2006 (8) TMI 185 - SC - Central Excise

Whether excise was leviable on manufacturing cost plus manufacturing profit and post manufacturing cost and profits arising from post manufacturing operations, the provisional assessments were made from July, 1973 to February, 1983? Held that - In the present case there is not even an allegation much less finding by the department that there has been any clandestine removal of goods without assessment. As such the penalty is liable to be set aside. The matter having been settled in the Kar Vivad Samadan Scheme, 1998 the question of determination of the duty payable or levy of penalty did not arise. The Tribunal clearly erred in upholding the levy of penalty. Accordingly, Civil Appeal filed by the assessee is accepted and the penalty levied is ordered to be deleted.

Summary

Issues Involved:
1. Deletion of duty demand of Rs. 17,67,13,315/-.
2. Levy of penalty of Rs. One crore.

Issue-wise Detailed Analysis:

1. Deletion of Duty Demand of Rs. 17,67,13,315/-:
The appeals arose from a common order by the Customs, Excise & Gold (Control) Appellate Tribunal, addressing duty demands and penalties. The case history includes multiple rounds of litigation and provisional assessments from July 1973 to February 1983. The core issue was whether excise duty should include post-manufacturing costs and profits. The Assistant Collector issued a show cause notice on 8-5-1984 for disallowing deductions and including various charges in the assessable value. Another show cause notice on 1-10-1986 alleged willful mis-declaration of assessable value, demanding Rs. 97,55,56,362/- in unpaid duty.

The Delhi High Court dismissed the writ petition challenging the show cause notice, stating that Section 11A of the Central Excises Salt Act, 1944, could be invoked even with provisional assessments. The Collector of Central Excise, Delhi, directed the Assistant Collector to finalize assessments, incorporating materials from the show cause notice dated 1-10-1986. The Assistant Collector issued an addendum on 20-2-1992, and the final assessment on 11-1-1996 determined the assessable value and demand.

The Tribunal set aside the duty demand of over Rs. 17 crores, noting that the duty demand had already been adjudicated and finalized, and no second demand could be made. The Supreme Court affirmed this, emphasizing that there could not be two assessments for the same period. Additionally, the dispute was settled under the Kar Vivad Samadhan Scheme, 1998, precluding further review or determination.

2. Levy of Penalty of Rs. One Crore:
The penalty was proposed under Rule 9(2) and 52A. The Supreme Court in N.B. Sanjana v. Elphinstone Spg. & Wvg. Mills Co. Ltd. held that Rule 9(2) applies only if goods are removed clandestinely without assessment, which was not the case here. The Tribunal upheld the penalty, but the Supreme Court found no allegation or finding of clandestine removal. Given the settlement under the Kar Vivad Samadhan Scheme, 1998, the question of penalty did not arise. The Supreme Court set aside the penalty, noting the Tribunal's error in upholding it.

Conclusion:
The Supreme Court dismissed the Revenue's appeals regarding the duty demand and affirmed the Tribunal's order. It accepted the assessee's appeal, deleting the penalty, and disposed of both sets of appeals, leaving the parties to bear their own costs.