Allegation of suppression not tenable when price list submitted was approved.

PJ-Case law-2013/14-1605

Case:- M/s ANDREW YULE AND CO LTD Vs COMMISSIONER OF CENTRAL EXCISE, KOLKATA-III

Citation:- 2013-TIOL-745-CESTAT-KOL

Brief facts:- The Appellant filed this Appeal against the Order-in-Original No.15/Ch.40/Commissioner/CE/Cal-III/Adj./2000 dated 19.12.2000, whereby the learned Commissioner has confirmed the demand against the Appellant. The Appellant, a Public Sector Undertaking, are a manufacturer of Vee Belts and Fan Belts. Proceedings were initiated against them on the ground that during the period from April, 1983 to July, 1984 and from August, 1984 to March, 1988, they undervalued their goods and thereby short-paid the Central Excise Duty amounting to Rs.59,36,050.82/-.Accordingly, show cause Notices were issued against them demanding duty along with a proposal for penalty under Rule 173Q of the rest while Central Excise Rules, 1944. The learned Commissioner confirmed the proposal in the show cause notice.

Appellant’s contention:- The contention of the Appellant is that they had entered into an Agreement with M/s. Goodyear India Ltd. on 11.6.1982 on the terms and conditions that the latter would supply technical knowhow and then would buy 50% of the goods produced by the Appellant by affixing their (M/s. Goodyear) brand name that they would make payment within 15 days and that the price would be lower by 25% than the wholesale price. The contention is that they had filed the Part-II Price Lists For the Contractual Price under the provisions of Section 4(1)(a)(i) of Central Excise Act, 1944, which existed at the material time. The contention is that they had filed the Contract along with the Price Lists, and the Price Lists were provisionally approved in case of the first show cause notice and in case of the second show cause notice, all the Price Lists were approved. The assessments were initially provisional. However, they were finally assessed on 15.4.1987. The contention of the Appellant is that the Department had sought to enhance the price by comparing with the wholesale price of the goods, where Appellant's brand name was affixed instead of the brand name of the Appellant, M/s. Goodyear. The contention is that in their case, the prices were contractual priced and therefore, the same cannot be compared with the wholesale prices in the normal course of trade as per Section 4(1) (a) of the Act. The contention is that all the Price Lists were approved and the impugned demands were raised against them beyond the normal period of six months prescribed in the then Section 11A of the Act. The contention is that the second show cause notice for the earlier Period was issued subsequently. The contention is that the show cause notice was issued on the ground of suppression of facts, whereas the learned Commissioner confirmed the demand on the ground that they had not filed the copy of the Agreement. The contention is that in their reply to the show cause notice, they submitted that they had filed the Agreement along with the Price Lists, the fact which has been recorded by the learned Commissioner in para 8(xvi) which reads as under:

"8(xvi). The allegation about of the elements of cost was unfounded and without any material evidence, as a copy of the agreement dtd. 11/6/82 entered into with the said "GY" was made available to the department along with lists at the very outset of the said agreement coming into operation."

They also contention that the above is contrary to learned Commissioner's finding that the copy of the Agreement was not submitted by the Appellant and the learned Commissioner has not given any finding in respect of the copy of the Agreement by the Appellant.

Appellant also submitted that the Price Lists were already approved in this case and the demand notice was issued beyond the normal period of six months which existed at the material time, therefore hit by limitation of time. In support of his contention, he placed reliance on this Tribunal's decision in the case of Commissioner of Central Excise, Madurai vs. Dharangadhara Chemicals Works reported in 2003 (159) ELT 652 (Tri.-Chennai) and on the Hon'ble Supreme Court's decision in the case of Commissioner of Central Excise, Nagpur vs. Ballarpur Industries Ltd. reported in 2007 (215) ELT 489 (SC) = (2007-TIOL-153-SC-CX). The contention is that in the subsequent show cause notice, the demand for the longer period cannot be raised. In support of his contention, he has also placed reliance on the Hon'ble Supreme Court's decision in the case of Nizam Sugar Factory vs. CCE, AP reported in 2006 (197) ELT 465 (SC) = (2006-TIOL-56-SC-CX).

Respondent’s Contention:- The respondent reiterated the findings of the learned Commissioner. He has emphasized on the observation of the learned Commissioner made at para 29 of his Order from which it is revealed that the Appellant did not furnish any evidence showing that the Assistant Commissioner was given the Agreement along with the Price Lists or they had given the information in the Price Lists itself. Therefore, the extended period is correctly invoked.

Reasoning of Judgement:-For the period from August, 1984 to March, 1988, the first show cause notice was issued on 27.7.1989 and the second show cause notice for the period from April, 1983 to July, 1984 proposing for a demand of duty of Rs.7 lakh was issued on 31.5.90. The fact that the Price-Lists were already approved is also not dispute in this case. On perusal of the show cause notice, we find that the show cause notices were issued on the ground that the Appellant undervalued their goods in comparison with the assessable value of the goods cleared to others under the Appellant's own name, 'Yule Shakti', whereas the learned Commissioner confirmed the demand on the ground that the Appellant did not submit a copy of the Agreement. However, the learned Commissioner at Para 8(xvi) of his Order, has recorded that a copy of the Agreement dated 11.6.1982 entered into between the Appellant and M/s. Goodyear, was submitted. Surprisingly, he has not given any finding in regard to the copy of the Agreement produced by the Appellant. We also find that the learned Commissioner has specifically mentioned that the Appellant were filing that Price Lists under Part-I and Part-II performs from time to time. It is well-settled principle that the already approved Price Lists cannot be re-opened retrospectively. So far as invoking the extended period is concerned, the Department is required to show that the assessee had suppressed the material facts from the Department. This Tribunal in the case of Commissioner of Central Excise, Madurai vs. Dharangadhara Chemicals Works (supra), held as under:-

"6. We have carefully considered the submissions made by both sides. We notice that the order passed by the Commissioner (Appeals) is after due consideration of all the facts in the matter. The Revenue is required to show that the assessee had suppressed material facts. In the present case, it is on record that assessee had been filing the classification list and the price lists which had been approved from time to time. The RT-12 returns also had been filed which have been scrutinized and approved. The department officials have visited the assessee's firm and the manufacturing process has been observed and seen. Before the classification list is approved, it is the duty of the proper officer to ascertain the manufacturing process and verify the declarations filed by them. Although, the declaration made in the classification list is "Hydrochloric Acid (on 100% basis)" and duty has been paid as such, but the department's contention is that 100% HCL acid does not exist and they are manufacturers of 30 to 33%. All these aspects of the matter have been explained by the assessee and they have clearly contended that HCL does not exist as 100% as it will be in gaseous stage and requires to be liquefied on lesser percentage. The hydrochloric acid fumes are taken to the HCL absorber where it is absorbed by water to form hydrochloric acid of 30 to 33% concentration and the unabsorbed fumes along with the inert gas are vented out through the discharge side of the tail end blower. It is the assessee's case that absorption of HCL fumes with water is an exothermic reaction and hence the HCL absorber is necessarily cooled by water. The manufacturing process has been filed with the department in November, 1979 itself which clearly disclosed the formation of HCL of 30 to 33% concentration and that the other materials are also produced. It shows about the correct manufacture and entries which have been checked by the Inspector of Central Excise. Therefore, it cannot be said that department was not fully aware of the manufacturing process and the assessee had suppressed any material facts with an intention to evade duty. There has been scrutiny of documents on several occasions and it is only at a later date, the department intended to change their view regarding tariff classification. The Commissioner has duly examined the matter and clearly upheld the assessee's contention that there was no mis-declaration, mis-representation or suppression of material facts in the matter with an intention to evade duty. The order is legal and proper order which does not require any interference. Hence we reject the Revenue's appeal."

In view of the above findings, the appeal was allowed with consequential relief.

Decision:- Appeal allowed.

Comment:-The analogy drawn from this case is that when the price list was submitted by the assessee and was duly approved by the revenue, then the valuation cannot be reopened. Moreover, as it cannot be said that there was suppression of facts, extended period is also not invokable.

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PJ-Case law-2013/14-1605

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