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TMI Blog2021 (4) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... out jurisdiction, we may also add that in the order in original dated 20.11.2019 the adjudicating authority had recorded a clear finding that the only presumption for the demand was that because the maximum retail price of the goods manufactured at Una, Himachal Pradesh and those manufactured elsewhere by the petitioner, which included excise duty, were the same, therefore the maximum retail price of the goods manufactured at Una, Himachal Pradesh included central excise duty which were collected from the ultimate consumers but not deposited in the government treasury. Negating the fallacy of this presumption the adjudicating authority held that other than such a presumption, there was no evidence at all to establish that any amount was collected by the petitioner as representing duty of excise. In such a case, provisions of section 11D of the Central Excise Act would not be applicable. This again is a conclusive finding of fact which has remained undisturbed. The impugned show cause-cum-demand notice is clearly without jurisdiction and is an attempt to reopen an issue which was concluded by the adjudicating authority vide the order in original is not permissible - Petition allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erms and conditions contained therein. This agreement was renewed by three successive agreements dated 07.10.2012, 07.10.2013 and 01.04.2014. It is stated that petitioner had entered into another agreement dated 01.04.2015 with Tigaksha for further processing of petitioner s goods including packaging for retail sale. The agreement dated 01.04.2015 was for the period 01.04.2015 to 31.03.2018. 5.1. Petitioner has stated that the language and clauses of all the agreements entered into by the petitioner with Tigaksha were identical. 6. Petitioner had transferred some of the intermediate/semi-finished goods on payment of excise duty at 110% of the cost of production under Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 (referred to hereinafter as the Valuation Rules ) to one of its depots situated at Garget, Una, Himachal Pradesh. The goods were consigned to Tigaksha at Garget, Una, Himachal Pradesh for further processing under the aforesaid agreements i.e. agreement dated 01.04.2014 and agreement dated 01.04.2015. 7. Petitioner has explained that the main input/raw material used by the petitioner is the cold rolled stainless stee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chal Pradesh. Name of the petitioner appears only as marketed by . In contrast, in case of finished goods manufactured by the petitioner at Thane, the declaration on the package reads as manufactured, packed and marketed by . The finished goods manufactured by the job worker i.e. Tigaksha are brought to the factory of the petitioner at Thane over which respondent No.2 exercises jurisdiction under the Central Excise Act. 10. Central Excise Revenue Audit (CERA) in respect of the petitioner was initiated by the Central Excise Department for the period from 2013-14 to 2017-18 (upto June 2017). Objections raised by the auditors included allegations to the effect that petitioner had collected excise duty from the customers but had not deposited the same with the government; finished goods manufactured at the factory of the job worker were cleared to various depots of the petitioner for onward sale in the market without payment of excise duty; petitioner also manufactured similar goods at its factory at Thane and other places which were sold upon payment of excise duty; maximum retail price of the goods cleared/manufactured by Tigaksha and other factories of the petitioner was the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Central Excise Act on the goods cleared by Tigaksha from its factory at Una, Himachal Pradesh. According to the auditors, duty of ₹ 44,87,53,889.00 is payable by the petitioner on account of such clearance made during the period 2015-16 to 2017-18 (upto June 2017). 14.1. This was explained to by the petitioner vide letter dated 19.11.2019 requesting the authority to drop the proceeding. 15. As part of pre show-cause notice consultation, a hearing was given to the petitioner on 18.03.2020. Besides making oral submissions petitioner also furnished written submissions. 16. According to the petitioner, such consultation was a mere formality as it is the requirement under circular dated 10.03.2017 of the Central Board of Indirect Taxes and Customs that in cases where the duty allegedly not paid exceeds ₹ 50,00,000.00 an opportunity for pre-show cause notice consultation should be given. This became evident when respondent No.2 issued show cause-cum-demand notice dated 26.05.2020. By the said show cause-cum-demand notice, petitioner was called upon to show-cause as to why the extended period envisaged under sub section (4) of section 11A of the Central Exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tigaksha to the petitioner s sale depots wherefrom it was sold by the petitioner under commercial invoices without discharging the due central excise duty under section 4A of the Central Excise Act. 19.1. As the principal manufacturer, petitioner during the audit period sold the job worked finished goods valued at ₹ 552 crores from their sale depots without payment of applicable central excise duty specified under section 4A of the Central Excise Act involving aggregate central excise duty of ₹ 44.87 crores. This was pointed out by the auditors whereafter show causecum- demand notice dated 26.05.2020 was issued. 19.2. Referring to the statements made in paragraphs 24 and 25 of the show cause-cum-demand notice, it is stated that goods were procured by the petitioner from Tigaksha and sold from its sale depots without payment of central excise duty and hence recoverable under section 11D of the Central Excise Act. Accordingly, a show cause-cum-demand notice was issued to the petitioner on 26.04.2018. The above show cause-cum-demand notice was dropped vide the order in original dated 20.11.2019 passed by the adjudicating authority on the ground that the demand notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and other laws (Relaxation of Certain Provisions) Ordinance, 2020 dated 31.03.2020. 19.4. Referring to Rule 10A(ii) of the Valuation Rules, it is stated that contrary to the contention of the petitioner it is the principal manufacturer who has to discharge the central excise liability. 19.5. In the circumstances, it is contended that the writ petition is devoid of merit and therefore, should be dismissed. 20. Petitioner has filed rejoinder affidavit reiterating the averments made in the writ petition. It is asserted that central excise duty is once again sought to be demanded on the very same goods manufactured and cleared by Tigaksha which was the subject matter of dispute in the previous show cause- cum-demand notice dated 26.04.2018. Denying that petitioner has evaded central excise duty, it is submitted that provisions of sub section (4) of section 11A of the Central Excise Act has no application in the present case. The same is without jurisdiction and against settled position of law. Allegations of the respondents that petitioner has resorted to mis-representation has been denied. 20.1. A plain reading and comparison of the earlier show cause-cum-demand notice dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, respondent No.3 took the view that petitioner had contravened the provisions of sub section (1A) of section 11D of the Central Excise Act. It was noted that had CERA not audited the records of the petitioner, the relevant facts would have remained unnoticed. Following CERA objection, respondent No.3 held that excise duty was recoverable under section 11A(4) and 11D of the Central Excise Act along with interest under section 11AA of the said act. He submits that in the said notice to show cause-cum-demand, respondent No.3 had taken the view that since petitioner had contravened the provisions of the Central Excise Rules, 2002 by clearing goods without payment of appropriate central excise duty and by not disclosing the same to the central excise department with an intention to evade payment of duty had rendered itself liable to penalty under section 11AC of the Central Excise Act and Rule 25 of the Central Excise Rules, 2002. In the circumstances, by the said notice petitioner was asked to show cause as to why central excise duty amounting to ₹ 82,02,22,391.00 covering the period from 2013-14 to 2017-18 (upto June 2017) should not be demanded and recovered under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use-cum-demand notice dated 26.05.2020. Therefore, the impugned show cause-cum-demand notice is clearly hit by the principle of res-judicata . On a comparison of the two show cause notices, he submits that both the notices are identical and there is no difference between the two show cause notices on facts. 21.3. In support of his contention that the impugned show cause-cum-demand notice is hit by the principle of res-judicata, he has placed reliance on a decision of this Court in Union of India Vs. East and West Shipping Agency, 2010 (253) E.L.T. 12 . 21.4. Mr. Prakash Shah, learned counsel for the petitioner has specifically drawn our attention to Notification No.13/2017 dated 09.06.2017 issued by the Central Board of Excise and Customs demarcating territorial jurisdiction of the Principal Chief Commissioners and Chief Commissioners in India. He submits therefrom that Chief Commissioner, Chandigarh has jurisdiction over Commissioner, Shimla who in turn has jurisdiction over the entire State of Himachal Pradesh. Commissioner, Thane is under the jurisdiction of Principal Chief Commissioner, Mumbai and is confined to areas falling under Thane Metropolitan areas in the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an order adverse to the petitioner, the same can be assailed before the appellate forum. In such circumstances, petitioner should be relegated to the forum of adjudicating authority rather than availing the remedy of writ jurisdiction. 22.1. Mr. Pradeep S. Jetly has extensively referred to the reply affidavit filed by the respondents and has justified issuance of the impugned show cause-cum- demand notice. He therefore submits that there is no merit in the writ petition which should accordingly be dismissed. 23. Submissions made by learned counsel for the parties have been duly considered. 24. At the outset, it would be apposite to deal with the first notice to show cause-cum-demand dated 26.04.2018. Referring to CERA audit, it was stated that valuation of the goods manufactured was based on maximum retail price under section 4A of the Central Excise Act which consist of all elements of cost and margins including duties and taxes. Referring to Explanation-1 to section 4A, it was mentioned that retail sale price would mean the maximum price at which the excisable goods in packaged form may be sold to the ultimate consumer which would include all taxes, local or otherwise, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny excisable goods or has collected any amount as representing duty of excise on any excisable goods which are wholly exempt or chargeable to nil rate of duty from any person in any manner, shall forthwith pay the amount so collected to the credit of Central Government. As per the general exemption applicable to the industries in the state of Himachal Pradesh, the assessee is claiming full exemption from payment of excise duty for the goods manufactured in the sate of Himachal Pradesh. 5. It was also observed by CERA from the cost data of the assessee submitted to the Ministry of Corporate Affairs (MCA) for the year 2013-14 that there was excess recovery of the duty to the tune of ₹ 5 Crores. This showed that the assessee was recovering the excess excise duty more than that paid to the government without passing on benefit of exemption to the ultimate consumers. This excess recovery was required to be deposited to the government along with interest as per the above stated provisions which was not done. Therefore, it appears that the assessee has contravened the provisions of sub-section (1A) of section 11D of Central Excise Act 1944. Had the CERA not audited the assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods was the same as those manufactured elsewhere central excise duty was included thereunder and collected from the consumers. However, it was found that there was no evidence to establish that such amount was collected by the petitioner as representing duty of excise. Therefore, section 11D of the Central Excise Act would not be applicable. Further, as a matter of fact, it was found by respondent No.3 that the goods in question were manufactured by Tigaksha at Himachal Pradesh which was outside the territorial jurisdiction of respondent No.3. On the above two grounds, the notice to show cause-cum-demand dated 26.04.2018 was set aside by respondent No.3 vide the order dated 20.11.2019. Relevant portion of the order dated 20.11.2019 reads as under :- 9. On perusal of the provisions of section 11D, ibid , it is clear that any amount which has been collected as representing duty of excise is required to be deposited to the credit of central government by such person who has collected the amount. In the instant case, there is nothing on record to show that the amount collected was collected as being duty of excise . 10. As per provisions of section 11D of the Central Exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting excisable goods i.e. safety razor blades etc. assembled and retail packed at Tigaksha in Himachal Pradesh by supply of inputs/components and packing materials required in the said assembly of consumer retail products. However, harping on clause (8), it is stated that at no stage of the job work conversion of the said excisable goods were the title of the goods ever stood transferred. The ownership and all other rights in the product continued to remain with the petitioner. Till such time the retail packed blades were not sold from the sales depot of the petitioner, petitioner as the principal manufacture had the responsibility of discharging the liability in respect of central excise duty leviable and payable on the following products which had not been discharged by the petitioner from the inception of the job conversion agreement dated 01.04.2015 i.e. from April 2015 to June 2017. Since the goods were cleared/sold from the sales depot of the petitioner under commercial invoices without payment of applicable central excise duty specified under section 4A of the Central Excise Act involving an aggregate central excise duty of ₹ 44,87,53,889.00, audit objection was raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ong with interest thereon and imposition of penalty. 28. A comparison of the first notice to show cause-cum-demand dated 26.04.2018 and the impugned show cause-cum-demand notice dated 26.05.2020 would go to show that the basic premise for issuing the notices remained the same. According to the respondents, petitioner was getting excisable goods i.e. safety razor blades etc. assembled and retail packed by Tigaksha at its factory in Una, Himachal Pradesh by supply of inputs/components and packing materials required in the said assembly of consumer retail products. While issuing the impugned show cause-cum-demand notice, respondent No.2 placed heavy reliance on clause (8) of the job work conversion agreement dated 01.04.2015 which reads as under :- the ownership and all other rights in the product, other materials and work in progress shall always remain with SPCPL . 29. On this basis, it is asserted that ownership of the goods continued to remain with the petitioner till such time the retail packed blades were not sold from the sales depot of the petitioner. Therefore, petitioner was the principal manufacturer of the goods and as such had the responsibility to discharge the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2015-16 2,52,93,94,065 1,64,41,06,142 20,55,13,268 2016-17 2,36,17,77,388 1,53,51,55,302 19,18,94,413 2017-18 (06/17) 63,19,53,332 41,07,69,666 5,13,46,208 Total 5,52,31,24,785 3,59,00,31,110 44,87,53,889 31. From a comparison of the two statements as extracted above, a view may be taken that to enable the respondents from availing the extended period of limitation of five years under sub section (4) of section 11A of the Central Excise Act, the period covered by the impugned show cause-cum-demand notice has been curtailed by excluding the years 2013-14 and 2014-15. 32. Be that as it may, at this stage, we may briefly refer to some of the relevant provisions of the Central Excise Act. The word factory is defined under section 2(e) of the Central Excise Act to mean any premises, including the precincts thereof, wherein or in any part of which excisable goods are manufactured, or wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacture takes place and liability to duty is attracted. The sale or the ownership of the end-product is absolutely irrelevant for the purpose of the taxable event under central excise which is manufacture. 35. The above view taken in Empire Industries Ltd. ( supra ) was affirmed by a constitution bench of the Supreme Court in Ujagar Prints Etc. Vs. Union of India, 1988 (38) E.L.T. 535 by holding that the view taken in Empire Industries Ltd. ( supra ) is an eminently plausible view and does not suffer from any fallacy. It does not call for any reconsideration. 36. Subsequently, in Collector of Central Excise, Baroda, Vs. M. M. Khambatwala, 1996 (84) ELT 161, Supreme Court while reiterating the above proposition held that even though sale proceeds may go to the respondents that would not alter the character of manufacture. In the facts of that case, it was held as under :- 7. We have considered the submissions advanced before us by the learned counsel on both the sides. We find force in the arguments of the learned counsel for the respondents : on the admitted facts which we will set out immediately the respondents cannot be considered as manufacturers of agarba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondents and thus have attained finality. As alluded to by the petitioner, Central Board of Excise and Customs has vested territorial jurisdiction upon various central excise officers vide Notification No.13/2017 dated 09.06.2017. From the said notification, it is evident that Commissioner of Central Excise, Shimla has territorial jurisdiction over the entire State of Himachal Pradesh. He in turn is under the administrative jurisdiction of Chief Commissioner, Chandigarh. On the other hand, Commissioner, Thane who is under the administrative jurisdiction of Principal Chief Commissioner, Mumbai has territorial jurisdiction over the areas falling under the following pin-codes which are in the State of Maharashtra :- The areas falling under following pin codes: 400066, 400067, 400068, 400091, 400092, 400101, 400103, 400601, 400602, 400604, 400605, 400606, 400609, 400610, 400613, 400616, 401101, 401104 to 401107. 39. Therefore, it is evidently clear that the taxable event i.e. manufacture of the goods in question had taken place in the factory premises of Tigaksha at Una in Himachal Pradesh. Thus, neither respondent No.2 nor respondent No.3 has the territorial jurisdicti ..... 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