The Commissioner of
Central Excise Visakhapatnam Vs M/s. Mehta & Co.
JUDGMENT
Dr. MUKUNDAKAM
SHARMA, J.
1.
Delay
condoned.
2.
The
present appeal filed by the appellant - Commissioner of Central Excise, Visakhapatnam
arises out of an order dated 28.07.2008 passed by the Customs, Excise & Service
Tax Appellate Tribunal, South Zonal Bench at Bangalore (hereinafter referred to
as `the Tribunal') in appeal No. E/132/2005.
3.
Two
primary issues fall for consideration in this appeal. The first issue is, as to
whether or not the demand for payment of duty is barred by limitation, whereas the
second issue is whether the items like chairs, beds, tables, desks, etc., affixed
to the ground could be said to be immoveable assets and not liable to excise duty.
The aforesaid two issues have arisen in the light of the rival submissions made
on the basic facts of this appeal which are hereinafter being set out.
4.
M/s.
Mehta & Company, Mumbai (the "assessee") are engaged in the business
of interior decoration. The assessee provides composite services including woodwork,
furniture items etc. They entered into contracts with customers for doing these
works as per their requirement and also carry out these works at their
customer's premises.
5.
On
gathering specific intelligence that the assesses have undertaken the
manufacture of articles of wood, furniture, etc. in the premises of Hotel Grand
Bay, Vishakhapatnam and removed the same without payment of duty of excise, the
officers of Head Quarters Preventive unit inquired and investigated the matter.
6.
It
was found that the assessee along with M/s Chandrasekhar Architects Pvt. Ltd., Mumbai
entered into an agreement with M/s. Adyar Gate Hotel Ltd., Chennai (now M/s Welcome
Group) on 30.08.1995 for carrying out the renovation of the existing structure in
their hotel at Nowroji Road, Maharanipeta, Visakhapatnam. The scope of this agreement
was further modified by another agreement dated 18.10.1995. As seen by the
final bills dated 31.03.1997, raised by the assessee on Hotel Grand Bay, it was
observed that the assessee, inter alia, manufactured and cleared furniture, falling
under chapter sub-heading Nos. 9401.00 & 9403.00, 4410.11, 8302.00 and
7610.90 respectively, of the Schedule to the Central Excise Tariff Act, 1985. As
per the agreement the assessee quoted prices which included sales tax, excise
duty, octroi etc.
7.
It
appears that the assessee manufactured goods covered under different chapter headings
at the customer's site and removed them without payment of proper duty of excise
with an intention to evade payment of duty. The contract between the assessee and
M/s Adyar Gate Hotel Ltd., clearly mentions that the assessee has quoted rates
which include the excise duty and it had been made in the contract that the contractor
would not have any claim subsequently after execution of the work for excise duty,
sales tax etc. from M/s. Adyar Gate Hotels Limited.
8.
A
show cause notice under the Central Excise Act, 1944 [for short "the
Act"] dated 15.05.2000 was issued to the respondent - M/s. Mehta &
Company to show cause as to why: -
i.
Duty
of excise amounting to Rs. 62,94,910/- should not be demanded from them on the goods
manufactured and cleared under Rule 9(2) of the Rules read with the proviso to
section 11A (1) of the Act
ii.
The
amount of Rs. 10,00,000/- already paid under protest towards the duty of excise
should not be adjusted towards the payment of duty demanded in above;
iii.
Penalty
should not be imposed on them under Rule 9(2), Rule 52A and Rule 173Q of the
Rules;1
iv.
Penalty
equal to the duty demanded in (i) above should not be imposed on them under Section
11AC of the Act;1
v.
Interest
@ 24% p.a. from the first day of the month succeeding the month in which the duty
ought to have been paid, till the date of payment of such duty should not be demanded
from them under section 11 AB of the Act; and1 (vi) The goods involved should not
be confiscated under Rule 173Q (1) of the Rules.
9.
M/s.
Grand Bay Hotel, Beach Road, Visakhapatnam was also asked to show cause as to why
penalty should not be imposed under Rule 209A of the Rules for purchase and
possession of the excisable goods on which duty of excise had not been paid.
10.
The
respondent - M/s. Mehta & Co. and M/s. Grand Bay Hotel submitted their respective
replies. The Commissioner of Central Excise vide order dated 31.12.2002 confirmed
the demand of Rs. 43,59,710/- out of the proposed demand of Rs. 62,94,910/- under
Rule 9(2) along with penalty of equal amount i.e. Rs. 43,59,710/- and directed the
redemption of the confiscated goods after the payment of a fine of Rs.
1,00,000/- plus the duty and penalty adjudged.
11.
Aggrieved
thereby, the respondent filed an appeal before the CESTAT, Bangalore, which allowed
the appeal and remanded the matter to the concerned adjudicating authority to examine
the matter afresh and to pass an appropriate order in accordance with law by
providing an effective hearing to the parties. Thereupon, the Commissioner, Central
Excise & Customs, Visakhapatnam vide order dated 22.10.2003 confirmed the
demand of Rs. 14,94,656/- with penalty of Rs. 7,47,328/- with interest as per
Section 11 AB of the Central Excise Act, 1944 (for short "the Act")
and also imposed a penalty of Rs. 5,00,000/- under Rule 173Q. Aggrieved thereby
the respondent filed an appeal before the Tribunal and vide order dt. 28.7.2008
the Tribunal allowed the appeal and set aside the order of the Commissioner, Central
Excise & Customs, Visakhapatnam under the impugned judgment and order as against
which the present appeal was filed.
12.
We
heard the learned counsel appearing for the parties at length who had taken us
through all the orders which gave rise to the aforesaid two issues which fall for
our consideration in the present appeal.
13.
The
learned counsel appearing for the appellant submitted before us that so far as the
issue with regard to the limitation is concerned, the same was not urged before
the Commissioner when he was hearing the matter after the order of remand by the
Tribunal and in that view of the matter, the Tribunal could not have decided the
said issue against the appellant. It was further submitted that in any case proviso
to Section 11A of the Act is attracted to the facts and circumstances of the present
case, and therefore, the show cause notice was issued by the appellant within the
period of limitation as prescribed under the proviso to Section 11A of the Act and
that the Tribunal was wrong in holding that the demand was beyond the period of
limitation. It was further submitted that the Tribunal erred in holding that all
the items manufactured by the assessee are exempted from demand of excise duty.
14.
Per
contra, the learned counsel appearing for the respondent, however, refuted the aforesaid
submissions and submitted that the appellant never had any intention to evade excise
duty and there is no finding to that effect and therefore no such duty is leviable
particularly when it is barred by limitation. It was also submitted that the pre-conditions
for attracting the provisions of proviso is not satisfied in the present case,
and therefore, it cannot be submitted that the demand is not barred by
limitation.
15.
We
have considered the aforesaid submissions of the learned counsel appearing for
the parties in the light of the records placed before us. So far as the issue with
regard to limitation is concerned, since that goes to the root of the demand made,
it is appropriate to deal with the same before we go into the second issue.
16.
Section
11A of the Act empowers the Authority to demand excise duty in terms of the conditions
laid down in the said provision as and when the pre-conditions mentioned therein
are satisfied.
17.
There
is no dispute with regard to the fact that issuance of a notice for invoking the
provisions of Section 11A of the Act is a condition precedent for a demand to
be made under Section 11A of the Act. However, in the present case, a show
cause notice was issued to the respondent herein making it a specific case that
the respondent manufactured excisable goods as mentioned in the notice and
covered under different chapter headings at the site of the customer and removed
the same without payment of duty of excise with an intention to evade payment of
duty when the contract clause between the respondent and M/s. Adyar Gate Hotel
Ltd. clearly mentioned that the contractors quoted rate shall also include the excise
duty. It was also mentioned that such conscious action on the part of the contractor
has clearly established the intention to evade payment of duty of excise and consequently
proviso to Section 11A of the Act could be invoked in the present case.
18.
In
the reply submitted by the respondent, it was stated that a proforma was enclosed
to the show cause notice and also the summons. The hotel furnished the details
of work done by the respondent and that the Central Excise Department was
informed that the work order was to carry out job on the turn key basis and not
for any furniture as such.
19.
As
stated hereinbefore, after the order of remand was passed by the Tribunal, the Commissioner
considered the issue with regard to the liability of payment of excise duty at
length and held that the respondent is liable to pay central excise duty for the
items as specifically mentioned in the said order passed.
20.
A
perusal of the said order would also indicate that no issue with regard to the
demand raised by the appellant as time barred was either raised or discussed by
the Commissioner.
21.
Being
aggrieved by the aforesaid order passed by the Commissioner, an appeal was filed
before the Tribunal. The Tribunal, however, held that the items fabricated by the
respondent herein are permanently fixed to the walls and ground of the room and
the same could not be removed from one place to another without causing much damage
to them and without cannibalizations and consequently the said items cannot be considered
as furniture in the light of the decision of this Court in the case of Craft
Interiors Pvt. Ltd. vs. CCE, Bangalore reported in (2006 (203) ELT 529 (SC)]. It
was, however, held that the case of the appellant is weak not only on merits,
but also in any case the entire demand is also hit by time bar as there is no justification
for invocation of the longer period. Thus, findings which are recorded appear
to be abrupt and without recording any reasons.
22.
Consequently,
we propose to look into the first issue in the light of the background facts as
stated hereinbefore. The specific case of the appellant is that the respondent
having manufactured the excisable goods covered under different chapter headings,
removed them without payment of proper duty of excise and that from the
aforesaid action it is explicit that there was an intention on the part of the respondent
to evade payment of duty particularly when the contract clause between the
respondent and M/s. Adyar Gate Hotel Ltd. clearly mentioned that the
contractors quoted rate would also include excise duty.
23.
Although,
the respondent has pleaded that it was done out of ignorance, but in our considered
opinion there appears to be an intention to evade excise duty and contravention
of the provisions of the Act. Therefore, proviso of Section 11A (i) of the Act would
get attracted to the facts and circumstances of the present case.
24.
The
cause of action, i.e., date of knowledge could be attributed to the appellant
in the year 1997 when in compliance of the memo issued by the appellant and
also the summons issued, the hotel furnished its reply setting out the details of
the work done by the appellant amounting to Rs. 991.66 lakhs and at that stage only
the department came to know that the work order was to carry out the job for
furniture also. A bare perusal of the records shows that the aforesaid reply was
sent by the respondent on receipt of a letter issued by the Commissioner of Central
Excise on 27.2.1997. If the period of limitation of five years is computed from
the aforesaid date, the show cause notice having been issued on 15.5.2000, the demand
made was clearly within the period of limitation as prescribed, which is five
years.
25.
So
far as the second issue is concerned, we fail to appreciate as to how the
Tribunal could come to a finding, as recorded in the impugned judgment and order
in view of the proposition of law already settled by this Court in the decision
of Craft Interiors (supra).
26.
The
decision in Craft Interiors (supra) has clearly laid down that ordinarily furniture
refers to moveable items such as desk, tables, chairs required for use or ornamentation
in a house or office. So, therefore, the furniture could not have been held to
be immoveable property.
27.
A
perusal of the records would also indicate that the Commissioner in his order
has listed out various items which were held as furniture and while doing so, he
has scrutinized the records to determine the immovability or movability of the items.
A bare perusal of the said order would also indicate that he has given deductions
for the items held as immovable. He has prepared Annexures 1,2, 3 and 4 and the
items mentioned in Annexures 1 and 2 have been held as `furniture' after proper
examination of the records whereas he has held items in Annexures 3 and 4 as
immovable and has allowed deduction.
28.
So
far as the items such as chairs, tables etc. listed in Annexure 5 is concerned,
the same admitted to be furniture by the assessee himself. The Commissioner having
considered the aforesaid issue carefully and after proper scrutiny, the Tribunal
was not justified in rejecting the said findings by mere conclusion and without
trying to meet the findings recorded by the Commissioner.29.Accordingly, we allow
this appeal and set aside the order passed by the Tribunal and restore the order
passed by the Commissioner. However, there shall be no order as to costs.
..........................................,
J (DR. MUKUNDAKAM SHARMA)
...........................................,J
(ANIL R. DAVE)
NEW
DELHI;
FEBRUARY
10, 2011.
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