Case Law Details

Case Name : CCE Vs. Minda Industries Ltd. (CESTAT Mumbai)
Appeal Number : Appeal No. E/2946/2006/MUM
Date of Judgement/Order : 08/12/2016
Related Assessment Year :
Courts : All CESTAT (525) CESTAT Mumbai (113)

As per the fact of the case there is no dispute that the duty was payable on the escalated value of the goods cleared by the appellant. The main issue was whether the interest is chargeable on the duty paid on the escalated portion of the value. This issue has been considered in various judgements as cited by the Learned Counsel, subsequently the matter was referred to the Larger Bench of the Honourable Supreme Court. As regard the intention of the appellant regarding payment of duty on the escalation value, 1 am of the view that at the time of clearance of the goods there was no knowledge to the appellant about any differential value. The value was escalated subsequent to the clearance of the goods by the buyer. The appellant have paid the duty without any contest to the demand. In this fact there is no reason to invoke section 11AC for the penalty.

Full Text of the CESTAT Order is as follows:-

The fact of the case is that the respondent had cleared their finished goods to their customer by valuing the goods on the basis of purchase order placed by them by their customers. However, consequent upon price escalation, their customers amended the purchase order and revised the price of the goods on the higher side with retrospective effect. Thus, by revision of the respective price amendment, the differential price would become payable by the buyer of the goods and as per the definition of transaction value, the amended price ought to have been the transaction value of the goods already cleared by the assessee and the goods should have been assessed to duty on the basis of such transaction value. However, when the goods were originally cleared by the assessee the same were not correctly assessed to duty at transaction value in as much as the price at which the goods were originally cleared was not the amended price, and therefore, the value arrived at by the assessee was not the transaction value for the purpose of assessment of duty. Show cause notice was issued proposing demand of differential duty under the proviso to section 11A(1) of Central Excise Act, 1944, penalty under section 11AC and interest under section 11AB of the Act. The adjudicating authority confirmed the demand, imposed equal amount of penalty and demanded the interest. Aggrieved by the said original order, the respondent filed the appeal before the Commissioner (Appeals) contesting only the imposition of penalty and demand of interest. The Commissioner (Appeals) upheld the demand and interest, however set aside the penalty imposed under section 11AC by the original authority. Therefore the Revenue aggrieved by the portion of the order to the extent that the Commissioner (Appeals) set aside the penalty, filed this appeal.

2. Shri Sanjay Hasija, Learned Superintendent (A.R.) appearing on behalf of the Revenue submits that the demand is for extended period, there is a suppression of fact therefore the demand was confirmed invoking the proviso to section 11A(1) of the Act. In such case, the penalty under section 11AC is inevitable. The Commissioner (Appeals) should not have dropped the penalty imposed under section 11AC therefore the order to that extent deserves to be set aside. He further submits that, in the case of CCE & C v. BIL Metal Industries. The Honble Gujarat High Court in Tax Appeal No. 1664 of 2008 in the remand direction by the Honble Supreme Court, the Tribunal order giving relief from interest and penalty was quashed and set aside. Therefore, the penalty imposed was upheLearned

3. Shri Prakash Shah, Learned Counsel for the respondent submits that there is no dispute regarding the demand of duty on the escalation of price. He submits that the appellant had no intention to evade payment of duty on the escalated price at the time of clearance, the appellant have paid the duty on the transaction value prevailing at the time of clearance of the goods. The price was escalated subsequent to the clearance of the goods by the buyer therefore on the escalation portion of the value, there was no reason to pay duty at the time of clearance of the goods, therefore the penalty under section 11AC cannot be imposed. He further submits that the issue of interest on the duty paid due to escalation of price subsequent to the clearance of goods is still under debate as the various judgements not only by the Honourable High Court but also of the Honourable Supreme Court delivered on the issue. Presently the issue is referred to the Larger Bench of the Honourable Supreme Court. Therefore the issue involved is of serious interpretation of the provisions for charging interest on the delayed payment of duty due to escalation of price of the excisable goods cleared on payment of duty. In this regard he placed reliance on the following judgements :–

(i) CCE Vs. SKF India Ltd.(2009) 21 STT 429 (SC)

(ii) Transformers & Rectifiers (I) Ltd. Vs. CCE 2015 (321) ELT 518 (Tri.-Ahd.)., Upheld by the Honourable Supreme Court 2105 (321) E.L.T. A203 (S.C)

(iii) CCE Vs. Bharat Heavy Electricals Ltd. 2010 (257) ELT 369 (Kar.) Upheld by 2015 (318) E.L.T. A155 (S.C.)

(iv) Steel Authority of India Ltd. Vs. CCE/(2016) 53 GST 372 (SC)

4. I have carefully considered the submissions made by both the sides. In the present appeal, the Revenue has challenged the dropping of the penalty by the Learned Commissioner (Appeals) which was imposed by the original authority under section 11AC. As per the fact of the case there is no dispute that the duty was payable on the escalated value of the goods cleared by the appellant. The main issue was whether the interest is chargeable on the duty paid on the escalated portion of the value. This issue has been considered in various judgements as cited by the Learned Counsel, subsequently the matter was referred to the Larger Bench of the Honourable Supreme Court. As regard the intention of the appellant regarding payment of duty on the escalation value, 1 am of the view that at the time of clearance of the goods there was no knowledge to the appellant about any differential value. The value was escalated subsequent to the clearance of the goods by the buyer. The appellant have paid the duty without any contest to the demand. In this fact there is no reason to invoke section 11AC for the penalty. Moreover, the issue of interest is still debatable; therefore there cannot be mala fide intention on the part of the appellant with intention to evade payment of duty. As regard the submission of the Learned AR that in the case of BIL Metal Industries (supra), the High Court in the remand matter by the Supreme Court upheld the penalty and interest. On careful reading of the said judgement I observed that the Honourable High Court has framed the following question of law thereafter the order was passed :–

“Whether, in the facts and circumstances of the case, in a case where the payment of duty on enhanced value at the time of issuance of supplementary invoices cannot be regarded as delayed payment of duty and whether interest on such delayed payment is leviable under the provisions of Section 11AB of the Central Excise Act, l944?”

In the remand order the following paragraph is reproduced below:-

“9. As the issue is squarely covered by the order of the Honourable Apex Court in case of International Auto Ltd. (supra) where an earlier decision of SKF India Ltd. (supra) is reiterated in this very authority where also similar view was expressed. In this premise, this appeal needs to be allowed and order of the Tribunal in the present case need to be quashed and set-aside.

Rule to the above extent is to be confirmed. Accordingly, this Tax Appeal stands allowed with consequential relief and stands disposed of.”

From the reading of the above judgement, it is very clear that the issue decided by the Honourable High Court is whether the interest is leviable in the circumstances when the value was enhanced at the time of issuance of supplementary invoice. The Honourable High Court has decided this very issue and from the order also it can be seen that the rule relating to the issue of interest was confirmed. Though the Tribunal order was set aide, which involved the penalty also but no explicit finding on the penalty was given by the Honourable High Court of Gujarat. Considering the legal position of charge ability of interest which is highly debatable issue and, therefore, it cannot be said that the appellant had any mala fideintention, therefore this is not a case for imposition of penalty under section 11AC of the Act. As per our above discussion and the various judgements cited by the Learned Counsel, I am therefore of the view that the Learned Commissioner (Appeals) has rightly dropped the penalty of section 11AC. I therefore upheld the order of the Learned Commissioner (Appeals) and dismiss the Revenue’s appeal.

Download Judgment/Order

Author Bio

More Under Excise Duty

Posted Under

Category : Excise Duty (4001)
Type : Judiciary (9619)
Tags : Cestat judgments (784)

Leave a Reply

Your email address will not be published. Required fields are marked *

Search Posts by Date

May 2017
M T W T F S S
« Apr    
1234567
891011121314
15161718192021
22232425262728
293031