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2006 (8) TMI 461 - AT - Central ExciseDemand of duty - cost recovery charges and facility charges appears to be erroneous - Valuation of final products - Penalty imposed - CEGAT passed the Final Order remanding the case for de novo adjudication - HELD THAT - A demand of Rs. 6, 63, 30, 535/- has been made on the ground that the payment made by the appellants to JVSL for the power received by them from JTPCL does not represent the real cost and therefore the difference between the real cost and what has been paid by the appellants represents additional consideration. The CEGAT has actually remanded the matter to the Commissioner to examine the issue in the light of all the evidences produced by the appellant. The appellant has shown that the price paid by them to JVSL is in fact much higher than the price charged by KEB. The appellant has actually shown through documents that they had adopted the rate of Rs. 3.05 per unit for the period from 1-7-1999 to 5-1-2000 and Rs. 2.65 per unit thereafter. However the KEB itself purchased power from JTPCL at the rate of Rs. 2.60 per unit pursuant to formal Orders and Notifications issued by the Government of Karnataka. This is definitely sufficient to accept that the power rate adopted by the appellant reflects the power cost. The Commissioner has not at all examined these documents and has adopted some weighted average cost of power as indicated in Annexure III of his findings. In our view there is no case for demanding duty by taking a higher value for power when KEB itself was purchasing at a lower value from JTPCL. Therefore the demand of Rs. 6, 63, 30, 535/- is not sustainable. Thus it is seen that the entire demand of Rs. 12, 62, 13, 125/- on account of (a) Facility charges (b) MTOP Charges and (c) Electricity charges is not sustainable. Hence the demand is set aside. The consequence of such a decision is that the penalty under Section 11AC is also not sustainable and the same is set aside. Hence interest u/s 11AB penalty on M/s. JPOCL under Rule 173Q(1) and the penalties under Rule 209A on (a) Shri Sajjan Jindal Chairman JPOCL (b) Shri Indarjit Mookerjee Non-Executive Director (c) Shri Raaj Kumar Managing Director and (d) Shri V.S. Kumar General Manager (Finance) and Company Secretary are not sustainable. In fine we allow all these appeals and set aside the OIO.
Issues Involved:
1. Alleged undervaluation of final products. 2. Demand of duty on cost recovery charges and facility charges. 3. Demand of duty on MTOP payments. 4. Demand of duty on electricity charges. 5. Penalty and interest imposed under various sections and rules. 6. Limitation and time-barred demands. Detailed Analysis of Judgment: 1. Alleged Undervaluation of Final Products: The Revenue conducted investigations and concluded that the appellant was indulging in undervaluation of their final products. The Show Cause Notice dated 1-8-2000 demanded duty of Rs. 14,63,51,143/- under three heads: differential duty due to revision of gas prices, additional consideration in the form of power free of cost/at concessional rate, and additional consideration in the form of MTOP payments. The extended period under proviso to Section 11A was invoked. 2. Demand of Duty on Cost Recovery Charges and Facility Charges: The Commissioner demanded Rs. 5,22,47,703/- on cost recovery charges inclusive of facility charges. However, it was found that the appellant had already discharged the duty liability on these charges before the issuance of the Show Cause Notice. The Tribunal observed that the Commissioner's findings were cursory and did not adhere to the directions of the Tribunal in the de novo order. The demand of Rs. 5,22,47,703/- was found to be erroneous and not sustainable. 3. Demand of Duty on MTOP Payments: The Commissioner considered MTOP payments as additional consideration and demanded Rs. 76,34,887/-. However, the Tribunal noted that MTOP payments are compensations for the buyer's failure to purchase the minimum quantity assured and are not related to the assessable value of the products supplied. Citing various case laws, the Tribunal concluded that MTOP charges cannot be included in the assessable value and set aside the demand. 4. Demand of Duty on Electricity Charges: The Commissioner demanded Rs. 6,63,30,535/- on the ground that the payment made by the appellant for power received did not represent the real cost. The Tribunal found that the appellant adopted a power rate higher than the rate charged by KEB, which was sufficient to reflect the power cost. The Commissioner's adoption of a higher value for power was found to be erroneous. The demand of Rs. 6,63,30,535/- was set aside. 5. Penalty and Interest Imposed: The Commissioner imposed a penalty of Rs. 12,62,13,125/- under Section 11AC, Rs. 50,00,000/- under Rule 173Q(1), and penalties under Rule 209A on various individuals. The Tribunal found that there was no mens rea, and the provisions of Section 11AC were not applicable as it was not a case of short levy. The penalties were found to be unjustified and were set aside. 6. Limitation and Time-Barred Demands: The Tribunal noted that the Commissioner failed to examine the issue of limitation as directed by the CEGAT. The substantial portion of the demand was found to be barred by time. The Tribunal reiterated that all issues, including limitation, should have been examined by the adjudicating authority. Conclusion: The Tribunal allowed the appeals, set aside the Order-in-Original, and concluded that the demands and penalties were not sustainable. The operative portion of the order was pronounced in open court.
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