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TMI Blog1997 (12) TMI 355X X X X Extracts X X X X X X X X Extracts X X X X ..... product available in the factory and started investigation. Deputy Collector, Central Excise, issued show cause notice dated 21-10-1986 recording the above facts and alleging contravention of various rules by reason of fraud, wilful mis-statement of facts, suppression of facts with intent to evade duty, proposing demand of duty not paid under Rule 9(2) of the Central Excise Rules read with Section 11A of the Central Excise Act, 1944, proposing confiscation and imposition of penalty. Though the appellant resisted the notice contending that he was under the honest belief that where the value of clearances during the year in question would not exceed Rs. 15 lacs, Central Excise procedures were not to be followed and central excise duty was not to be paid on account of small scale exemption as he was informed so by the Chartered Accountant and there was no intention to evade duty nor deliberate mis-statement or suppression of facts. Alternatively he contended that in case duty is payable, deductions on account of central excise duty, sales tax and certain other elements were to be given. He also pleaded for grant of Modvat credit in respect of the duty paid on the inputs. 3. This not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of a Division Bench of the High Court of Karnataka in Ralectronics Limited - 1993 (67) E.L.T. 810 (Kar. H.C.). 7. In Ralectronics Limited show cause notice was issued within a period of three months by the Superintendent of Central Excise. The notice contained allegation of suppression of material facts with intent to evade duty. The assessee filed writ petition challenging the show cause notices purportedly issued under the proviso to Section 11A(1) of the Act by an incompetent officer as without jurisdiction. It was contended by the Department that the unnecessary averments regarding suppression of facts should be treated as withdrawn since the notice was issued within the period of six months by an officer competent to do so. This contention was resisted on behalf of the assessee by contending that amendment or deletion cannot be made so as to bring the notice within the jurisdiction of a Central Excise officer. The High Court of Karnataka held that there was no justification to refuse permission to delete the offending words from the show cause notice and to proceed with the show cause notice without those words. Department was permitted to proceed with the show cause no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a nullity and capable of being treated as a notice issued by a competent officer under the main provision in Section 11A(1) of the Act. 10. It is next contended that the second show cause notice issued by the Additional Collector was barred by time. The notice was issued evidently because the first show cause notice contained averments which could attract the proviso. As we have pointed out, these averments were quite unnecessary and notwithstanding the presence of those averments the notice must be treated as valid. The second show cause notice also makes it clear that it was in continuation of the first show cause notice. Dealing with the averments in the notice, namely, suppression of material facts with intent to evade duty, the defence of the appellant is that he was not aware of the requirements of law and was misguided by the Chartered Accountant into believing that the Central Excise procedures would not be attracted since there was exemption in respect of clearances of the value up to Rs. 15. lacs. That there was no such exemption available is not in dispute. The question is whether the appellant had such bona fide belief which misled him into not confirming to Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Central Excise Act. Apparently, the earlier decisions were not placed before the Bench. The same view was taken in Pawan Tyres (P) Ltd. - 1997 (93) E.L.T. 635 (Tribunal) = 1997 (19) RLT 66 (Tribunal) relying on the observation of the Supreme Court in Bata India Ltd. - 1996 (84) E.L.T. 164 (S.C.). Another Bench of the Tribunal took the same view in Ajanta Dyeing - 1997 (20) RLT 848 (Tribunal) following the decision in Geep Industrial Syndicate - 1995 (80) E.L.T. 341. 14. In Bata India Ltd. - 1996 (84) E.L.T. 164, the Supreme Court was considering the effect of exemption provision on the price per pair of footwear. The Court observed that Section 4 deals with valuation of excisable goods where the duty of excise is chargeable with reference to value, it has nothing to do with the rate of duty. Sub-clause (ii) of clause (d) of Section 4 lays down that value will not include the amount of duty of excise, if any, payable on such goods . This is a rule of valuation. The amount of duty of excise payable will depend on such valuation. The amount of excise duty payable has been explained to be the effective duty of excise payable on such goods, and not the duty of excise calcula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly paid. Ordinarily entire duty payable is paid at the time of clearance and is required to be so paid. Subsequently either the Department or the assessee may reaslise that duty paid was either short or excess. Such contingencies can be taken care of by initiating action either under Section 11A or Section 11B of the Act. Even in the case of refund it has to be after re-determination of assessable value as indicated by the High Court of Karnataka in the case of Alembic Glass Industries Ltd. (supra). We see no reason why the same principle is not to be followed under Section 11A. This decision has clearly emphasised that duty (effective) is to be deducted from the wholesale price which is the normal price collected from the buyers. Burden of excise duty is ordinarily passed on to the buyers and such duty element is collected in addition to the price. This situation is taken care of by Section 4(4)(d)(ii) of the Act by requiring that the element of excise duty has to be deducted in order to arrive at the assessable value. This understanding is in accordance with the decisions of the Supreme Court and High Court of Karnataka referred to above. In these circumstances, we are bound to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax actually paid and payable will arise for consideration and what we have indicated regarding excise duty payable will apply also to sales tax payable . This aspect also has to be considered afresh. 19. The claim of the appellant for benefit of Modvat credit has been rejected on the ground that formalities prescribed in Rule 57G of the Central Excise Rules had not been followed. This is a case where no Central Excise procedure was followed and no duty was paid. We are at the stage of demand of duty not paid. In a similar situation the Tribunal has held that Modvat credit cannot be denied on the ground of non-filing of declaration and non- maintenance of RG 23A account where liability is fastened in respect of past period. See Vivek Re-rolling Mills - 1994 (73) E.L.T. 660 (Tribunal). In the view taken by the Additional Collector, the question of eligibility was not examined. We hold that the benefit of Modvat credit cannot be denied to the appellant on account of non-adherence to the prescribed procedures, if the appellant is otherwise eligible for the same. This matter has to be re-examined by the adjudicating authority. 20. The last contention urged is that the quantum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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