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TMI Blog2011 (9) TMI 779X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. 25,000 1.4 888/2008 M. Muruganandam, MD, MM Cylinders 6,00,000 1.5 889/2008 R. Ravi Verma, Director, M.M. Cylinders (P) Ltd. 1,00,000 1.6 890/2008 K. Subramaniam, C.A. 10,000 1.7 876/2008 Sri Mehala Transport 4,00,000 1.8 877/2008 M. Muthuramalingam, Partner, Sri Mehala Transport 50,000 2. The seven (07) appeals listed in S. No. 2.1 to 2.7 arise out of common order of the Commissioner of Central Excise, Customs & Service Tax, Tirupathi Adjudication Order No. 12, 13 & 14/2008, dated 28-8-2008 by which Commissioner confirmed demand of duty along with interest against M/s. GDR Cylinders (P) Ltd. and imposed penalties on GDR Cylinders (P) Ltd. and others as detailed below : Sl. No. Appeal No. Party's name Period Duty Penalty (Rs.) 2.1 878/2008 GDR Cylinders P. Ltd. 17-9-01 to 12/2006 70,77,117 + Interest 7077,117 2.2 879/2008 R. Ravi Verma, Dir, GDR Cylinders P. Ltd. 1,00,000 2.3 880/2008 M. Muruganandam, MD, GDR Cylinders P. Ltd. 6,00,000 2.4 881/2008 M. Ramanathan, Despatch In-charge, GDR Cylinders P. Ltd. &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for short) though a partnership concern consisting of the Directors and their relatives and employees of appellant companies as partners is an independent concern and is neither a dummy unit of the appellant companies nor a front of the appellant companies. SMT consists of 15 partners each of whom contributed Rs. 1,00,000/- towards capital and the firm came into existence as per partnership deal dated 1-4-2001. They are Income Tax assessees. The partnership deal could not be produced at the time of investigation as the same was not readily available. The hiring of vehicles by SMT, from the Directors cannot lead to a conclusion that the said firm is not independent. (b) The financial transactions between the appellant-companies and SMT are at arms length and in the normal course of business. The appellant-companies were meeting the fuel expenses and other expenses for running the vehicle at the time of booking itself and the balance amounts to be paid on receipt of payments from oil companies. The fact that substantial amounts were pending payment from the appellant-companies cannot lead to doubting the transaction between the appellant-companies and SMT. (c)&nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost of transportation from the place of removal up to the place of delivery of such excisable goods. Thus the freight/transportation charges are eligible for deduction in determining the assessable value if the actual charges has been shown in the invoice separately in terms of Board's Circular M.F. (D.R.) F. No. 354/81/2000-TRU dated 30-6-2000. (b) With the change in the pricing pattern from August 2001, the employees of appellant-companies including the Managing Director and the Director adopted a modus operandi of starting a transport company under the name of M/s. Sri Mehala Transports (SMT) and engaging the same for the transportation of cylinders for delivery to the oil companies. The freight charges were inflated abnormally and were claimed as deduction from Gross Delivery Price fixed by the purchasing oil companies and thereby reducing the assessable value of the cylinders for discharging duty. (c) SMT was floated by Director of the appellant-companies; lorries owned by the M.D. and another Director were leased out to SMT; almost all consignments were transported only through the lorries of SMT; even when the lorries of other transpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such excisable goods in terms of Section 4(1)(a) of Central Excise Act, 1944 read with Rule 5 of the Central Excise Valuation (Determination of Price of Goods), Rules 2000. 7.3 However, the above legal position does not permit an assessee to deliberately suppress the assessable value by inflating the cost of transportation. 7.4 In the light of the above legal position, the facts of the present cases require to be analyzed to see whether the findings of the Commissioner that the two appellant-companies have deliberately reduced the assessable value by inflating the cost of transportation are correct or not. 8. The following are relevant - (a) The appellant-companies are supplying to the oil companies the empty LPG cylinders. For the period prior to August 2001, the oil companies were paying the appellant-companies towards freight amounts limited to transportation charges by rail irrespective of the freight amounts incurred by the suppliers like the appellant-companies. From August 2001, the mode of pricing was changed to GDP prices which were inclusive of all elements. In other words, as far as the oil companies were concerned, they had fixed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s getting reduced and the deduction towards freight charges claimed was getting inflated clearly with an intention to evade duties. (f) The fact that the recipient companies may be eligible for CENVAT credit cannot absolve them of the consequences of manipulations by the appellant-companies with the intention to evade duty. 9.1 It is the case of the department that the appellant-companies used the transport firm SMT to suit their convenience to inflate the claims towards freight charges and reduce the assessable value within the overall composite price paid by the oil companies. On the other hand, the case of the appellant-companies is that the firm SMT though a partnership firm with the Directors, relatives and employees of the appellant-companies as partners, the same was independent. The vehicles used by SMT were specially designed and were dedicated to work only for the appellant-companies and they remained idle when there was no work given by the appellant-companies and the vehicles returned empty after delivering the empty cylinders and the financial transactions between the appellant-companies and SMT were in the normal course of business. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oney if they were to do business in the normal course. 9.4 Without going to the controversy as to whether SMT is a dummy or front unit, it is clear that the appellant-companies have clearly used SMT to claim inflated freight charges and consequently to reduce the assessable value and the same have happened in spite of substantial increase in prices of major inputs, namely HR sheets as already discussed. In such a scenario, the case laws relied by them have no application to the facts of their cases. Limitation 10.1 The appellant-companies are challenging the demand raised invoking the extended period of limitation. It is submitted that, in both cases, show cause notices dated 1-9-2006 were issued demanding duties relating to the period July 2001 to January 2002 and, therefore, subsequent show cause notices dated 27-2-2007 and 8-5-2007, in both cases, for demanding duty on subsequent periods were clearly hit by time bar. In this regard, they relied on the following decisions : (i) Nizam Sugar factory v. CCE [2006 (197) E.L.T. 465 (S.C.) = 2008 (9) S.T.R. 314 (S.C.)] (ii) ECE Industries Ltd. v. CCE [2004 (164) E.L.T. 236 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing of cotton fabrics was with the aid of power or not. After appreciating the facts that the very same issue was there in earlier proceedings it was held that - "As the department had full knowledge of the activities of the Respondents in view of the earlier proceedings against them, we agree with the contention of the learned Advocate that there is no justification for invoking the extended period." (d) Frick India Ltd. In the said case, considering the facts of the case, it has been held that on same set of facts demand cannot be raised alleging suppression of facts when earlier show cause notice has been issued on same issue and on same set of facts. (e) Tuni Textile Mills Ltd. In the said case, it was held that invoking extended period of limitation in the "second notice" when the same was issued on the basis of same documents based on the same operation was irregular. (f) Swathy Chemicals Ltd. In the said case, after adjudicating the dispute of classification and claim for exemption in pursuance of show cause notice dated 15-5-90 by issue of order dated 16-8-90, by denying the exemption, issue of a subsequent show cause notice dated 11-4-91 alleging sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subsequent set of show cause notices issued to the appellant-companies. 10.5 In the case of M.M. Cylinders (P) Ltd., it has been claimed that audit has taken place during July-Augusi 2004 and a letter was issued by Superintendent of Central Excise, vide O.C. No. 425 of 2004 dated 6-8-2004. When investigations were going on till December 2006, no claim has been made on behalf of the appellant, that any such communication has been issued by the jurisdiction Supdt. Even in the reply to the show-cause notice, it has not been claimed that such a communication has been received from the Superintendent of Central Excise and that the appellant-company has given any reply to the said communication. Under these circumstances, the claim before the Tribunal that there was such a communication by the Superintendent to contend that the department was aware of the fact that appellant was using the services of SMT for transportation of goods and the freight charges paid to SMT were claimed as abatement cannot be appreciated. Even otherwise, it is not the case of the appellant-company that the department was made aware of the facts like disproportionately inflating the freight, reducing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inders (P) Ltd. (E/878/2008) are rejected. (b) Appeals of Sri Mehala Transport (E/876/2008 & E/883/2008) are partly allowed by reducing the penalties of Rs. 4,00,000/- in each case to Rs. 1,00,000/- in each case. (c) Appeals of Shri M. Muruganandam, Managing Director of M.M. Cylinders (P) Ltd. and GDR Cylinders (P) Ltd. (E/888/2008 & E/880/2008) are partly allowed by reducing the penalty of Rs. 6,00,000/- in each case to Rs. 1,00,000/- in each case. (d) Appeals of Shri Ravi Verma, Director of M.M. Cylinders (P) Ltd. and GDR Cylinders (P) Ltd. (E/889/2008 & E/879/2008) are partly allowed by reducing the penalty from Rs. 1,00,000/- in each case to Rs. 50,000/- in each case. (e) Appeals of Shri Ramanathan, Despatch In-charge of M.M. Cylinders (P) Ltd. and GDR Cylinders (P) Ltd. (E/886/2008 & E/881/2008); appeals of Shri Krishnamachari, General Manager of M.M. Cylinders (P) Ltd. and GDR Cylinders (P) Ltd. (E/887/2008 & E/882/2008); appeals of Shri Muthuramlingam, Partner of Sri Mehala Transport (E/877/2008 & E/884/2008); and appeal of Shri K. Subramaniam (E/890/2008) are allowed. (Pronounced ..... X X X X Extracts X X X X X X X X Extracts X X X X
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