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PJ/Case law/2013-14/1894

Whether excess transportation charges collected by assessee includible in the assessable value for excise duty?

Case:-COMMISSIONER OF C.EX., AHMEDABAD VERSUS VRW REFRACTORIES PVT. LTD.

Citation:-2013(294) E.L.T. 105 (Tri.-Ahmd.)

Brief Facts:-Being aggrieved with the order passed by Commissioner (Appeals) vide which he has set aside the order of the original adjudicating authority, Revenue has filed the present appeal.
Demand of duty of Rs. 1,92,224/- was raised against the respondents by way of issuance of a show cause notice dated 2-2-2005 on the allegation that during the period 2000-01, the respondents have recovered excess transportation charges to the extent of Rs. 12,01,402/- from their customers than the actual amount paid by them to the transporters. The adjudicating authority confirmed the demand along with interest and imposition of penalty of identical amount under Section 11AC of the Act. However on appeal, the Commissioner (Ap­peals), by following the Hon'ble Supreme Court's decision in the case of Baroda Electric Meters reported in 1997 (94) E.L.T. 13 (S.C.), held that since the transpor­tation activity is not connected with the manufacturing activity, the excess recov­ery of transportation charges from customers cannot be added to the assessable value. He accordingly set aside the impugned order.
He also held the demand to be barred by limitation inasmuch as the duty for the period 2000-01 was raised by way of issuance of a show cause notice on 2-2-2005. By relying upon the Hon'ble Supreme Court's decision in the case of Padmini Products v. CCE reported in 1989 (43) E.L.T. 195 (S.C.), he observed that mere failure or negligence on the part of the manufacturer in not paying duty does not attract the extended period of limitation unless there is a positive evi­dence to show that the manufacturer knew the goods were liable to duty. As such by observing that the elements of proviso to Section 11A relating to willful misstatement, suppression of facts, fraud and collusion being absent in the pre­sent case, the extended period will not be available to the Revenue.
Appellant Contentions:-As against the above findings, the Revenue in their appeal memo have contended that the law declared by the Hon'ble Supreme Court in the case of Baroda Electric Meterscannot be followed in this case inasmuch as another mat­ter relating to the same issue is pending before the Hon'ble Supreme Court in the case of Majestic Auto Ltd. Revenue has also submitted that the recovery of excess freight charges was not known to the Revenue inasmuch as the respondent never disclosed the said fact to escape his duty liability, the suppression of fact with an intent to evade payment of duty was rightly incorporated in the show cause no­tice. They have accordingly prayed for setting aside the impugned order of Commissioner (Appeals).
 
Respondent Contentions:-The respondent reiterated the findings of the lower adjudicating authority.
Reasoning of Judgment:-We have considered the submission from parties and perused the record, we find that respondent has brought to our notice the Supreme Court's judgment in the case of CCE, Meerut v. Majestic Auto Ltd.reported in 2005 (184) E.L.T. 130 (S.C.).On going through the said decision, we find that it again stands reiterated by the Hon'ble Supreme Court that in view of the earlier deci­sion in the case of Baroda Electric Meters,the appeal filed by the Revenue is dis­missed However in respect of other appeals a different issue was involved as is clear from paras 5 & 6 of the judgment, wherein they have observed that there seems to be some confusion as to the factual and legal basis on which the original order of assessment had been passed. In view of that the appeal gets remanded to the Tribunal for determining the questions so formulated. As is already ob­served one of the appeals before the Hon'ble Supreme Court stands dismissed in view of the decision of the Hon'ble Supreme Court in the case of Baroda Electric Meters. As such we find no infirmity in the views adopted by Commissioner (Appeals) on merits.
 
We also find favour with the findings arrived at by Commissioner (Appeals) in respect of limitation. Merely because the fact of charging more freight was not being disclosed to the Revenue, by itself cannot be taken as a ground for invoking the longer period of limitation unless any evidence to reflect upon the assessee's malafide is brought on record. In the absence of any such evi­dence, the extended period has been rightly held has not invoked as not against the respondent.
 
In view of our foregoing observations, the appeal filed by the Reve­nue is rejected.
 
Decision:-The appeal filed by the Reve­nue is rejected.
 
Comment:- The gist of this case is that in view of decision given by the Supreme Court, the excess transportation charges collected by the manufacturer assessee is not includible in the assessable value for the purpose of excise duty as transportation is not integral to the manufacture of goods.
 

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