Commissioner of Central Excise, Jaipur Vs. Dugar Tetenal
India Limited
[2008] INSC 387 (7 March 2008)
ASHOK BHAN & DALVEER BHANDARI CIVIL APPEAL NO. 4055 of 2002 With Civil Appeal No. 5608 of 2002 BHAN, J.
1. These two appeals are directed against the order of Customs Excise and
Gold (Control) Appellate Tribunal, Delhi in appeal No. E/303/2001-C (Final
Order No. 14/02-C) dated 25.1.2002. Civil Appeal No. 4055 of 2002 has been
filed by the Revenue whereas Civil Appeal No.
5608 of 2002 has been filed by the assessee.
2. The Assessee is engaged in the manufacture of photographic chemicals.
During the period from March, 1988 to February, 1992 assessee cleared its
products under the brand name "Tetenal" without payment of duty,
claiming the benefit of exemption under Notification No. 175/86-CE dated
1.3.86. From the result of investigation conducted by the officers of Central
Excise, it was found that the brand name "Tetenal" belonged to M/s
Tetenal Vertribs GmBH, Germany and that the assessee was not eligible for the
benefit of exemption Notification as they had cleared their product affixed
with the brand name of another person. It further appeared to the department
that the assessee had mis-stated and suppressed facts with intent to evade
payment of duty on the goods. The department, therefore, by show cause notice
dated 24.6.1992 called upon the assessee to pay central excise duty of
Rs.32,25,465/- on the goods cleared during the aforesaid period and also to
show cause why penalty should not be imposed on them.
3. The Collector vide his order dated 5.11.1992 dropped the proceedings. The
Revenue filed an appeal before the Tribunal. The Tribunal by its order dated
21.3.2000 held that the assessee was not entitled to the benefit of the
Notification and consequently remanded the matter to the adjudicating authority
for fresh decision on the question whether the demand of duty was within the
time prescribed under the Act.
4. In pursuance to the order passed by the Customs Excise and Gold (Control)
Appellate Tribunal, the Commissioner by its order dated 6.11.2000 rejected the
plea taken by the assessee that the extended period of limitation could not be
invoked. The Commissioner confirmed the demand of duty of Rs.32,25,465/-
against the assessee by invoking the extended period of limitation prescribed
under the proviso to Section 11A(1) of the Central Excise Act, 1944 (for short
"the Act") and also imposed a penalty of Rs. 3 lakhs under Rule 173Q
of the Central Excise Rules, 1944 (for short "the Rules").
5. The assessee being aggrieved filed an appeal against the aforesaid order
before the Tribunal. Apart from raising the issue of applicability of the
Notification and limitation, the assessee further contended that the selling
price of the goods was the cum-duty price and they were entitled to deduct the
duty element from the sale price for the purpose of determination of assessable
value of the goods in terms of Section 4(4) (d) (ii) of the Act. Tribunal by
its impugned order held that the demand of duty is not barred by time.
That the extended period of limitation was invokable in the present case.
Against this portion of the order the assessee has filed the appeal. The
Tribunal however set aside the quantum of duty and directed the adjudicating
authority to re-determine the assessable value of the goods after examining the
assessee's claim under section 4(4) (d) (ii) of the Act on its merits and in
the light of the Tribunal's order in the case of Shri Chakra Tyres Ltd. V. CCE,
Madras, 1999 (32) RLT-1. Against this portion of the order, the Revenue is in
appeal. Tribunal had set aside the order imposing penalty but the same has not
been challenged by the Revenue.
Civil Appeal No. 5608 of 2002
6. Mr. V. Lakshmikumaran, learned counsel appearing for the assessee
strenuously contended that the assessee was under a bonafide belief that they
were entitled to the benefit of exemption under the Notification in respect of
the products manufactured by the assessee and cleared under the brand name
"Tetenal" during the material period and, therefore, they had no
intent to evade payment of duty. It was also contended that the brand name
"Tetenal" on the finished goods was duly declared by the assessee in
its classification list which were accepted by the Revenue. That they were
eligible to the exemption treating the brand name "Tetenal" as their
own product. That the classification list was being submitted right from 1988
and approved by the department and that it was not a case of mis-statement or
suppression of the fact but interpretation of Notification No.
175/86-CE. The period of dispute was from February, 1988 to March, 1992 and
the show cause notice was issued on 26.6.1992, hence the demand prior to
24.12.1992 was clearly barred by time.
7. As against this, Mr. I. Venkatanarayana, learned senior counsel appearing
for the Revenue submitted that the assessee was fully aware of the fact that
during the material period, the brand name "Tetenal" did not belong
to them but belonged to their German collaborator. The assessee suppressed this
material fact before the department with intent to evade payment of duty on the
branded goods by wrongly availing the benefit of Notification No. 176/86-CE. It
was contended that there was no material on record to support the plea of
bonafide belief. It was further submitted that the assessee deliberately
withheld from the department the material information that the brand name was
that of their foreign collaborator and the same was done with the intention to
avail the benefit of exemption under the notification to which the assessee was
not entitled.
8. Assessee's main contention is that use of brand name "Tetenal"
on finished goods was duly declared in their classification list and they were
under a bonafide belief that they were entitled to SSI benefit treating the
brand name "Tetenal" as their own property. That the belief of the
assessee was reinforced by the fact that classification lists which were being
submitted from 1988 onwards had been duly approved. It is not disputed that the
appellants had given the following declaration on various classification list
filed by it from time to time:- "We shall affix our brand name on finished
goods which will be only our brand name viz. "Tetenal"
9. This declaration gives an impression as if the brand name "Tetenal"
was owned by them. On investigation the claim of the assessee was found to be
false. The excise officers unearthed that the said brand name was in fact owned
by one M/s. Tetenal Vertriebs GmBH, Germany, their foreign collaborator and
that they were paying royalty @ 4% of ex-factory price minus the cost of
imported inputs as per written agreement between them. Thus it is established
beyond reasonable doubt that the assessee had wrongly been giving declaration
in various classification lists that the brand name "Tetenal" was
owned by them.
10. Proviso to Section 11A(1) of the Act reads:
"Section 11A - Recovery of duties not levied or not paid or
short-levied or short- paid or erroneously refunded (1) When any duty of excise
has not been levied or paid or has been short-levied or short-paid or
erroneously refunded, whether or not such non-levy or non- payment, short-levy
or short payment or erroneous refund, as the case may be, was on the basis of
any approval, acceptance or assessment relating to the rate of duty on or
valuation of excisable goods under any other provisions of this Act or the
rules made thereunder, a Central Excise Officer may, within one year from the
relevant date, serve notice on the person chargeable with the duty which has
not been levied or paid or which has been short-levied or short-paid 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 :
Provided that where any duty of excise has not been levied or paid or has
been short-levied or short-paid or erroneously refunded by reason of fraud,
collusion or any wilful mis-statement or suppression of facts, or contravention
of any of the provisions of this Act or of the rules made thereunder with
intent to evade payment of duty, by such person or his agent, the provisions of
this sub-section shall have effect, as if, for the words "one year",
the words "five years" were substituted"
11. The declaration of the assessee in the classification list that the
brand name "Tetenal" was owned by them was a willful
mis-statement/suppression of facts with the intent to evade payment of duty
with ulterior motive to avail benefit under Notification No. 175/86-CE dated
1.3.86. The assessee was fully aware of the fact that the same was not owned by
it and that the same belonged to their foreign collaborator. Shri Vijay Prakash
Katta, Director of the unit in his statement dated 11.3.1992 admitted that the
brand name "Tetenal" was owned by the foreign collaborator and not by
the assessee. Thus the conditions postulated in proviso to Section 11A(1) for
invoking extended period of limitation are fully satisfied.
12. Para 7 of the Notification No. 175/86-CE stipulates that the benefit of
exemption will not be available to the goods on which the brand name of another
manufacturer is affixed and the said manufacturer is not entitled to the small
scale exemption, so that the benefit of small scale exemption should not be
misused by manufacturers manufacturing goods for different persons. Admittedly
the German collaborator was not entitled to avail the SSI exemption. We presume
that the assessee while filing the classification list would be aware of Clause
7 of the Notification. In spite of clause 7 in the Notification, the assessee
made a mis-statement in the classification list for claiming benefit of the
exemption Notification No. 175/86- CE. For the reasons stated above, we do not
find any merit in the appeal filed by the assessee.
13. The assessee in addition to the submission that the extended period of
limitation could not be invoked had contended that the selling price of the
goods was the cum-duty price and they were entitled to deduct the duty element
from the sale price for the purpose of determination of assessable value of the
goods in terms of Section 4(4) (d) (ii) of the Act. The Tribunal accepted this
plea of the assessee relying upon the decision of the Tribunal in the case of
Shri Chakra Tyres Ltd (supra). The view taken in Shri Chakra Tyres Ltd (supra)
was affirmed by this Court in Commissioner of Central Excise, Delhi V. Maruti
Udyog Limited, 2002 (3) SCC 547. Learned counsel for the Revenue has relied
upon the judgment of this Court in Asstt. Collector of Central Excise V. Bata
India Limited , 1996 (4) SCC 563. This judgment was duly considered in Maruti
Udyog Limited (supra). After considering the case in Bata India Limited (supra)
this Court observed in para 5 as under:- "5. A reading of the aforesaid
Section clearly indicates that the wholesale price which is charged is deemed
to be the value for the purpose of levy of excise duty, but the element of
excise duty, sales tax, or other taxes which is included in the wholesale price
is to be excluded in arriving at the excisable value.
This Section has been so construed by this Court in Asstt. Collector of
Central Excise and Ors v. Bata India Ltd., 1996 (4) SCC 563, and it is thus
clear that when cum-duty price is charged, then in arriving at the excisable
value of the goods the element of duty which is payable has to be excluded. The
Tribunal has, therefore, rightly proceeded on the basis that the amount
realised by the respondent from the sale of scrap has to be regarded as a
normal wholesale price and in determining the value on which excise duty is
payable the element of excise duty which must be regarded as having been
incorporated in the sale price, must be excluded. There is nothing to show that
once the demand was raised by the Department, the respondent sought to recover
the same from the purchaser of scrap. The facts indicate that after the sale
transaction was completed, the purchaser was under no obligation to pay any
extra amount to the seller, namely, the respondent. In such a transaction, it
is the seller who takes on the obligation of paying all taxes on the goods sold
and in such a case the said taxes on the goods sold are to be deducted under
Section 4(4) (d) (ii) and this is precisely what has been directed by the
Tribunal.
There is also nothing to show that the sale price was not cum-duty. "
14. In our view, the Tribunal has rightly remanded the case to re-determine
the duty payable keeping in mind the provisions of Section 4(4) (d) (ii).
15. For the reasons stated above, we do not find any merit in either of the
appeals and accordingly dismiss the same leaving the parties to bear their own
costs.
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