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TMI BlogCORRIGENDUM TO ORDER-IN-ORIGINALX X X X Extracts X X X X X X X X Extracts X X X X ..... CORRIGENDUM TO ORDER-IN-ORIGINAL - By: - Mr. M. GOVINDARAJAN - Central Excise - Dated:- 23-5-2019 - - In respect of tax matters for adjudication of any case many steps are involved as stated below- Issue of show cause notice to the assessee giving the details of allegations against the assessee invoking the correct sections of the Act and the rules with the direction to give reply to the show cause notice within the time prescribed in the notice. The assessee is to give reply to the show cause notice within the time specified in the show cause notice along with the documents relied on by him to prove his case. The Adjudicating Authority will hear the assessee, if he opts to be heard in his re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply. The assessee can be appear either on his own or through his authorized representative before the Adjudicating Authority and represent his case and put forth the arguments in favor of him. The Adjudicating Authority will pass the order-in-original after considering the facts of the case and the documents relied on both sides. The Adjudicating Authority may drop the show cause notice or confirm the demand, confirm the interest and impose penalty on the assessee according to the provisions of law. The order-in-original should be a reasoned order. Appeal can be filed against the order-in-original of the Adjudicating Authority before the Appellate Authority within the limita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion period. The order-in-original cannot be recalled by the Adjudicating Authority. If there is prima facie error on the face of the order, rectification may be done by filing application either by the department or by the assessee. On rectification of the order-in-original, if it happens for the enhancement of duty, then reasonable opportunity should be given to the assessee before passing such order. Similar is the position in respect of issuing of corrigendum to the order-in-original by the Adjudicating Authority. In Commissioner of Customs, Central Excise and Service Tax, Hyderabad IV v. Lokesh Machines Limited 2018 (4) TMI 469 - CESTAT HYDERABAD three appeals were filed by the parties agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the order-in-original dated 30.11.2007 and corrigendum issued to the said order-in-original, dated 07.03.2008, as mentioned below- Mahindra Mahindra Limited (M M); Lokesh Machines Limited (LML); and Commissioner of Customs, Central Excise and Service tax, Hyderabad IV. The LML is the manufacturer of CNC machines and cylinder blocks used for manufacture of vehicle engines. These are manufactured for M M. LML also finishes the rough castings, manufactured by Kirloskar Ferrous Industries Limited (KFIL) for M M. KFIL is manufacturing rough castings on the machineries supplied by M M. The Revenue undertook investigations on LML and found that LML was clearing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e engine blocks and machined blocks to M M on payment of duty but the value did not include various costs like amortization charges, sales tax, flight charges for transportation of castings, cost of free items supplied by M M and value of supplementary invoices of raw materials. Show cause notice was issued on 23.08.2006 for demand of differential duty for undervaluation. The Adjudicating Authority confirmed the demand of ₹ 64.19 lakhs and dropped the demand of ₹ 61.33 lakhs by corrigendum enhanced the duty to ₹ 69.33 lakhs and confirmed demand of ₹ 12.43 lakhs on the machines alleged to have been undervalued, confirmed the interest liability on such duty liability and also imposed equal penalty on LM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L. The Adjudicating Authority also imposed ₹ 50 lakhs as penalty under Rule 25 of Central Excise Rules on M M under the corrigendum to order-in-original. LML has paid the differential duty, interest and 25% of the penalty of the demand raised on cylinder blocks and CNC machines. LML submitted the following before the Appellate Tribunal- The duty cannot be enhanced by way of corrigendum to the adjudication order. The Adjudicating Authority has accepted that the amount attributable to sales tax is deductible from the assessable value but not the CST while determining the value of the cylinder blocks and CNC machines. The duty demands on CNC machines, the value which ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been taken should be considered as cum duty and excise duty needs to be re-worked out. When the duty is paid before the issuance of show cause notice, penalty cannot be imposed under section 11AC of the Central Excise Act, 1944. If the CST is not included the duty amount paid would be more than the amount of duty liable to paid. In case of non inclusion of amortization charges etc., extended period is not invocable and hence penalty should not have been imposed. LML prayed that the corrigendum to the order-in-original should be set aside. M M submitted the following before the Appellate Tribunal- The penalty under Rule 25 of the Central Excise Rules, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44 cannot be imposed in these proceedings and the penalty imposed under the provisions which were not invoked in show cause notice, is unsustainable in the law. The penalties under Rule 25 are not applicable to M M as the said rule is invocable in respect of producer, manufacturer, registered person of a warehouse or registered dealer whilst M M is the receiver of goods from LML and the undervaluation, if any, is done by LML is not attributable to them. The undervaluation was result of improper calculation of dues in respect of the clearances by LML and M M had, time and again, issued circulars to LML regarding valuation of components, thus the onus of requirements of the statute rests with LML. If the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same has not been done so, the same cannot be shifted to M M for imposing such a huge penalty. The Revenue submitted the following before the Appellate Tribunal in respect of their appeal- The Adjudicating Authority has dropped the demand of ₹ 61.64 lakhs which is totally incorrect inasmuch as the Adjudicating Authority- has replaced the amortizing cost of the machine from ₹ 38/- per piece to ₹ 23.80 per piece by relying upon the submissions made by LML; has taken amortizing cost as NIL in respect of clearances of goods from M M; had excluded the differential value wherever job work charges are mentioned as NIL. The Revenue submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the following before the Appellate Tribunal in respect of the appeals filed by LML and M M- It is an accepted fact that there was undervaluation by not including various costs while evaluating the finished goods cleared on job work basis. It is an accepted fact that they had collected an amount of ₹ 2 crores in cash for CNC machines cleared from their factory premises. The Adjudicating Authority has correctly come to the conclusion while confirming the demand with interest and imposing penalty. M M being the principal of the ob work from LML was required to excise control over them and should have ensured that LML followed the law properly and therefore the penalty imposed on M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M is according to law. The Appellate Tribunal heard all sides. The Appellate Tribunal found that- The Adjudicating Authority has clearly recorded the findings which are very correct while upholding the demand raised on LML. The Adjudicating Authority has given detailed reasoning for arriving at various demands confirmed by him which are correct and legal and does not require any interference. As regard the deductions claimed by LML from the demands raised in the show cause notice, the Adjudicating Authority has also given detailed reasons as to why he is convinced that the demands needs to be re-determined and also ascertaining himself about the correctness of the claim. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As regards the undervaluation of CNC machines, the Adjudicating Authority has clearly recorded that LML received some amount in cash for the value suppressed by them on CNC machines and has correctly included the value thereof for payment of the amount on CNC machines. In regard to corrigendum to the order-in-original, the Adjudicating Authority has specifically stated that the corrigendum does not change or modify any part of the discussions and findings or merits of issues decided and is issued only for correction of arithmetical and accounting errors in computation and calculation of totally duty payable on account of various reasons. Therefore there no reason to interfere with the order of the Adjudicating Authority. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In regard to the fine imposed on M M the Appellate Tribunal found that the Adjudicating Authority has come to a conclusion that M M had not guided LML on the valuation of the goods, which were received by them from LML and hence they acquiesced with the undervaluation. The said findings are without support of evidence. The statements recorded by the investigating authorities of individuals do not indicate that M M had knowledge of undervaluation by LML, on the contrary the various circulars and notes issued by M M to LML as regards a correct valuation to be adopted for clearance of cylinder blocks has not been addressed by the Adjudicating Authority. The Appellate Tribunal held that the penalty imposed on M M is uncalled for. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In regard to the appeal filed by the Revenue the Appellate Tribunal held that since the Adjudicating Authority has considered the entire issue on payment of duty from LML the appeal filed by the Revenue is devoid of merits and dismissed the appeal filed by the Revenue. - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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