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TMI Blog2006 (8) TMI 461X X X X Extracts X X X X X X X X Extracts X X X X ..... -1999 to 5-1-2000 and Rs. 2.65 per unit thereafter. However, the KEB itself purchased power from JTPCL at the rate of Rs. 2.60 per unit pursuant to formal Orders and Notifications issued by the Government of Karnataka. This is definitely sufficient to accept that the power rate adopted by the appellant reflects the power cost. The Commissioner has not at all examined these documents and has adopted some weighted average cost of power as indicated in Annexure III of his findings. In our view, there is no case for demanding duty by taking a higher value for power when KEB itself was purchasing at a lower value from JTPCL. Therefore, the demand of Rs. 6,63,30,535/- is not sustainable. Thus, it is seen that the entire demand of Rs. 12,62,13,125/- on account of (a) Facility charges, (b) MTOP Charges, and (c) Electricity charges is not sustainable. Hence, the demand is set aside. The consequence of such a decision is that the penalty under Section 11AC is also not sustainable and the same is set aside. Hence, interest u/s 11AB, penalty on M/s. JPOCL under Rule 173Q(1) and the penalties under Rule 209A on (a) Shri Sajjan Jindal, Chairman, JPOCL (b) Shri Indarjit Mookerjee, Non-Executive D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of duty of Rs. 14,63,51,143/- (ii) Appropriation of Rs. 3,04,71,194/- already paid by the appellants under 'protest' under Rule 233B of CE Rules, 1944. (iii) Penalty of Rs. 14,63,51,143/- under Section 11AC. (iv) Demand of interest under Section 11AB on the duty confirmed. (v) Penalty of Rs. 1,00,00,000/- on M/s. JPOCL under Rule 173Q(1). (vi) Penalty under Rule 209A on the following persons:- (a) Rs. 1,00,00,000/- on Shri Sajjan Jindal, Chairman, M/s. JPOCL. (b) Rs. 50,00,000/- on Shri Inderjeet Mookerjee, Non-Executive Director, M/s. JPOCL. (c) Rs. 25,00,000/- on Shri Raaj Kumar, Managing Director, M/s. JPOCL. (d) Rs. 25,00,000/- on Shri V.S. Kumar, General Manager(Finance),and Company Secretary, M/s. JPOCL. Aggrieved by the above order, the appellants approached the CEGAT. The CEGAT passed the Final Order No. 1421 to 1425/2002, dated 8-11-2002 [2003 (161) E.L.T. 562 (T)] remanding the case for de novo adjudication. Both the Members passed separate orders. The observations of the CEGAT in brief are as follows :- "The undervaluation as alleged in the Show Cause Notice is under the following heads :- (i) Price re-computation based upon : (a) Project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is necessary for the application of this principle that the original contract must be subsisting and unbroken. When once they enter into a new contract with varied terms and conditions, which is called novation, automatically old contracts disappears and new contract emerges in its place. In the instant case* Clause was amended with reference to the determination of price and both the parties mutually agreed that project cost of Rs. 227.32 crores fixed for, applying price escalation formula. As long as contract is valid, it is only for the parties to enforce their rights and obligations under the respective contract." Further, Shri Brahma Deva made the following observations on the above issue: "We are in total agreement with the arguments advanced on behalf of the parties that in ignoring the second amendment negotiated in good faith by the parties and in purporting to recompute the gas prices based upon the provisions of the original PISA as interpreted by the Commissioner and what he considered to be an increased project cost of the plant is erroneous. In the view we have taken, issue requires to be re-examined by the adjudicating authority to examine whether any additiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,62,13,125/- on M/s. JPOCL under Section 11AC. (iv) Interest under Section 11AB on the duty confirmed, (v) Penalty of Rs. 50,00,000/- on M/s. JPOCL under Rule 173Q(1). (vi) Penalty under Rule 209A on the following persons:- (a) Shri Sajjan Jindal, Chairman, JPOCL - Rs. 25,00,000/- (b) Shri Inderjeet Mookerjee, Non-Executive Director - Rs. 10,00,000/- (c) Shri Raaj Kumar, Managing Director - Rs. 5,00,000/- (d) Shri V.S. Kumar, General Manager (Finance) and Company Secretary - Rs. 5,00,000/-. The appellants strongly challenge the findings in the impugned order. 3. S/Shri Naganand, the learned Sr. Advocate, L.P. Asthana, Muralidhar, learned Advocates, appeared on behalf of the appellants and Shri Bipin Kumar Verma, the learned JDR for the Revenue. 4. The learned Advocates urged the following points :- (i) The Commissioner has not applied his mind to the specific directions given by the CEGAT. (ii) A substantial portion of the demand is hit by limitation. Though the CEGAT had specifically remanded the matter for examination of limitation also, the Commissioner failed to apply his mind and has made a cursory finding to the effect that he agrees with the findings in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not be doubted as representing a proper value for the power received by the appellant. The Commissioner has ignored completely the fact that KEB itself was purchasing power from JTPCL at a rate of Rs. 2.60 per unit, pursuant to formal Orders and Notifications issued by the Government of Karnataka, which is even lower than the rate at which reimbursements were being made by the appellant to JVSL. This fact alone is sufficient to accept the power rate adopted by the appellant as an arm's length rate which correctly reflected the power cost. The cost of power taken into account by the appellant for fixing the assessable value of its goods was the same as that actually incurred by JVSL, based on correct weighted average cost for power sourced by JTPCL. Therefore, there was no question of any additional consideration flowing from JVSL(the purchaser of the subject goods) to the appellant (the seller). In the first order, the Commissioner adopted a notional KEB rate for valuation of all the power received by the appellant from JTPCL (including for the infirm power generated by JTPCL itself). However, in the present order, the Commissioner valued the power based on a weighted averag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case, the Revenue has not discharged this burden and, therefore, the entire additional duty demands are based on extraneous and irrelevant considerations and is, therefore, not sustainable. (viii) A huge penalty of Rs. 12,62,13,125/- under Section 11AC and Rs. 50,00,000/- under Rule 173Q have been imposed without any findings at all to justify the imposition. There is not even a mention in the findings made by the Commissioner in the impugned order, which are to be found only in paragraphs 17 to 20 of the issue of imposition of penalty on the appellants under any provisions of law, let alone, any discussion of the factual and legal basis for any such imposition or of the numerous decisions relied on by the appellant. The levy of penalty on the appellant-company as well as on the Directors and Officers is wholly illegal and unsustainable. There was no mens rea at all. The provisions of Section 11AC of the Act are not applicable because it is not a case of short levy in the first place, and in any case, no fraud, collusion, wilful misstatement or suppression of facts or contravention of the Act or Rules has been committed by the appellant with any intent to evade duty paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt's contention that substantial portion of the demand is barred by limitation, the Adjudicating Authority, in the impugned order, has not at all discussed the same. Paras 12 to 16 of the findings are only re-statement of the facts already mentioned up to page 30 of the order. Therefore, the actual findings are just limited to four paragraphs from 17 to 20. We are in agreement with the appellant that the Commissioner has not taken care to adhere to the directions of the Tribunal in the de novo order. The appellant and M/s. JVSL had entered into a contract for the supply of the gas manufactured by the appellant. There is an agreement with regard to the price and as per the Agreement, the price is liable to be changed when the project cost increases. It has also been mentioned that cost price will increase by Rs. 0.01/cubic NM for each increase of Rs. 2.4 crores in the Project cost. However, there were two amendments to the original contract and as per the second amendment, it was mutually agreed that the revised project cost for Gas price calculation with respect to the Production Facility would be Rs. 227.32 crores. We have to understand that this is a contract between two parties. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amendments. This has been made amply clear in the order of the CEGAT. Hence, demand of Rs. 5,22,47,703/- is not sustainable. It is on record that the appellant had already paid the duty on cost recovery charges and facility charges much before the issue of Show Cause Notice. 6.2 As regards the MTOP charges, the Commissioner simply makes a statement that it is an additional consideration. The appellants have produced a number of case-laws to show that the MTOP charges cannot be added to the assessable value treating them as additional consideration. These case laws are very relevant for the present case. The Commissioner, in the impugned order, has not at all discussed the case-laws cited by the appellants. (i) The CEGAT, in the case of CCE v. Bhagwati Oxygen Ltd (cited supra), has clearly held that compensations were payable when goods were not supplied cannot be included in the assessable value of earlier supplies. The MTOP charges are paid by the JVSL to the appellant when they fail to take the minimum quantity assured by them. It does not stand to common sense that these charges form an additional consideration especially when no goods are supplied. The additional considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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