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Crompton Greaves Ltd V/S Commissioner of Central Excise

    Appeal No. E/937/07 E/CO/194/07 (Arising out of Orders-in-Appeal No. AT/83/M-III/2007 Dated: 8.3.2007 Passed by the Commissioner of Central Excise (Appeals), Mumbai) and Order No. A/89675-89676/17/EB

    Decided On, 26 September 2017

    At, Customs Excise Service Tax Appellate Tribunal West Zonal Bench At Mumbai

    By, THE HONORABLE JUSTICE: RAMESH NAIR
    By, MEMBER AND THE HONORABLE JUSTICE: RAJU
    By, MEMBER

    For Petitioner: M.H. Patil, Ld. Advocate And For Respondents: S.V. Nair, Asstt. Commissioner (AR)



Judgment Text


1. The fact of the case is that appellant are engaged in the manufacture of transformer. They received the order for supply of transformer from M/s. Power Grid Corporation India Ltd (PGCIL) for project to be undertaken at PGCIL at Hosur/Kolar. The supply of transformer to PGCIL which is Government of India undertaking fall into the category of deemed export under the Foreign Trade Policy at the relevant time. Accordingly, PGCIL issued the project authority certificate to the appellant to enable them to apply for advance license from DGFT, Mumbai. Appellant applied for obtaining licence for duty free import to be used in the transformer to be supplied to the PGCIL. The PGCIL applied for world bank loan for concern project where the said transformer were to be utilised. The said loan

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did not materialize, accordingly, appellant on their own prevailed upon PGCIL to pay custom duty on the import. The PGCIL paid import duties on behalf of the appellant. Initially when the goods were supplied, the value of transformer was contracted without considering customs duty, however, duty was paid on such value at the time of clearance. The appellant realised that since the custom duty should be part and parcel of the value of the manufactured goods, they paid differential duty, on the basis of custom duty. However, they have not paid the differential duty on the element of CVD for the reason that same was available as Cenvat Credit. The case of the department is that entire custom duty should be included in the assessable value and demand of excise duty on the element not only on custom duty but also CVD, was raised in the show cause notice and penalties and interest was proposed. The adjudicating authority confirmed the demand and appropriated the differential duty attributed to basic customs duty. Being aggrieved by the order-in-original appellant filed appeal before the Commissioner (Appeals) who also upheld the order of the original authority and rejected the appeal therefore appellant are before us. Shri. M.H. Patil, Ld. Counsel for the appellant submits that appellant have suo moto paid the duty alongwith interest on the element of basic custom duty, therefore the same should not have been raised in the show cause notice in terms of Section 11A(2B). He submits that when the appellant realised that the world bank loan was not materialised, PGCI supply was not eligible for deemed export therefore custom duty was paid and consequently differential duty of excise was also discharged suo-moto without pointing out by the department and same was intimated by the appellant to the department vide their letter dated 28-3-2003 and 22-8-2002. The show cause notice was issued on 21-3-2006. Since there is no malafide intention on the part of the appellant and the duty alongwith interest was paid on their own, no show cause notice was warranted, consequently no penalty could be imposed. As regard the differential duty on the element of CVD, he submits that since the appellant have availed Cenvat Credit on such CVD the same is not includible in the value of the goods as held by Hon'ble Supreme Court in case of Collector of Central Excise, Pune vs. Dai Ichi Karkaria Ltd [1999 (112) ELT 353 (S.C.). He further submits that Hon'ble Supreme Court in case of Union of India vs. Rajasthan Spinning & Weaving Mills [2009 (238) ELT 3 (SC)] on issue of mandatory penalty under section 11AC, held that penalty under Section 11AC cannot be imposed in each and every case, the same can be imposed only when there is intention of assessee to evade payment of duty. He submits that it is not the case that the appellant have disputed the valuation as regard the inclusion of basis custom duty in the assessable value of transformer and admittedly paid duty therefore penalty under Section 11AC is not imposable.

2. On the other hand, Shri S.V. Nair, Ld. Asstt. Commissioner (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order.

3. We have carefully considered the submissions made by both sides and perused the record. We find that from the facts of the case, it is absolutely clear that appellant have not undervalued the goods, initially valuation was arrived at after considering the non levy of the customs duty due to supply in the nature of deemed export. When the World Bank has denied the loan to the PGCIL supply become normal and deemed export benefit was not available. The appellant admittedly on own their ascertainment duty amount of Rs. 23 lacs was paid alongwith interest and intimated to the department. In such case no show cause notice should have been issued in terms of Section 11A(2B) which reads as under:

2B) Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person, chargeable with the duty, may pay the amount of duty [on the basis of his own ascertainment of such duty or on the basis of duty ascertained by a Central Excise Officer] a before service of notice on him under sub-section (1) in respect of the duty, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section ( 1) in respect of the duty so paid:

Provided that the Central Excise Officer may determine the amount of short payment of duty, if any, which in his opinion has not been paid by such person and, then, the Central Excise Officer shall proceed to recover such amount in the manner specified in this section, and the period of "one year" referred to in sub-section (1) shall be counted from the date of receipt of such information of payment.

Explanation 1.-Nothing contained in this sub-section shall apply in a case where the duty was not levied or was not paid or was short-levied or was short-paid or was erroneously refunded by reason of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made there under with intent to evade payment of duty.

Explanation 2.-For the removal of doubts, it is hereby declared that the interest under section 11AB shall be payable on the amount paid by the person under this sub-section and also on the amount of short-payment of duty, if any, as may be determined by the Central Excise Officer, but for this sub-section.

Explanation 3. - For the removal of doubts, it is hereby declared that no penalty under any of the provisions of this Act or the rules made thereunder shall be imposed in respect of payment of duty under this sub-section and interest thereon.

From plain reading of the above section, it can be seen that all ingredient of non issuance of show cause notice such as appellant on their own ascertainment paid duty alongwith interest and intimated to the department. Therefore the appellant have made a fit case to invoke Section 11A(2B) accordingly Revenue was not suppose to issue show cause notice at least on the portion of the demand which was paid alongwith interest by the appellant. Therefore no penalty attributed to the demand was warranted. We therefore set aside the penalty corresponding to duty of Rs. 23,11,451.221.

3.1 As regard the issue whether CVD amount should be included in the cost of final product, we find that appellant have availed Cenvat Credit in respect of CVD therefore it cannot be said to be a cost of final product. In the case of Dai Ichi Karkaria Ltd (supra) Hon'ble Supreme Court clearly held that element of excise duty on which Cenvat Credit was availed is not includible in the value of the manufactured goods. Therefore duty demand, attributed to the CVD which was not included in the assessable value, is not sustainable therefore demand of excise duty to this extent and corresponding penalty and interest are set aside. Appeal is allowed partly in the above terms. CO stands disposed of
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