal.

4. Heard both the sides and perused the case records. So far as the appeal filed by the Revenue regarding extended period invocable is concerned, it is observed from the order passed by the First Appellate Authority that the demand for the extended period was not only confirmed on the basis of Apex Courts judgment in the case of M/s Nizam Sugar Factory Ltd (supra) but also by giving detailed finding in Para 10 and 11 of the OIA dt.13.02.2007 as to why there is no intention to evade duty. Para 11 of the OIA dt.13.02.2007 passed by the First Appellate Authority is reproduced below:-

11. In that view of the matter, I find that the demand pertaining to the period 2001-02, 2003-03, is hopelessly barred by limitation as it was raised as late as on 02.01.2006. I do hold that raising of demand, after more than thirteen months of first demand, on charge of suppression, mis-declaration that too of prior period (01-02 & 02-03), in view of Honble S.C. judgment in Nizam Sugar case as reported at 2006 (197) ELT 465 (SC) was definitely time barred. However, the short levy as was pointed out in the show cause notice dt.30.11.2004, which pertained to the period 03-04 and the short levy pertaining to the period 04-05, which was raised on 06.01.2006, these two demands are not barred by limitation in as much as the cost declared or for that matter, the value on which the duty was paid were provisional value as the costing was done by the Appellant and the declaration of the value on their part was adhoc. Therefore, it had to be treated as provisional. The costing could be arrived at the end of the year and till that as prescribed in the law such transactions has to be treated on provisional basis only. Since the financial year closed on 31.03.2004, for 03-04 and on 1.4.05 for 04-05, from those dates the one year period for raising demand was available. In that view of the matter, both the demand i.e. dt.30.11.2004 and dt.06.01.2006 are very much in time. Thus, the demand for Rs.20,528/- and for Rs.919/- had rightly been confirmed on merit as well as on limitation. Therefore, that part of the order is hereby confirmed.

5. From the facts as narrated by the First Appellate Authority, it is clear that M/s Mahalaxmi Fabrics Mills Ltd was clearing the goods on provisional basis as the exact amount of costing could be arrived at only at the end of the financial year. As the entire facts of the valuation and clearances were within the knowledge of the Department, the First Appellate Authority has correctly held that the extended period under proviso to Section 11A cannot be invoked and also that no penalty under Section 11AC of the Central Excise Act, 1944 are imposable upon the assessee.

6. Regarding the appeal filed by M/s Mahalaxmi Fabrics Mills Ltd, for the demands of Rs.20,528.00 and Rs.919.00 it has been held by the Commissioner (Appeals) that the same are payable by the Assessee. The First Appellate Authority after giving a detailed finding in Para 8 of the OIA dt.13.02.2007, has held that the mutuality of interest is established. M/s Mahalaxmi Fabrics Mills Ltd have also taken a ground that the payment of duty@ 115% of the cost of production would have made M/s Mahalaxmi Exports Ltd eligible for more credit and because of revenue neutrality of entire exercise, no demand is sustainable. The concept of revenue neutrality for not confirming the demand cannot be raised for the period within the limitation. If the duty is payable by the Appellant is paid by the Appelalnt, the credit of the same can be taken by M/s Mahalaxmi Exports Ltd.

7. In view of the above findings, both the appeals filed by Revenue, as well as M/s Mahalaxmi Fabrics Mills Ltd, are dismissed.

(Operative portion of the order pronounced in Court)

(P.K. Das) (H.K. Thakur) Member (Judicial) Member (Technical)

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