2019 (2) TMI 1480 - AT - Central Excise

Jurisdiction - power of proper officer to issue demand notice - Held that - There is no discrepancy in the aforesaid observation of the learned Commissioner (Appeals) nor any contrary evidence produced by the Appellant. Also, on going through the show-cause notice, we find that it was issued on the basis of the investigation carried out by Pune-II Commissionerate and also the reply has been filed by the appellant to the Additional Commissioner, Pune-II Commissionerate, therefore, the demand notice was properly issued by the proper officer who has been authorized and it is valid. Imposition of penalty - allegation of the Revenue is that while considering the landed cost of free issue material, for the purpose of valuation, the appellant M/s SPM Tools has failed to consider the entire value of the free issue material used by them in the manufacture of finished goods on which the appellant discharged duty on clearing the same to M/s KFPL - Held that - The appellant M/s SPM Tool Pvt. Ltd. were fully aware of the fact that the total landed cost of free issue material ought to be considered while determining the assessable value and the duty at the time of clearance of the goods be determined on the total value, but suppressed the correct assessable value by taking into consideration a part of the value of the free issue material. Hence, in our opinion, the plea of the appellant that it was a bona fide mistake on the part of the appellant cannot be acceptable - the authorities below are justified in imposing penalty equivalent to the duty under Section 11AC of Central Excise Act, 1944 and the case of the appellant falls under the exclusion clause i.e. Explanation (1) of Section 11A(2B) of Central Excise Act, 1944. Benefit of reduced penalty - Held that - The appellant has paid the entire amount of differential duty with interest before issue of show-cause notice, therefore, they are eligible to discharge 25% of the penalty in accordance with Section 11AC of the Central Excise Act, 1944. The impugned order is modified to this extent of extending 25% of the penalty amount. CENVAT Credit - duty paying invoices - supplementary invoices - Held that - The learned Commissioner (Appeals) has not decided the issue on merit but set aside the adjudication order denying benefit of CENVAT Credit on supplementary invoices issued by M/s SPM Tools in favour of respondent M/s Fuel Instrument Engineers Pvt. Ltd. on the ground that it was premature since the charge of suppression against M/s SPM Tool was not decided - matter remanded to the adjudicating authority to decide the issue of admissibility of CENVAT Credit on the supplementary invoices issued by M/s SPM Tools. Appeal allowed in part and part matter on remand.

Summary

Issues Involved:
1. Jurisdiction of the Additional Commissioner to issue the show-cause notice.
2. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.
3. Eligibility for CENVAT Credit on supplementary invoices.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Additional Commissioner to issue the show-cause notice:
The appellant raised a preliminary issue arguing that the show-cause notice was invalid as it was issued by the Additional Commissioner of Pune-I Commissionerate, while the appellant's factory was under the jurisdiction of Pune-II Commissionerate. The Tribunal found that the Chief Commissioner had authorized the Additional Commissioner to deal with cases from both Commissionerates. The show-cause notice was issued mentioning the File No. and address of Pune-II Commissionerate, and the appellant had responded to the Additional Commissioner, Pune-II Commissionerate. Hence, the Tribunal upheld the validity of the show-cause notice, stating that the Chief Commissioner had the authority to allocate work among officers across Commissionerates within the Pune Zone.

2. Imposition of penalty under Section 11AC of the Central Excise Act, 1944:
The appellant did not dispute the duty liability but contested the imposition of the penalty, claiming it was a bona fide mistake in not including the entire value of free issue material. The Tribunal noted that the appellant had included only a portion of the free issue material's value, resulting in short payment of duty. Statements from employees and evidence showed that the appellant was aware of the requirement to include the total landed cost of free issue materials but failed to do so, indicating suppression of facts with intent to evade duty. The Tribunal upheld the penalty under Section 11AC, referencing the Supreme Court's decision in UOI Vs. Rajasthan Spg. & Wvg. Mills Ltd., which clarified that intentional evasion of duty excludes the applicability of Section 11A(2B) for penalty waiver. However, the Tribunal modified the penalty to allow the appellant to discharge 25% of the penalty amount, as they had paid the differential duty with interest before the issuance of the show-cause notice.

3. Eligibility for CENVAT Credit on supplementary invoices:
The Revenue appealed against the Commissioner (Appeals)'s order allowing CENVAT Credit on supplementary invoices issued by M/s SPM Tools to M/s Fuel Instrument & Engineers Pvt. Ltd. The Commissioner (Appeals) had set aside the adjudication order on the grounds that the issue of suppression by M/s SPM Tools was not yet decided. The Tribunal remanded the matter to the adjudicating authority to decide the admissibility of CENVAT Credit on the supplementary invoices, as the issue of suppression had now been addressed.

Conclusion:
The Tribunal upheld the validity of the show-cause notice, confirmed the imposition of penalty under Section 11AC with a modification allowing 25% of the penalty payment, and remanded the issue of CENVAT Credit eligibility to the adjudicating authority for reconsideration. Both appeals were disposed of accordingly.