2012 (1) TMI 123 - AT - Central Excise

Duty demand - Suppression of facts - Place of removal - Creation of dummy unit to evade duty - Under valuation of goods - Invocation of extended period of limitation - Penalty u/s 11AC - Burden of proof - SSI Exemption - Held that - for the purpose of manufacture of Cell Pack on job work basis by the appellants M/s. Sysmex Transasia Bio-Medicals Ltd. which applied and obtained a loan licence No. DD162 issued by the Drugs Licensing Authority, Daman. The copies of the subject licence and manufacturing agreement dated 23-7-1998 between the appellants and M/s. Sysmex Transasia Bio-Medicals Ltd. and the certificate dated 7-6-2003 for renewal of loan licence were also produced. The appellants also submitted that M/s. Sysmex Transasia Bio-Medicals Ltd. were importing the basic raw material namely Cell Pack from M/s. Sysmex Corporation (Japan/Singapore) after clearing the same on payment of appropriate customs duty, the same was being supplied under cover of challans or such documents to the appellants for the manufacture of Cell Pack on job work basis. On completion of the manufacture of Cell Pack the appellants were returning the same to M/s. Sysmex Transasia Bio-Medicals Ltd. under the cover of central excise invoice. The appellants were ultimately selling the goods from the godown at the prices ranging from Rs. 2100/- per unit to Rs. 3100/- per unit. They were filing regular monthly returns and maintaining records prescribed under the law. The facts being so and supported by several documents as a proof, it can be safely concluded that M/s. STBM cannot be a dummy unit - There is nothing on record to show that Cell Pack manufactured on job work out of the raw material supplied by M/s. Sysmex Transasia Bio-Medicals Ltd. were not dispatched to the premises Gala No. 5, Prithvi, Industrial Complex, Somnath, Nani, Daman. The copies of transport receipt showing excise invoices were produced by the appellants and they had paid transportation charges to the transporters. For purpose of Section 4 concerned would be taken to be the related person if there is a reciprocity of interest between the assessee and such allegedly related person - The burden to prove that the goods in question were under-valued by the respondent lies on the Revenue which the Revenue has failed to discharge. The clearance value exceeded because it was arrived at by adopting the value at which the appellants have sold their packs from depot instead of adopting the value on which they sold to M/s. STBM. The value of clearances of diagnostic reagents and demokits as well as the value of packing charges and forwarding charges have also been added to the value of clearance. However, the contention of the appellant is that they have not collected any duty from their customers in respect of clearances made by them by availing the benefit of SSI exemption - unless it is proved otherwise, the value of clearances as contended by the appellants has to be considered. Since there is no evidence to prove otherwise the contention of the Revenue remains unsubstantiated and the SSI exemption is rightly available to the appellants. There was no suppression or misstatement of facts with an intention to evade payment of duty nor there was any evidence either documentary or otherwise comingforth to support the case of Revenue - Following decision of Union of India & Ors. v. Atic Industries Ltd. 1984 (6) TMI 51 - SUPREME COURT OF INDIA - Decided in favour of assessee.

Issues Involved:
1. Whether M/s. STBM is a dummy unit and the implications of not issuing a show-cause notice to them.
2. Whether the Cell Packs were actually transported to M/s. STBM, Daman, and the correct valuation of these goods.
3. The applicability of duty exemption on diagnostic reagents used with auto analyzers.
4. The inclusion of transportation charges in the assessable value under the Central Excise Valuation Rules.
5. The eligibility of the appellant for SSI exemption for the year 2001-2002.
6. The applicability of extended period for demand due to alleged suppression or misstatement of facts.
7. The imposition of penalties under Section 11AC and interest under Section 11AB.

Detailed Analysis:

1. Dummy Unit and Show-Cause Notice:
The Tribunal examined whether M/s. STBM was a dummy unit. The Commissioner held that M/s. STBM was a dummy unit as it had no employees, and all its operations were managed by M/s. TBM employees. The goods never reached M/s. STBM's premises, making it a non-existent company. Thus, a show-cause notice to M/s. STBM was deemed unnecessary.

2. Transportation and Valuation of Cell Packs:
The Tribunal scrutinized the transportation and valuation of Cell Packs. The appellant provided documents proving the independent existence of M/s. STBM, including income-tax returns, annual returns, and board meeting minutes. The Tribunal found these documents genuine, indicating that M/s. STBM was not a dummy unit. The physical movement of Cell Packs was not obligatory, and the business practice was acceptable. The Tribunal concluded that M/s. STBM was not a dummy unit and the valuation of goods should consider the actual transaction values.

3. Duty Exemption on Diagnostic Reagents:
The Tribunal addressed the contention that diagnostic reagents were meant for use with auto analyzers, which were exempt from duty. The appellants argued that diagnostic reagents supplied as free replenishments or demo kits should be considered as discounts in kind, exempt from duty. The Tribunal accepted this argument, noting the absence of evidence to the contrary.

4. Inclusion of Transportation Charges:
The Tribunal examined whether transportation charges should be included in the assessable value. Rule 5 of the Central Excise Valuation Rules excludes the cost of transportation from the place of removal to the place of delivery. The Tribunal found that the appellants were eligible for deduction of actual freight charges from their godown to the customers' premises, aligning with the Supreme Court's decision in Baroda Electric Meter.

5. SSI Exemption for 2001-2002:
The Tribunal evaluated the eligibility for SSI exemption. The Revenue argued that the clearance value exceeded Rs. 3 crores, including packing and forwarding charges, demokits, and overvalued Cell Packs. The appellants contended they had not collected duty from customers for clearances made under SSI exemption. The Tribunal accepted the appellants' contention, finding no evidence to prove otherwise, thus granting SSI exemption.

6. Extended Period for Demand:
The Tribunal considered the applicability of the extended period for demand due to alleged suppression or misstatement of facts. The appellants argued that their records were subject to audit and verification, and they had a bona fide belief regarding freight charges. The Tribunal found no evidence of suppression or misstatement with an intention to evade duty, citing various judgments supporting this view.

7. Penalties and Interest:
The Tribunal examined the imposition of penalties under Section 11AC and interest under Section 11AB. Given the absence of suppression or misstatement, the Tribunal found the imposition of penalties and interest unsustainable.

Conclusion:
The Tribunal allowed the appeals filed by M/s. Transasia Bio-Medicals Ltd. and others, setting aside the order of the Commissioner of Central Excise & Customs, Daman. The decision emphasized the importance of examining each case on its merits, evidences, and legal principles, ensuring justice is served without undue reliance on precedents.

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