By TIOL News Service

MUMBAI, JAN 31, 2018: THIS is a Revenue appeal against the order dated 25.03.2015 - 2015-TIOL-684-CESTAT-MUM, passed by the CESTAT.

The facts:

The appellant is engaged in the manufacture of motor vehicles which are cleared through various depots that are also Regional Sales offices (RSO). Some of the vehicles are sold from the depot but in certain circumstances some of the vehicles are transferred from one RSO to another RSO and goods are sold from the latter RSO.

The appellants discharged excise duty at the time of clearance of the vehicle from the factory at the price prevailing at the RSO where the vehicles are initially cleared. However, subsequently some of the vehicles are transferred to another RSO, where the prevailing price of the vehicle is higher and vehicle is sold at that higher price.

Show cause notices were issued demanding differential excise duty by adopting the prevailing price of the vehicle at the depot (RSO) from where the actual sale of the vehicle took place.

The Adjudicating authority, applying Rule 7 of Valuation Rules, 2000, confirmed the demands and which orders were upheld by the Commissioner(A).

The CESTAT while disposing of the appeals held thus –

Merits:

+ The fact remains that the goods are sold from the subsequent depot, and not from first depot, therefore, in terms of Rule 7 a depot from where the goods is actually sold, the price prevailing at that depot at the time of clearance of the goods from factory shall be the correct transaction value for charging the excise duty.

+ Where the goods are cleared to first depot and thereafter transferred to second depot or in the case directly supplied to second depot in both the cases since goods is sold from second depot in terms of Rule 7 i.e. "goods are to be sold after there first clearance from the place of removal?" shall mean that only that depot or a place from where the goods is sold shall be considered as place of sale. In this scenario, price prevailing at the first depot has no relevance for the purpose of valuation of the excisable goods in terms of Rule 7.

Limitation:

+ As regard first SCN dated 19.7.2005 , the fact regarding movement of their vehicle, that is removal from factory to their one depot and from there transfer to 2 nd depot and sale of vehicle from 2 nd depot was not disclosed to the Department. This fact was detected by the audit officers, therefore, is it clear that there is suppression of fact on the part of the appellant. Hence, the demand of duty for the period up to January 2001 is correct and legal.

+ Further, when the fact of the issue came to the notice of the Department in January, 2001, subsequent to that it cannot be said that there was suppression on the part of the appellant. Therefore, in our considered view, the demand for the period February 2001 to June 2004 becomes time-barred , hence the same is dropped. So also proviso to section 11A is not invokable in respect of the demand raised during the period July 2004 to March 2013 . Consequently, penalty imposed under section 11 AC for the said period is not correct and legal and, therefore, dropped.

Conclusion:

+ Though demand of duty for period involved in the appeals (except for the period February, 2001 to June 2004) is sustainable on merit, however, demand of duty pertaining to the period February 2001 to June 2004 is hereby dropped being time barred. Penalty imposed under Section 11AC commensurate to duty demand for the period July, 2004 to March, 2013 is hereby dropped.

+ The Adjudicating Authority shall re-quantify the duty, interest and penalty and recover the same from the Appellant, in accordance with law.

Aggrieved, the CCE, Nashik filed an appeal before the Bombay High Court in the year 2016.

In a strongly worded ( 695 words to be precise) reprimand, the High Court at the outset, set the tone of the order that was to follow.

An extract there from –

++ It is time we indicate to the Revenue Officials and in the order of their hierarchy that at least the highest Court in the State is of the firm view that when the Revenue complains of pendency of cases, it is squarely to be blamed for the largest litigant before us is the Revenue itself.

++ In matters after matters, where the Tribunal has taken a view on the point of limitation and applicability of Section 11A of the Central Excise Act, 1944 ("the Act” for short), rarely has the Tribunal's findings and conclusions been accepted with the required degree of grace and maturity by the Revenue Officials.

++ It is the Commissioner or the Commissioner (Appeals) or the Member (Technical) of the Tribunal who invariably, sitting as an Adjudicator, finds it difficult to uphold the stand of the Revenue and when it is ex facie untenable in law.

++ When this happens, it is for the Revenue Officials to ponder and introspect whether they should challenge the order in the higher Court, waste the higher Court's precious time and which it desires to save for genuine litigation.

++ When we find that conclusions on mixed question of fact and law like limitation are challenged, the Revenue Officials pursue the case with such vigour as is normally not reflected and exhibited when there is a question of interpretation of a enactment or a subordinate legislation.

++ When the stakes are high and the Revenue must decide for itself in matters of moment as to whether its stand is correct and requires a look at or some sort of modification or approval from a higher Court, it neither initiates the litigation, or if initiated, does not pursue it with the required degree of competence and proficiency. We find that in such high stake matters, the assessees are let off very lightly.

++ Such matters, which are very serious and have far reaching consequences, are left to Junior Advocates and we never find any Senior Advocate or a Senior Law functionary coming to Mumbai and arguing such cases for the Revenue.

++ If the Revenue really feels that tax collection must increase or improve, it is time it revisits its Panel of Advocates and appoint competent and experienced members of the legal profession to represent it. That engaging them means paying them high fees is no reason for substituting them with incompetent Advocates.

++ Then, all the more the Revenue ends up in losing cases. It is not as much about winning or losing but what is disturbing is the failure or any attempt to match the opponent's skill, expertise and efficiency.

++ No Panel Advocate for the Revenue seeks or desires to apply for leave to withdraw such proceedings when the Court in clear and loud terms says that it is not inclined to interfere with the orders under appeal.

++ In this matter, we repeatedly pointed out to the Revenue's Advocate that this is a frivolous and vexatious litigation and ought not to be pursued by the Revenue. He states he has no instructions to either withdraw or give it up.

++ We warned him even during the course of the arguments that we will dismiss such appeals with heavy costs. We embark upon that exercise and this matter is the first in the line.

As for the submission by the counsel for the Revenue that the Tribunal was not right in holding that the date of information received in the course of audit about suppression of sales value was the relevant date for determining the period of limitation, the assessee countered the same by inter alia mentioning the following and emphasizing that the Revenue appeal should be dismissed with heavy costs -

“…Once the suppression was detected, the law envisages prompt measures to recover and Section 11A does not ordinarily and normally permit invocation of the extended period. If the extended period is invoked, the burden is on the Revenue to establish and prove the facts alleged and particularly in this case of suppression. The Revenue could not bring any material to allege and prove suppression after January, 2001. This is also a finding of fact rendered by the Tribunal which cannot be termed as perverse, …. There are, therefore, no materials enabling the Revenue to recover these sums and merely because the assessee is a manufacturer of motor vehicles and virtually a market leader, does not mean that the Revenue can pursue the illegal demand…"

The High Court while agreeing with the assessee's counsel extracted paragraphs 5 and 5.1 of the Tribunal order and further observed that the reliance placed by the counsel for the Revenue on the decision in Neminath Fabrics - 2011-TIOL-10-HC-AHM-CX is misplaced and the apex court decision in Mathania Fabrics – 2008-TIOL-03-SC-CX runs counter to its arguments canvassed before the Bench.

Noting that the issue is squarely covered by a series of judgments viz. ECE Industries Limited = 2003-TIOL-89-SC-CX, Nizam Sugar Factory Vs. Collector of Central Excise, A.P. - 2006-TIOL-56-SC-CXand Caprihans India Ltd. Vs. Commissioner of Central Excise, Surat = 2015-TIOL-244-SC-CX, the High Court further observed -

"26. We do not think, therefore, that the legal position was in any way unclear or ambiguous. Throughout, the Hon'ble Supreme Court has been emphasising that the Revenue cannot resort to what it has repeatedly done in matters after matters. It cannot cover up its own fault or error by such erroneous application of law. Once the legal position was clear and throughout, we do not see any justification for the Revenue bringing this appeal. We have reproduced the relevant portion of the order of the Tribunal in extenso only to demonstrate that its findings are in no way perverse or vitiated by any error of law apparent on the face of the record. The legal principles have also been summarised by us only to emphasise that filing of such appeals and questioning the findings on the issue of limitation does not serve any purpose but wasting the time of a higher judicial forum. It is precisely that which compels us to term this litigation as frivolous and a clear waste of time. Since this is a clear waste of our precious judicial time, we can also safely term the exercise as an abuse of the process of the Court by the Revenue. No abuse can go unpunished and, therefore, while dismissing this appeal, we impose costs of Rs.1,00,000/- (Rupees One Lakh only) on the Revenue…"

Revenue was directed to pay the costs to the assessee within four weeks after which the assessee could recover the same by treating the Department to be in default of payment of arrears of land revenue.

(See 2018-TIOL-187-HC- MUM-CX)