Raychem RPG Ltd. Vs Commissioner of Central Excise (CESTAT Mumbai)
We are not in agreement with the findings recorded by the Commissioner on the issue of limitation. Undisputedly all the facts were in the knowledge of the revenue and in fact have been corresponded between the revenue and appellant since 1993. For the clearance of the said goods either by adopting the value determined on the basis of cost construction method prior to 1994, appellants would have filed Price List as per Rule 173 C of the erstwhile Central excise Rules, 1944 and thereafter price declarations with the department. These price lists would have been considered and approved by the appropriate authorities throughout. Commissioner does not deny the correspondences between the appellant and the revenue since 1993 on the issue. When the entire issue was in knowledge of the revenue since 1993, we do not find ourselves in agreement with the findings recorded by the Commissioner for invoking extended period of limitation in the present case. Since we do not find any merits in the order invoking extended period of limitation, the penalty imposed under Section 11AC cannot be sustained and needs to be set aside.
FULL TEXT OF THE CESTAT MUMBAI ORDER
These appeals are directed against order in original No. 09-10/PD/TH-II/2008 dated 30.05.2008 of the Commissioner of Central Excise, Thane II. By the impugned order, the Commissioner has held as follows:
“ORDER
1. I hold that the value of excisable goods cleared/stock transferred to their Unit No. 2/Customer Care Centre at Kalher from where the goods are sold to unrelated buyers without carrying out any manufacturing activity should be determined by applying the principles and provisions enumerated under Rule 7 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. Since M/s Raychem RPG Ltd. have failed to give the selling price of the components manufactured in their factory which are put up along with other bought out items constituting various cable jointing kits, I hold that the same should be arrived at on pro-rata basis of total sale price of the kits as furnished by M/s Raychem RPG Ltd. vis-à-vis the cost of excisable goods manufactured and that of the bought out items constituting cable jointing kits.
2. I confirm in terms of sub-section (2) of Section 11A of the Central Excise Act, 1944, the total duty of Rs. 5,54,55,641/-(Rupees Five Crore Fifty Four Lakh Fifty Five Thousand Six Hundred Forty One only) [ Basic Excise Duty Rs. 5,48,84,430/+ Education Cess Rs. 5,51,815/- + Secondary and Higher Education Cess Rs. 19,396/-), as demanded vide subject Show Cause Notices dated 11.5.2007 and 28.12.2007 under Section 11A(1), as payable by/recoverable from M/s Raychem RPG Ltd., Vasai.
3. I order that the statutory liability of interest on the amount determined as payable at Sr.No.2 above shall also be recovered from M/s Raychem RPG Ltd. under Section 11AB of the Central Excise Act, 1944.
4. I impose a penalty of Rs. 5,01,51,8221- (Rupees Five Crore One Lakh Fifty One Thousand Eight Hundred Twenty Two only) on M/s Raychem RPG Ltd. under Section 11AC of the Central Excise Act, 1944.
5. I also impose penalty of Rs. 53,03,819/- (Rupees Fifty Three Lakh Three Thousand Eight Hundred Nineteen only) under Rule 25 of the Central Excise Rules, 2002 for contravening various provisions of the said Rules.
6. I impose a penalty of Rs. 1,00,000/- (Rupees One Lakh only) on Mr. Kapil M. Gohil, Senior Manger-Finance and Company Secretary of M/s Raychem RPG Ltd. under Rule 26 of the Central Excise Rules, 2002.”
1.2 Appeal No E/85535/2013 has been filed by the revenue against order-in-appeal No. 14/15 dated 23.10.2012 of the Commissioner (Appeals-IV) Central Excise, Mumbai-I dropping the demands for the subsequent period on the same issue.
2.1 Appellants are engaged in the manufacture of excisable goods viz. Electrical Insulating Material, Heat Shrinkable Sleeves/Tubes, Power Cable Accessories, Surge Arrestors, Bus Bars, Branch Off Clips etc. falling under Ch. No. 85, 76, 73, 83, 84 and 39 of the first schedule to Central Excise Tariff Act, 1985.
2.2 They were clearing Electrical Insulating material, and Telephone Cable Accessories, such as Heat Shrinkable Tubings, Moulded Parts, Wrap Around Sleeves, Break Cuts etc. of various dimensions (hereinafter referred to as “the excisable goods”) on stock transfer basis, to their Customer Care Centre situated at Kalher, Bhiwandi (depot), by paying duty on the value arrived at on the basis of 110% of the cost of production or manufacture of such goods.
2.3 At their depot, they also procure some bought out items/articles, such as copper braids, hose clips, support rings etc. directly from the market. These bought out items, in their original condition, as obtained from various manufacturers/dealers, are put together in cartons along with the excisable goods cleared by them from their manufactory. The composition/constituents of each carton varies as per the specifications / requirements of different customers. The goods put up/packed in the cartons are sold from their depot in the name of “Cable Jointing Kits”
2.4 The activity of making the cable jointing kit basically involves putting together of the excisable goods (in packed condition as received from their factory) along with other bought out items, along with the instructions for use of the said articles in the carton/box is not the activity of manufacture and hence the use of excisable goods for consumption by them or on their behalf in the production or manufacture nor any other article emerge as a result of putting together various items /articles in a carton/box. Therefore the value determined by the Appellant under Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, is improper and the value should have been determined under Rule 11 read with Rule 7, ibid.
2.5 Accordingly a show cause notice dated 28.12.2007 was issued to appellant alleging contravention of the provisions of the Central Excise Act, 1944 and Rules framed thereunder in as much as they have failed to : –
i. determine the correct assessable value of the excisable goods manufactured and cleared by them from their factory to their customer Care Centre / Depot at Kalher, as required under Section 4(1)(b) of the Central Excise Act, 1944 read with Rule 11 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.;
ii. correctly assess the duty payable on the excisable goods as required under Rule 6 of the Central Excise Rules, 2002;
iii. clear the said excisable goods on payment of appropriate duty as required under Rule 4 read with Rule 8 of the Central Excise Rules, 2002;
iv. declare proper Assessable value, Central Excise Duty payable/paid on the excisable goods on the invoice under which the goods were cleared, as required under Rule 11 of the Central Excise Rules, 2002 and
v. they have failed to declare proper assessable value, Central Excise Duty payable/paid on the excisable goods cleared by them in the periodical returns filed by them at the relevant time, as required under Rule 12 of Central Excise Rules, 2002.
2.6 Therefore Appellants were asked to show cause as to why:-
> Differential central excise duty should not be demanded by invoking extended period of limitation.
> Why interest should not be demanded on the said differential duty.
> Why penalties should not be imposed in terms of Section 11AC of Central Excise Act, 1944, Rule 25 and Rule 26 of the Central Excise Rules, 2002
2.8 This show cause notice was adjudicated by the Commissioner as per the impugned order as per para 1, above. Aggrieved appellants have filed these appeals.
2.9 Two more show cause notices as detailed in table below were issued to the appellant.
