By TIOL News Service

MUMBAI, OCT 21, 2016: THIS is a Revenue appeal filed in the year 2005.

The respondent had under an agreement with IVO Power Engineering Ltd. manufactured Electrical Transmission Towers for a specified amount and of a specified weight and discharged Central Excise duty as per the invoices raised.

Subsequently, they raised debit note on the purchaser for excess amount of material used by them in manufacturing of such transmission towers (as when the goods were dispatched, weight of the goods were in excess than the contracted quantity) and recorded the same in the account books as amount receivable from IVO Power Engineering Ltd.

However, no CE duty was paid on this amount and which came to the notice of the jurisdictional authorities during the scrutiny of the balance sheet and ledger account.

The SCN issued demanding duty for the period April 1999 to March 2003was confirmed by the adjudicating authority.

However, since the Commissioner(A) set aside this order, Revenue has filed an appeal.

After considering the submissions made, the CESTAT,while noting that Debit notes were not presented before the Bench, hence they were unable to appreciate the narration in debit notes,observed thus -

++ For the period April 1999 to 30th June 2000, provision of Section 4 of the Central Excise duty, 1944 apply - during the relevant period it mandated determination of normal price. In the case in hand, it is undisputed that the clearances made by the respondent during the period were contracted price which was normal price as per the Section 4(1)(b), therefore, no addition was required even if for the period April 1999 to 30th June 2000 a debit note is issued for the excess material consumed.

++ Post July 2000, we find that provisions of Section 4 has been amended to bring in the concept of transaction value; it would be the situation wherein any price payable for the goods, the demand of the duty arises. In the case in hand, the respondent had raised debit notes for the excess quantity of steel used in the manufacturing of towers.

++ It cannot be the case that supplementary invoices raised by assessee in pursuance to the escalation clause despite increase in value, Central Excise duty is not payable. The same analogy will apply in the case in hand. In view of this we hold that the respondent is liable to discharge duty on the debit notes raised by them for the period post July 2000.

++ Duty liability cannot be demanded entirely on the amounts of debit notes so raised; cum-duty benefit needs to be extended to them. For limited purpose of re-quantifying the demand of duty for the post July 2000 by extending the benefit cum-duty, we remand this matter to the lower authorities to ascertain correct quantification of demand of duty along with interest thereof.

++ Issue is of interpretation of the provisions of Section 4, hence the question of visiting the respondent with penalty does not arise.

In fine, the appeal was disposed of partly in favour of the assessee and partly in favour of the Revenue.

(See 2016-TIOL-2749-CESTAT-MUM)