MIL INDIA LTD Vs. CCE

JUDGEMENT

(1.) The short question which arises for determination in this civil appeal is whether the Customs, Excise and Service Tax Appellate Tribunal (for short 'CESTAT') was right in entertaining the assessee's appeal on dutiability against the order passed by Commissioner (A) dated 9.4.2003 in the Quantum Dispute, particularly when in the earlier round of litigation the Commissioner (A) had concluded vide order dated 22.3.2000 that the bought out items were dutiable and which order had become final.

(2.) The appellants are engaged in the manufacture of plant and equipments for soaps, detergents and allied industries falling under Chapter Sub-Heading 8479.90 of the Central Excise Tariff Act, 1985. The manufactured equipments were cleared by the appellants on payment of duty. The dispute relates to dutiability of certain bought out items like motor-pumps, heat exchangers etc. The appellants had entered into a composite contract with M/s. Godrej Soaps Ltd. and M/s. Galaxy Surfactants Ltd. for the supply of various items which formed part of the fatty acid plant. Under the contract, in addition to the supply of the equipments manufactured by the appellants, various duty paid bought out items were directly supplied by the appellants to the site of M/s. Godrej Soaps Ltd. and M/s. Galaxy Surfactants Ltd. These items were never received in the factory premises of the appellants. The fatty acid plant and the film sulphonation plant were to be erected and commissioned not by the appellant but by M/s. K.S. Krishnan Associates Pvt. Ltd. On 23.5.1997 a show cause notice was issued by the department to the appellants demanding duty on the various bought out items supplied directly to the site of M/s. Godrej Soaps Ltd. and M/s. Galaxy Surfactants Ltd. The demand was for the period April 1996 to March 1997. By a corrigendum dated 6.6.1997 the period was reduced to November 1996 to March 1997 (6 months). However, the duty amount was not correspondingly reduced. In reply the appellants contended that no duty was payable on various bought out items which were directly sent to the site. In the alternative they submitted that maximum duty payable, if any, would be Rs. 23,21,500 since the period was restricted to six months. By order dated 1.5.1999 the adjudicating authority confirmed the demand on the bought out items on the ground that the same was necessary for the manufacture of the fatty acid plant at the site of M/s. Godrej Soaps Ltd. and M/s. Galaxy Surfactants Ltd. Aggrieved by the order dated 1.5.1999 the matter was carried in appeal to the Commissioner (A). By order dated 22.3.2000 the Commissioner (A) held that the value of the bought out items was includible in the assessable value of the equipments manufactured. However, the Commissioner (A) remanded the matter for quantification of the duty liability on the ground that the demand stood restricted for 6 months. In the quantum dispute the adjudicating authority confirmed once again the duty demand amounting to Rs. 94,03,500 although the period stood reduced to 6 months. Aggrieved by the said order of the adjudicating authority the appellants once again moved the Commissioner (A). Vide order dated 9.4.2003 the Commissioner (A) confirmed the duty demanded on the ground that the appellant had failed to produce evidence to disprove the quantification made by the department. The Commissioner (A) did not consider the claim of MODVAT credit made by the appellants on the ground that the appellants had not followed the prescribed procedure for claiming MODVAT credit. Accordingly, he dismissed the appeal and also the contention of the appellants that the net duty liability would be only for Rs. 20,42,993. Aggrieved, by the order passed by the Commissioner (A) dated 9.4.2003 the matter was carried in appeal by the appellants to the Tribunal. By judgment and order dated 3.10.2003 the Tribunal held that no duty was payable on the bought out items. The Tribunal further held that the appellants were entitled to raise the issue of dutiability of bought out items even though in the earlier round of litigation the appellants did not challenge the order of the Commissioner (A) dated 22.3.2000, on merits. The Tribunal concluded that the department was not entitled to add the value of the bought out items in the assessable value of the goods manufactured by the appellant. Accordingly, the Tribunal allowed the appeal. Aggrieved by the decision of the Tribunal the department preferred Central Excise Appeal No. 28 of 2004 in the High Court under Section 35-G of the Central Excise Act, 1944. By the impugned judgment dated 5.11.2004 the High Court held that the order of the Commissioner (A) dated 22.3.2000 had become final on merits since that order was never challenged by the assessee, and therefore, in the quantification dispute (quantum dispute) the only question to be decided was regarding the quantum of duty liability. In the circumstances the High Court held that the Tribunal was not competent to entertain the appeal preferred by the assessee against the later order of the Commissioner (A) dated 9.4.2003 in the second round of litigation on the question as to whether the bought out items were dutiable. By the impugned judgment the High Court set aside the order of the Tribunal.

(3.) Hence this appeal by the assessee.