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TMI Blog2003 (6) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1,00,000/- on the appellant company under Rule 173Q ibid besides adjusting an amount of Rs. 6,90,524.70 which the appellant had already paid and dropping the proceedings with regard to the demand of duty of Rs. 54,285.05 by extending the benefit of Notification No. 184/86-C.E. dated 1-3-86 in respect of rear flanges cleared by the appellant to M/s. HAL. 2. Briefly stated the facts of the case are that the appellant M/s. K.C.P. Ltd., Tiruvottiyur, Madras are manufacturers of Heavy Industrial Machines. On the basis of specific intelligence gathered that they have raised invoice for escalation charges and collected the same from the customers but have not paid the duty thereon to the Government, the officers of Headquarters Preventive, Chennai visited the said factory and office premises on 6-11-92 and found that no records were available at their corporate office at No. 2, Victorial Crescent Road, Madras-105. At the time of the Officer s visit to the factory situated at P.B. No. 2278, Tiruvottiyur, Madras-19, S/Shri V. Narayanaswamy, Sr. Accounts Officer and K. Rajagopalan, Assistant Manager, Sugar Sales Department, were present. The officers searched the premises and recovered c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t payment of duty should not be demanded; (ii) excise duty of Rs. 1,62,056.96 payable on Modvat inputs cleared without payment of duty should not be demanded; (iii) excise duty of Rs. 33,08,213.09 (as per Annexure E to SCN) payable on the price escalation charges charged/collected from the customers should not be demanded; (iv) excise duty of Rs. 54,285.05 payable on rear flanges manufactured and cleared to M/s. HAL without payment of duty by incorrectly availing exemption Notification No. 184/86-C.E. dated 1-3-86 should not be demanded; (v) excise duty of Rs. 12,37,022.76 (as per Annexure G to SCN) already paid by them should not be confirmed and adjusted and (vi) a penalty should not be imposed on the appellant under Rule 173Q of Central Excise Rule, 1944. The appellant submitted their reply on 2-11-93 in which they contended that there was no suppression of facts and that they were fully complying with all Central Excise Rules; that their sister unit at Vuyyuru had all along been following Chapter X procedure and enjoying exemption under Notification No. 281/86; that they have not discharged duty on the inter-unit transferred goods; that when the department pointed out, they ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing any opinion on the merits of the case for reconsideration of the issue in accordance with law. The Tribunal while remanding held that it would be open to the adjudicating authority to take into consideration all the terms of the contract and also give his finding in regard to the plea of limitation urged before the Tribunal as the Tribunal was left with no other alternative except to remand the matter in the absence of clear finding by the adjudicating authority on certain evidence . 5. This is the second round of appeal before the Tribunal. The adjudicating authority, on de novo consideration, granted personal hearing to the appellants on 19-2-97 and 15-3-97, and after taking into consideration all the facts, evidences and submissions made before him, has passed the following order : 37.1 I demand from M/s The K.C.P. Ltd., Chennai, an amount of Rs. 12,77,934/- (Rupees twelve lakhs seventy seven thousand nine hundred and thirty four only) being the Central Excise duty payable (as per the revised worksheet in the Annexure) on the price variation/escalation claims made and realised (as referred to under Sl. No. 1 and 2 of Annexure E to SCN) under Section 11A(2) read with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,273 27. The question that arises, among other things, for determination in this de novo adjudication is whether the demand for an amount of Rs. 18,00,000/- payable on the differential escalated value of Rs. 1.2 crores paid to the assessee by their buyers, CCI, is maintainable inasmuch as the said escalated value included the element of escalated value on bought out items which were supplied direct from the suppliers to CCI. 28. On the question whether the entire escalation price difference of Rs. 1.2 crores that KCP had received from the buyer, CCI, merit a levy of Central Excise duty @15%, in short, it is the case of KCP that Rs. 1.2 crores represented not only the escalated cost of their own manufactured products but also the escalated cost of their bought out items that were directly supplied from the suppliers of those bought out items to the site and not routed through the factory of KCP. As such, it is clear that KCP was not liable to pay any duty on those bought out items. 29. On perusal of the case records, I find that while settling the claim of not on account of price escalation for a total sum of Rs. 1,84,81,272.61, inclusive of the duty, CCI made an ad hoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it has been pointed out, it is not possible to apportion the escalation cost of bought out items and that of their manufactured products from the payment of Rs. 1.2 crores, it is for KCP to show separately the escalation cost of their own manufactured products in their claim bill/letter which they have not done. It is by now established that out of the amount of Rs.. 1.2 crores received by them, they have disbursed a total amount of Rs. 35,02,257/- only. Further, the balance amount was evidently absorbed by KCP and there is no reason why they should not be liable to pay the Central Excise duty on the balance amount. 31. I hold that the balance amount of Rs. 84,97,743/- should be subjected to Central Excise duty. The amount of Central Excise duty already paid by KCP should be adjusted with the amount that is payable and the balance amount shall be payable by KCP. 32. As regards the duty liability of Rs. 3,273/- on escalation cost in respect of the contract pertaining to L T, KCP had not disputed this claim and liability to pay duty, therefore, stands established. The amount of Central Excise duty of Rs. 3,070.55 already paid by KCP stands adjusted against this demand and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and circumstances of the case and the nature of the offence committed, I impose a penalty of Rs. 1 lakh on KCP under Rule 173Q of Central Excise Rules over and above the duty payable on the escalated cost. 6. Arguing for the appellant Ld. Advocate Shri Venugopalan submitted that the learned Commissioner has erred in not appreciating full facts of the case before passing the order demanding Rs. 12,77,934/-. He submitted that duty demanded by the Commissioner on the bought-out goods also from the sub-suppliers, which had already suffered duty and became the second sale at the hands of the appellant is totally against the ratio given by the Apex Court in the case of Atic Industries reported in 1978 (2) E.L.T. (J 444) (S.C.), hence the impugned order is liable to be set aside. He further contended that the finding recorded by the Commissioner that the appellant had not shown separately the escalated cost of their own manufactured products in the claim bill/letter and that the appellant have not been able to produce all the invoices of the bought out item worked out to Rs. 18,75,23,479/- is totally incorrect in as much as the appellant had put up all the purchase orders of the six m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted to any further excise duty as per the ratio in the case of Tata Robins Fraser v. CCE reported in 1990 (46) E.L.T. 562 (Trib.) and also the case law of Machine Products Pvt. Ltd., Ahmedabad v. CCE [1983 (14) E.L.T. 2480 (Trib.)] As the bought out goods were sold second time by the appellant by raising invoices separately, the original manufacturer is in no way connected to the buyer and the department cannot levy duty again on the increase value. It amounts to second sale of the bought out items by the appellant to their buyers which is a trading activity. He pointed out that as per the decision of the Apex Court in the case of Atic Industries Ltd., the department cannot levy duty second time on the increased value. It is further contended that mere raising a proforma invoice claiming escalation value should not be the criterion for payment of excise duty since it is only a demand and not realisation of the amount which is not complied with and disputed. In fact, the ad hoc amount sent by the buyer clearly mentioning that it is exclusive of excise duty and CST which would be paid subsequently, led the appellant not to pay excise duty, since they were carried away by the buyers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner itself proved that the appellant had no intention to evade payment of duty. Even on the duty demanded on bought out items, he submitted that the correct amount worked out to Rs. 6,85,014/- and not Rs. 12,877,934/-, after adjusting the duty amount already paid, as confirmed by the Commissioner in his order. As the appellant have proved beyond doubt that there was no intention to evade duty or any suppression of facts from the department, he sought for setting aside the impugned order by allowing their appeal. In the written submission, the appellant has also prayed that the matter may be allowed to be kept pending till finalisation of Arbitration award so that appellant could pay the differential duty, if any, on their manufactured goods. 8. While reiterating and defending the order, Ld. DR submitted that the Commissioner has given a very detailed order in respect of all the aspects pertaining to this case. 9. We have considered the submissions made by both the sides and gone through the case records. We are of the considered opinion that the appellants had not shown separately the escalation cost and the duty collected on such escalated price. The appellants were suppose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Excise Intelligence Bureau of the Department of Revenue, New Delhi as early as 19-10-91 investigated about this and directed them to discharge the duty and they have paid the duty only after that investigation and detection of the case by the department. Therefore, the plea that there was no intention on their part to evade payment of duty and suppression of any facts, is not acceptable to us. Therefore, mala fide intention of the appellants is clearly established. The plea of the appellants that they had been enjoying the benefit of the Notification 120/75 for non filing of the price list and subsequently under Rule 173C, proviso (ii) also does not come to their rescue since benefit of Notification No. 120/75 for non filing of any price list is available with conditions. The assessees who are not charging any extra price and some other consideration were allowed/permitted to issue only simple invoices. Thus benefit of Notification No. 120-C.E./75 dated 30-4-75 subsequently Rule 173C, proviso (ii) would be available only to such assessees, and not to assessees of the type the appellants are. Proviso (iii) and (iv) of the Notification No. 120-C.E./75 dated 30-4-75 stipulate that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve to pay duty on such clandestine clearance. Further there was escalation clause in the contract and since the escalation clause was not made known to the department, the department cannot wait nor is the department legally supposed to wait till finalization of the arbitration on the escalated price on the duty payable and hence the duty has been rightly demanded by the learned Commissioner. In view of the above facts and circumstances of the case, we do not find any infirmity in the order in original No. 8/97 dated 5-3-97 of the learned Commissioner and therefore we confirm the same and reject the appeal. Ordered accordingly. Sd/- (Jeet Ram Kait) Member (T) 10. [Contra per : S.L. Peeran, Member (J) (Oral)] . - With due respect to my learned brother, I am unable to agree with the findings recorded by him for dismissal of appeal. I am of the considered opinion that the appeal is required to be allowed on time bar as well as on merits. This is the second round of litigation. Earlier matter had been remanded by Order No. 49/95 dated 16-6-95. 11. Appellants are manufacturers of heavy industrial machines. Their office and factory were visited by the Central Excise officials o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be levied for the reason that there cannot be duty on bought out items. They also contended that duty was cum duty price and that demands raised are barred by time. 13. On a careful consideration of the submissions, I notice that the project contracts entered into with the parties involved design, supply, manufacture, erection and commissioning and appellant manufactured goods in their unit and cleared them on payment to site directly. In regard to items of electrical machinery and mechanical parts like electrical motors, control panels, instruments, industrial valves, pumps and structurals etc., appellant purchased them from outside and sent them over to site for assembly and erection purposes. This fact has been verified by the investigation officers and despite appellants brought this fact of purchase and producing duty paying components, yet the differential duty has been claimed adding it on the escalation charges. As the evidence on record clearly discloses that these duty paid items were purchased and sent to the site, therefore the inclusion of this in the invoice is required to be set aside and I order accordingly. 14. Further, the appellants were enjoying the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by Learned Member (Technical) Shri Jeet Ram Kait; OR that the appeal is required to be allowed both on merits as well as on time bar as held by Learned Member (Judicial) Shri S.L. Peeran in his order. Sd/- (Jeet Ram Kait) Member (T) Sd/- (S.L. Peeran) Member (J) 15. [Order per : P.G. Chacko, Member (J)]. - Examined the records and heard both the sides. Ld. Counsel and Departmental Representative reiterated their respective arguments. 16. It appears from the record that the appellants were engaged in the manufacture of heavy industrial machines for cement/steel/sugar plants; that their activity under Project Contracts entered into with their customers, involved design, supply, manufacture, erection and commissioning of plant/machinery; that the main parts of the plant/machinery were manufactured in their own factory and cleared directly to the customer s site; that certain parts were purchased from outside and the same were dispatched by the suppliers directly to the customer s site for use in assembly and erection of the plant/machinery; that in respect of such parts, the appellants raised their own separate invoices on the customer; that, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed this amount towards the confirmed demand of duty of Rs. 1,62,056.96. 18. It further appears that the appellants had cleared rear flanges to M/s. Hindustan Aeronautics Ltd. (for short, M/s. HAL) without payment of duty claiming exemption under Notification No. 184/86-C.E. dated 1-3-86; that the department contested the claim of exemption and demanded an amount of duty of Rs. 54,285.05 in respect of the rear flanges cleared to M/s. HAL; but the Commissioner accepted the appellant s claim and dropped the said demand. 19. The only surviving dispute in this case is in relation to the duty on the price escalation claim raised by the appellants on their customers through proforma invoices. It has been contended by the appellants that they were not liable to pay any duty of excise on the bought-out items which were supplied directly by their suppliers to their (appellants ) customers s site. The basis for this contention is that the appellants had only done trading activity in respect of such bought-out items and, therefore, no duty of excise was chargeable on those items. They relied on the Supreme Court s decision in the case of Atic Industries Ltd. [1978 (2) E.L.T. (J 444)]. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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