Back
2007(6) Supreme 205
Supreme Court of india
(From CEGAT)
S. H. Kapadia & B. Sudershan Reddy, JJ.
Commissioner of Central Excise, Nagpur — Petitioner
versus
M/s Ballarpur Industries Ltd. — Respondent
Appeal (civil) 1373 of 2002
Decided on : 30-08-2007
(b)Central Excise Rules, 1944 – Rule 57CC (7) – In order to apply sub-rule (7), the Department had to establish that common inputs were ordinarily used for both the categories of final products. (Para 12)
(c)Central Excise Rules, 1944 – Rule 57CC(1) – The said amount of eight per cent is not duty of excise – The manufacturer who did not maintain account or inventory is required to debit the amount equal to 8 per cent of the value of exempted goods at the time of removal of goods from the factory – Therefore, the said amount of 8 per cent of the value of the goods at the time of clearance is the measure and it brings in also the applicability of section 4 of the 1944 Act and the Valuation Rules 1975 – Further, the entire rule is based on “deemed price” and “recovery of presumptive amount” and, therefore, the words “price charged at the time of sale” must be read as “eight per cent of the value of the exempted goods”. (Paras 14 and 15)
AIR 1984 SC 420; Civil Appeal No. 3139/2002 etc. – Relied upon.
(d)Excise Act, 1944 – Section 11A– The word “suppression” is accompanied by the words “fraud” or “collusion” and, therefore, the word “suppression” should be construed strictly – Mere omission to give correct information did not constitute suppression unless that omission was made willfully in order to evade duty – Suppression would mean failure to disclose full and true information with the intent to evade payment of duty – When the facts are known to both the parties, omission by one party would not constitute suppression – An incorrect statement cannot be equated with a willful mis-statement. (Para 18)
(e)Excise Act, 1944 – Section 11A – As there was no suppression of fact, the Department could not invoke extended limitation in case of the first show cause notice – The same struck down as time barred. (Para 19)
(f)Central Excise Rules, 1944 – Rule 57CC(1) – In cases where the manufacturer does not comply with rule 57CC(9), he shall debit the presumptive sum equal to eight per cent of the value of the exempted goods at the time of clearance from the factory gate – This rule would apply to stock transfers also – Therefore, the impugned judgment of the Tribunal, holding that rule 57CC of the 1944 Rules is not applicable to this case as there was no “sale”, set aside being erroneous – Matter remitted back to Commissioner. (Para 19)
(g)Valuation Rules 1975 – Rule 7 – Well settled that show cause notice is the foundation in the matter of levy and recovery of duty, penalty and interest – Hence, if Rule 7 has not been invoked in the show cause notice, it would not be open to the Commissioner to invoke the said rule now. (Para 22)
Facts of the case :
The assessee is engaged in manufacture of paper falling under Chapter 48 of the Central Excise Tariff. The assessee is availing the benefit of MODVAT Scheme under Rule 57A of the Central Excise Rules, 1944 (for short, “1944 Rules”). The assessee is also manufacturing pulp falling under Chapter 47 of the Central Excise Tariff, which is chargeable to nil rate of duty. The said pulp is captively consumed for the manufacture of paper. According to the assessee, a small portion of the pulp is sent to the sister unit of the assessee at Asthi. According to the assessee, there was no sale of pulp as alleged by the Department. According to the assessee, a small quantity of pulp manufactured by the assessee was stock transferred to its sister unit at Asthi.
The issue which arises in this civil appeal is as to whether in the absence of any “sale”, rule 57CC of the Central Excise Rules, 1944 would have any application or not. The contention of the assessee is that in the case of “stock transfer” there is no “sale” and, therefore, rule 57CC was not applicable. This contention has been accepted by the Tribunal, hence this appeal.
Findings of the Court :
Rule 57CC(1) is applicable to the present case and the manufacturer is liable to debit the presumptive sum equal to eight per cent of the value of the exempted goods at the time of clearance from the factory gate.
The first show cause notice was time barred.
Result : Matter remitted back to Commissioner for fresh consideration in respect of the second and the third show cause notices.
JUDGMENT
KAPADIA, J. —
This civil appeal is filed by the Department under Section 35L(b) of the Central Excise Act, 1944 against the judgment dated 20.7.2001 delivered by the Customs, Excise and Gold (Control) Appellate Tribunal (“CEGAT”) in Appeal No. E/1758/2000.
2.The issue which arises in this civil appeal is as to whether in the absence of any “sale”, rule 57CC of the Central Excise Rules, 1944 would have any application or not. The contention of the assessee is that in the case of “stock transfer” there is no “sale” and, therefore, rule 57CC was not applicable. This contention has been accepted by the Tribunal, hence this civil appeal.
3.The assessee is engaged in manufacture of paper falling under Chapter 48 of the Central Excise Tariff. The assessee is availing the benefit of MODVAT Scheme under Rule 57A of the Central Excise Rules, 1944 (for short, “1944 Rules”). The assessee is also manufacturing pulp falling under Chapter 47 of the Central Excise Tariff, which is chargeable to nil rate of duty. The said pulp is captively consumed for the manufacture of paper. According to the assessee, a small portion of the pulp is sent to the sister unit of the assessee at Asthi. According to the assessee, there was no sale of pulp as alleged by the Department. According to the assessee, a small quantity of pulp manufactured by the assessee was stock transferred to its sister unit at Asthi.
4.In this civil appeal, we are concerned with the period September, 1996 to March, 1999. During this period, the assessee had transferred approximately 41000 MT of pulp to its sister unit and had paid duty at the rate of eight per cent of the cost price declared by them.
5.Three show cause notices were issued by the Department dated 21.5.1999, 30.9.1999 and 18.11.1999 in which it was alleged that if comparable prices obtained by the sister units are taken into consideration then the total duty payable at the rate of eight per cent would work out to Rs. 4.58 lacs (approx.) whereas the assessee had paid duty of Rs. 2.67 lacs (approx.). Therefore, it was alleged that the assessee had evaded payment of duty to the tune of Rs. 1.90 lacs (approx.) and accordingly they were also liable to pay penalty under Rule 57-I(4) read with Rule 173C of the 1944 Rules.
6.Vide reply dated 25.6.1999, the assessee contended that there was no sale of pulp, that it was the case of stock transfer of pulp which was consumed as raw-material in the manufacture of paper by the sister unit of the assessee. According to the assessee, a major portion of the pulp manufactured by it was consumed by the assessee and a very small percentage was stock transferred to the sister unit, which consumed the transferred pulp in the manufacture of paper. According to the assessee, in their reply to show cause notices, price declarations were filed for clearance of pulp to their sister unit at Asthi by way of stock transfer and, therefore, they adopted the rate of 8 per cent of the cost price for purposes of reversal of credit on inputs on which credit was taken. In this connection, the assessee applied rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975 (for short, “Valuation Rules 1975”). According to the Department, the assessee should have taken into account 8 per cent of the selling price of pulp sold by the assessee’s sister units in other states for reversal of MODVAT credit on inputs on which credit was taken by applying rule 6(b)(i) of the Valuation Rules 1975. If rule 6(b)(i) was to apply then considering the sale price of pulp cleared in other states, the duty amount payable by the assessee herein, worked out to Rs.4,57,56,812/- whereas assessee had paid an amount of Rs.2,67,32,851.
7.At this stage, it may be clarified that, in this case, three show cause notices were issued; the first was dated 21.5.1999, which related to the period September, 1996 to March, 1999, second show cause notice was dated 30.9.1999, which related to the period April, 1999 to June, 1999, and the third
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
