2018 (7) TMI 1055 - HC - Central Excise

Clandestine removal - 95 wagons - appellant did not pay excise duty on these wagons - N/N. 64/95-CE dated 16th March, 1995 - Held that - This exemption notification covered all goods falling under heading nos.86.01 to 86.06 of the schedule to the Central Excise Tariff Act, 1985. It is not in dispute that these heads include wagons for exemption but this exemption was subject to certain qualifications. Having regard to the stand of Railways as reflected in the letter of 24th July, 1997, it appears to us that the Railways had also proceeded in the matter on the assumption that excise duty was not payable for the period before the letter was issued on 24th July, 1997 - also, this appeal does not involve substantial question of law - the appeal and the application are dismissed.

Summary

Issues: Allegation of removal of wagons without payment of excise duty, interpretation of exemption notification, validity of show cause notice, principal-agent relationship with Railways, intention to evade payment of excise duty, justification for demanding duty and penalties.

The judgment of the Calcutta High Court dealt with an appeal against a decision of the Customs, Exercise and Service Tax Appellate Tribunal confirming the demand for a sum of money, penalty, and interest due to the alleged removal of 95 wagons without payment of excise duty between August 1996 and August 1997. The appellant, engaged in manufacturing railway wagons and other products, was the subject of the dispute. The appellant did not pay excise duty on the wagons supplied to the Government of India, Ministry of Railways, as per an order placed in 1995. The issue revolved around the interpretation of exemption notification no. 64/95-CE dated 16th March 1995, which covered goods falling under specific headings of the Central Excise Tariff Act, including wagons, subject to certain conditions. The appellant resisted the demand based on this exemption notification. The show cause notice was issued in July 1998, beyond the prescribed period of six months, which was contested by the appellant. The appellant claimed a principal-agent relationship with the Railways, arguing that the wagons were intended for use by the Railways, thus qualifying for the exemption. However, the authorities found that the wagons were actually intended for use by different companies in the oil industry, not the Railways, leading to the rejection of the appellant's plea.

The Court analyzed the agreement between the parties, dated August 4, 1995, where the Ministry of Railways placed the order and made the payment to the appellant for the wagons, which were delivered to the Railways. The appellant contended that the Railways supervised the manufacturing process, indicating a principal-agent relationship. However, the Court found that the wagons were required by the oil Coordination Committee, with funds deposited by the oil industry for procurement, as per the agreement clauses. Despite a communication from the Railway Board suggesting the wagons were not excisable at the time of the contract, the Court noted discrepancies indicating the appellant's intention to evade excise duty. The authorities determined that the appellant had illegally availed the exemption, leading to the suppression of material facts and evasion of payment. The Court upheld the findings that the wagons were not intended for use by the Railways, as claimed by the appellant, but for the oil industry, justifying the demand for duty and penalties.

Regarding the validity of the show cause notice issued beyond the prescribed period, the Court found that the notice was justified based on specific information from the Anti Evasion Unit, justifying the extended period for demanding duty and imposing penalties. The Court agreed with the Tribunal's decision that there was no substantial question of law involved in the appeal, leading to the dismissal of the appeal and application. The judgment highlighted the importance of adhering to excise duty regulations and the consequences of attempting to evade payment through misinterpretation of exemption notifications and misrepresentation of the intended use of goods.