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TMI Blog2013 (7) TMI 376X X X X Extracts X X X X X X X X Extracts X X X X ..... ulk to their sister units located at Ballabgarh and Mumbai, who were packing the same in retail packs and selling on payment of duty of excise on the basis of MRP fixed on such packs. The appellants were issued three show cause notices dated 07.10.2004, 29.5.2006 and 26.6.2006 alleging non inclusion of certain administrative expenses/overheads in the value of bulk lubricating oils cleared by them to their Ballabgarh unit. The other two show cause notices alleged that the appellants have not included the royalty charges required to be paid by them to M/s. Castrol U.K. for technology transfer and technical assistance. The demand in all the three show cause notices was raised by invoking longer period of limitation. Said notices culminated into the impugned order passed by the adjudicating authorities confirming the differential duties and penalties. 2. As regards the first show cause notice alleging non inclusion of administrative charges, appellants have submitted that there could be no motive or intention on their part to evade duty as their entire duty paid by them was available as cenvat credit to their sister unit located at Ballabgarh. Inasmuch as the duty at Ballabgarh was b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty was not included in the cost of production of bulk lubricating oil stock transferred to the appellants' Ballabgarh and/or Mumbai unit, is not sustainable. (iii) Without prejudice to the aforesaid, it is submitted that the entire duty paid by the appellants on bulk lubricating oil stock transferred from their Silvasa unit to Ballabgarh/Mumbai unit was available as Cenvat credit which the appellants could have utilized while making payments of duty on the lubricating oil cleared in retail packs. Therefore, there was no question of suppression of facts with the intention to evade payment of duty and hence the demand of duty by invoking larger period of limitation under first proviso to Section 11A (1) of the said Act is not sustainable at all. (iv) It is settled law as held in the following amongst other case that where there is no Revenue implication there can be no intention to evade payment of duty:- (i) Hindustan Zinc Ltd vs. CCE [2008 (232) ELT 687 (Tri.-Del.)] (ii) Engineers Combine vs. CCE [1999 (113) ELT 440] (iii) Indian Telephone Inds. vs. CCE (v) Inasmuch as the provisions of Section 11A(1) cannot be sustained, no penalty at al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from the impugned order that only part amount was paid. As regards the demand of differential duty on the same account covered by the show cause notice dated 29.05.2006 and 26.06.2006, the adjudicating authority has dropped the demand on the ground that suppression could not have been invoked as the same issue which had been raised in the show cause notice dated 07.10.2004. 8. The differential duty demand on the bulk lubricating oil on account of non-inclusion of royalty amount in the cost of production of the bulk lubricating oil has been confirmed invoking larger period of limitation. 9. I am in full agreement with the Learned Member (Judicial) as regards the view taken that on account of revenue neutrality and in the light of various judgments cited, it cannot be said that there was an intention on the part of appellants to evade duty. Therefore extended period can not be invoked. However, In my view on the ground of revenue neutrality, the whole demand cannot be dropped and the demand relating to the period beyond one year which requires the department to establish suppression/fraud/collusion etc. only is required to be set aside. Needless to say once it is held that ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertificate, wherein they have clearly stated that "Rates are in line with CAS-4 formula as per the board circular no.692/8/2003-CX Dt. 13.02.2003"; they further, affirmed this in the Cost Certificate dated 13.01.2006 for the period from January to March 2006 signed by Works Accountant of the unit and Cost Accountant Shri R.M. Kandol (appointed on behalf of the assessee) wherein the Royalty charges were included in their cost of production and stated at note no.7 of the certificate that "Rates are in line with CAS-4 formula as per the board circular no.692/8/2003-CX Dt.13.02.2003". I find that the royalty is correctly includible in the cost of production and I also find that it is in the knowledge of the assessee that the royalty charges is to be included in the cost of production but they just want to avoid the duty liability for the period covered in the notices." 11. The cost accountant firm whose services were utilised by the appellants for preparation of CAS-4 certificate had included the royalty charges in the cost of production for the period from January to March 2006. The Circular referred to by the Commissioner issued by the Board states that CAS-4 which is cost accounti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: " Section 11A(2) provides that the Central Excise Officer shall determine the amount of duty of excise due after considering the representation, if any, made by the person on whom notice has been served. 13. The above two provisions clearly show that the law recognizes the fact that there can be short levy even when there is an approval or an assessment by the Central Excise Officer and even in such cases, the Central Excise Officer is empowered to recover the amount if the notice is served within one year from the relevant date. The period of one year gets extended to five years when the short levy has arisen because of fraud, collusion or any willful mis-statement or suppression of facts with intent to evade payment of duty. In this case there is no dispute that there was no intention to evade payment of duty on the part of the appellants. Therefore the limited question that arises is whether the demand even within the limitation period of one year can be waived or can be set aside on the ground of revenue neutrality. I am unable to find any p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether matter has to be remanded to the original adjudicating authority for the limited purpose of calculation of differential duty in terms of the order of Member (Technical). " 2. The matter was referred to the Hon'ble President to nominate a third Member to decide on the difference. Hon'ble President in his order dated 10.08.10 observed that the two Members cannot refer the entire appeal because of difference of opinion instead of making a statement referring the point or points of difference between them. He relied upon the decision of the Hon'ble Gujarat High Court in the case of Colourtech Vs. UOI reported in 2006 (198) ELT 169 (Guj.) reiterated by the Hon'ble High Court in the case of CCE Cus. Vs. Jagat Texturising reported in 2010 (255) ELT 353 Guj. With these observations, Hon'ble President directed that the matter be returned and placed before the concerned Bench. 3. As directed by the Hon'ble President, the difference of opinion is revised as under: Difference of Opinion (i) Whether it has to be held that royalty charges in appropriate proportion relatable to production of bulk oil are to be included in the cost of production of bulk lubricating oil as held b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoked. It is his submission that the issued involved in this case is non inclusion of various charges on the bulk oil manufactured and cleared by the appellant from their Silvassa unit to Mumbai and Ballabgarh units. It is his submission that the entire difference of opinion can be answered only on the question of limitation and draws my attention to the show cause notices dated 07.10.2004, 29.5.2006 and 26.6.2006 and submits that the demands which have been raised for the period is beyond limitation. He would submit that since all the three show cause notices are beyond the period of limitation, the question of Revenue neutrality as address by both the Members will come into play and there cannot be any difference of opinion. 4. Learned Additional Commissioner (AR) on the other hand would submit that the third member can only hear the points of difference stated by the original Bench and they cannot derive the unintended question and has no power to decide the appeal in its entirety, as the law which has been decided by the Hon'ble High Court of Gujarat in the case of Color Tex Processing vs. UOI. He would submit that the findings recorded by the Member (Technical) being on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 95 which duty was paid = 0.87 Cost of production with Admn. overhead = (2,59,75,900+2,06,69,260 admn.overhead) 2,99,83,595 = 1.56 *Difference = 1.56-1.00 = 0.69 Total clearance from 11/2001 to 01/2003 taking into account @ 0.87 as process overhead Rs. 61,80,82,188/- duty paid Rs. 9,88,93,150/-. Duty has been paid @ 0.87 + 15% of 0.87 = 0.87 + 0.13 = 1.00. Duty was payable @ 1.56 + 15% 1.56 = 1.56 + 0.23 = 1.79 *Difference = 1.79 - 1.00 = 0.79 Total quantity cleared to Ballabhgarh units om 11/2001 to 01/2003 = 3,65,02,958 Ltrs. DUTY PAYABLE (Short levy) = 16% of 0.79 x 3,65,02,958 = 16% of 2,88,37,337 = Rs. 46,13,974/-. Superintendent Central Excise, Range-I, Div-III, Silvassa. 8.2. On perusal of the show cause notice dated 29.5.2006, I find that in the demand has been worked out for the period 2001 to December 2004, as per the annexure 'A' to the show cause notice, which is reproduced as under:- ANNEXURE "A" TOTAL ADDITIONAL (OVERHEADS AND ROYALTY) TO BE CONSIDERED FOR CAPTIVE CONSUMPTION (A+B) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een from the above reproduced three annexures to the show cause notice dated 07.10.2004 and 29.5.2006, clearly indicate that the demand is raised for the period beyond the period of normal limitation i.e. one year. 10. As regards the show cause notice dated 26.6.2006, it can be seen from the annexure 'A' to the show cause notice that only one entry i.e. dated 20.01.2006 can be considered as within limitation and all the other entries on which demand has been raised is for the period 08.6.2001 to 11.11.2004. The said entry on which the demands have been raised is for the month of January 2006 and is also indicating that there is no differential duty recoverable from the appellant herein. It can be seen from the above, that all the three show cause notices which raise the demand on the appellant are for the period beyond one year. Since there is no difference of opinion between the Members, that the demand which is confirmed by invoking extended period is liable to be set-aside on the Revenue neutrality, I find that on this point itself, the view expressed by the learned Member (Judicial) needs to be concurred with. 11. In view of the foregoing, instead of answering the differenc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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