M/S. MODIPON FIBRE CO. Vs. CCE, MEERUT

JUDGEMENT

(1.) IN these three appeals, arising out of a common Adjudication Order No.1/Commr/M -1/2001 dt.2.1.2001, the issue involved is whether Turn Over Tax @ 2% is deductible from the assessable of the excisable goods manufactured by M/s. Modipon Fibre Co. even in cases where the goods were sold to 'backward area' customers as the rate of Turn Over Tax is only 0.25%.

(2.) THE Ld. Senior Counsel, further, submitted that at the time of clearance of yarn from the factory, the Appellants have no knowledge as to the location of the customers/dealers who would eventually buy the goods from the Depots; that at the time of sale from the depot at Surat, they are not aware whether the purchaser is a 'special manufacturer' or an eligible unit within the meaning of said Notification dt.19.10.93 nor do they know whether the goods will ultimately be sold in the State of Gujarat; that it is thus not possible for the Appellant to determine whether ultimately they will be required to pay TOT @ 2% or 0.25% in the case of sales made from Surat Depot; that s they have no means of knowing at the time of either filing of the declaration under Rule 173 -C of the Central Excise Rules or at the time or removal of goods or even at the time or removal from the Depot whether ultimately the TOT would be paid @ 2% or 0.25%; they claimed deduction of TOT @ 2% in the declaration filed by them; that Section 4 of the Central Excise Act provides for the deduction of tax 'payable' whereby Tax normally payable on the sale transaction of the goods can be claimed as deductions in the declaration; that for want of information they cannot file different price declarations for sales made by them from Surat Depot to various customers; that as per the provisions of Sections 4(4)(d)(ii) and the Explanation thereto, the concept of effective duty of excise payable on the goods is restricted only to duties of excise and has not been extended to Sales Tax and other taxes payable on such goods; that further the said Explanation itself brings in the concept of "effective duty of excise" i.e. the duty of excise as reduced to give full and complete effect to an exemption; that in absence of any such Explanation in regard to Sales Tax and other Taxes, it is normal rate of such tax and not any reduced rate that is excludible from the value and accordingly the Sales Tax required to be deducted from the normal prices is the tax payable on such goods normally and not the effective tax paid thereon; that in any case, even as on date, the assessment of the Appellants with regard to TOT payable for 1995 -96 and 1996 -97 are pending the have not been taken up for assessment; that for 1994 -95 also the Sales Tax Department has issued a demand on the ground that they had incorrectly claimed deduction of 0.25% TOT in certain cases. Finally the Ld. Senior Counsel mentioned that show cause notice dt.9.3.99 is barred by limitation as extended period cannot be invoked since the Department was all along aware that they were claiming various deductions including deduction on account of TOT from he Depot Sale Price and the deductions claimed by them has been the subject matter of detailed investigation and adjudication by the Department; that the Department had issued two show cause notices dt.4.10.94 and 19.10.94 in respect of certain deductions claimed by them; that, however, the Department deliberately and consciously did not challenge the deduction claimed on account of TOT; that the Sales Tax Returns were furnished to the Excise Department by the Depot at Surat from time to time; that the said Returns clearly disclosed the rate of TOT; that the Depot invoices were also furnished as acknowledged by the Department by letter dt.16.12.96 and as such the Department was all along aware of sales to backward area; that this is evident from the Superintendent's letter dt.6.3.97; that the officers visited their factory on 18.9.97 and recorded statements on the present issue and records on 18.9.97 and recorded statements on the present issue and records of the Surat Depot pertaining to payment of TOT were also resumed; that thus the notice cannot be issued after more than 2 years on 19.3.99. Reliance was placed on the decision in the case of Asia Automotive vs CCE, Aurangabad : 1999(113) ELT.841. The Ld. Sr. Counsel also contended that rates of TOT charged in State of Gujarat are law which is known to everybody including Department which cannot allege suppression. He further mentioned that it is well settled law that Sections 11AB and 11AC of the Act cannot be given retrospective operation and cannot apply in cases where the demand relates to a period prior to 28.9.93 - Gomti Carbon Dioxide vs CCE, Kanpur, : 2000(119)ELT.565; that no penalty is imposable on other two Appellants under Rule 209A of the Central excise Rules in as much there is no evidence to show the guilty state of mind on their part nor any evidence that they were want only indulged in the alleged violation; that these Appellants do not look after excise related matters and were involved in regulating the daily administrative jobs and were not aware of the intricate factual and legal details entailing the alleged excise liability. Reliance was placed on various decisions such as Sheth Computers Pvt. Ltd. vs. CCE, Bombay : 2000(121)ELT.738 and Bindu S. Mehta vs CCE, Rajkot : 2000(121)ELT.281.

(3.) COUNTERING the arguments, Shri P.K. Jain, Ld. SDR, submitted that as per Section 4(4)(d)(ii) of the Central Excise Act, at the material time, value does not include the amount of Sales Tax and other taxes, if any, payable on such goods; that TOT 'payable' on the goods in specified area in Gujarat was 0.25% and not 2%; that the Tax payable has to be ascertained on the basis of any exemption provided by the Government concerned; that this issue has been settled by the Appellate Tribunal in the case of CCE vs Bajaj Auto Ltd., 1997(93)ELt.705(T) and accordingly actual TOT payable is to be deducted form the assessable value. He, further, submitted that the extended period of limitation for demanding duty is invokable as the Appellants chose to declare only on rate or TOT i.e. 2% in the Price Declaration filed under Rules 173C and suppressed the lower rate of duty; that it is not the law which they were to disclose to the Department but the factual position that they would be paying TOT at a lesser rate also; that the fact has not been disclosed by them which was only known to them. He also mentioned that the two show cause notices issued by the Department related to deduction like godown expenses, C&F, Cops repair charges, working capital interest, discount, transit loss, selling agent commission etc; that as they had claimed deduction on account of TOT at flat of 2%, it was not disputed as such a deduction is admissible. He further mentioned that Department can be claimed to have come to know about two rates of TOT only in 1997 and not earlier; that as held by the Larger Bench of the Tribunal in Nizam Sugar Factory vs CCE, Hyderabad,, 1999(34)RLT.864 that show cause notice issued beyond the period of six months, in case of suppression etc., from the date of knowledge will not be bared by limitation. In reply, the Ld. Senior Counsel mentioned that the Appellants did not pay any duty short on the date of clearance of goods from the factory as the sale of goods in backward area was a subsequent act.