ORDER
Lajja Ram, Member (T)
1. M/s. Air Control & Chemical Engineering Company Limited, have filed the present appeal against the Order-in-Original No. 16/Collector/1989, dated the 17th Oct., 1989, passed by the Collector of Central Excise, Ahmedabad.
2. The appellants were engaged in the manufacture of compressors, falling under Item No. 29A(3) of the erstwhile First Schedule to the Central Excises and Salt Act, 1944 (the old Tariff), and under Heading No. 8414.10 of the new Tariff, with effect from 1-3-1986. On investigation, scrutiny of documents recovered from their premises, and the information gathered from the officials of the appellant’s company, it was revealed that they were undervaluing the dutiable compressors, with an intent to evade payment of Central Excise duty, and at the same time were overvaluing the non-dutiable parts which were essential for the working of the compressors, and which were compulsorily supplied to the customers. In this process, while they were recovering their differential cost of the compressors, from the sale price of the parts, Central Excise duty otherwise leviable on the value of the compressors to the extent undervalued, was evaded. They were issuing two invoices – one for dutiable compressors and the other for the non-dutiable parts of compressors. Some of the essential parts of the compressors were taken out from the compressors and were packed and billed separately. It was alleged in the show cause notice dated 17-11-1987, issued by the Collector of Central Excise, Ahmedabad that the appellants had contravened the provisions of the Rule 173C of the Central Excise Rules, 1944 (hereinafter referred to as the ‘Rules’), and Rule 173F, read with Rule 9(1) of the Rules, and were liable for action under clauses (a) and (b) of Sub-rule (1) of Rule 173Q of the Rules. It was further alleged that as they intentionally suppressed the value of compressors to evade the payment of Central Excise duty, the short levy of duty on the compressors was recoverable under proviso to Sub-section (1) of Section 11A of the Central Excises & Salt Act, 1944 (hereinafter referred to as the ‘Act’), read with Rule 9(2) of the Rules and that the period of limitation of 5 years was applicable in the case. The differential Central Excise duty recoverable was calculated at Rs. 1,95,54,950.38.
3. In reply, the appellants challenged the calculations towards differential duty and denied the charge of suppression. They stated that their price pattern was known to the department. They did not, however, deny that the manufacturing cost of the compressor was higher than its selling price, but contended that the cost of production could not be the basis for levying Central Excise duty.
4. The appellants challenged the show cause notice in the Gujarat High Court. The Gujarat High Court ordered that the findings recorded by the adjudicating Collector should not be implemented without the express permission of that Court.
5. The Collector, Central Excise, Ahmedabad, who adjudicated the matter arrived at the assessable values for different models of compressors, based on the information supplied by the company and as gathered from the various records recovered from the premises of the appellants. He limited the demand for the period from 1-11-1982, and held that the demand for the period 1-4-1982 to 30-10-1982 was hit by limitation of 5 years. He confirmed the demand of duty to the extent of Rs. 1,55,22,150.60 (as against Rs. 1,95,54,950.38 demanded in the show cause notice), under proviso to Sub-section (1) of Section 11A of the Act. A penalty of Rs. 40 lakhs was also imposed on M/s. Air Control and Chemical Engineering, under Rule 173Q(1)(d) of the rules.
6. The matter was fixed for hearing on 8-10-1993 when Shri Ravinder Narain, Sr. Advocate with Shri Rajan Narain, Advocate and Ms. Amrita Mitra, Advocate appeared for the appellants. Smt. C.G. Lal, SDR represented the respondent.
7.1 Shri Ravinder Narain, the learned Sr. Advocate, in the beginning took up their miscellaneous application for consideration, and pleaded for taking on record the additional documents filed by them. Smt. C.G. Lal, the learned SDR did not object. The additional documents were taken on record, and it was ordered that they be treated as part of the paper book.
7.2 The main thrust of the arguments of the learned Sr. Advocate was that the show cause notice was hit by time bar. According to him, there was no suppression of any fact on the part of the assessee and that all the facts were within the knowledge of the department.
7.3 The learned Senior Advocate submitted that the price of their compressors, which were dutiable, was comparable to the price charged by the other manufacturers. He added that they could not have sold their goods at a price higher than the price at which their competitors were selling. The goods had to be sold in competition. As regards the accessories, which were non-dutiable, he stated that everybody was charging more and making profit thereon. A number of their customers were Government departments.
7.4 Contending that the demand was hit by limitation, the learned Sr. Advocate stated that all the facts were within the knowledge of the department. Their price lists had been approved. He referred to the earlier audit objections, show cause notices and the adjudication orders, and submitted that the substratum of the charge in the earlier notices was the same. In support of his arguments, the learned Sr. Advocate referred to the following citations :
(1) 1992 (58) E.L.T. 76 (Tribunal);
(2) 1990 (47) E.L.T. 295 (Tribunal); and
(3) 1989 (44) E.L.T. 552 (Tribunal).
7.5 Shri Ravinder Narain, the learned Sr. Advocate continued his arguments on 12-10-1993. He submitted that no notice under Section 11A could be issued unless the order approving the price list was set aside. In this connection, he referred to the following citations :
(i) 1991 (56) E.L.T. 718 (AP) and (ii) 1989 (44) E.L.T. 601 (Bom.)
7.6 On merits, he submitted that the cost of production could not be the basis for the sale price and added that the price at which the goods were sold was the real price. Their price was the sole consideration and that they had incurred losses. He also made the following points :-
(1) Selling below cost does not mean that the price was not genuine and was a manipulated price. Assistant Collector’s reliance on the Tribunal’s decision in the case of Collector, Central Excise v. United Glass, 1989 (40) E.L.T. 488 (Tri.), was misplaced.
(2) When the unit was incurring loss, the assessment could not be based on cost price; *
(3) If the cost of production is taken as the asssessable value then the permissible deductions under Section 4 of the Act should have been given;
(4) ‘Capacity Control’ like ‘fan regulater’ was not a necessary part. In any case, it could not be added to the entire quantity;
(5) As there was no suppression, no penalty should have been imposed.
He relied on the citation reported in 1991 (51) E.L.T. 619 (Tribunal);
8. Smt. C.G. Lal, the learned SDR made the following submissions :-
(1) In the earlier notices/communications the allegations were different. On intelligence, their premises were raided, document recovered and the statements recorded;
(2) There was no estoppal in law and there was no bar of raising the demand. She relied upon the following decisions :-
(a) Continental Engineering Industries Pvt. Ltd. v. Collector, Central Excise, 1989 (42) E.L.T. 14 (CEGAT) – Department not estopped from reopening the matter on new materials coming to light in respect of the duty short paid or short levied.
(b) Elson Machines Private Limited v. Collector, Central Excise, 1988 (38) E.L.T. 571 (SC) – There could be no estoppel against the law, and the excise authorities were not estopped from taking a view different than in the approved classification list;
(3) The costing was based on the information supplied by the appellants. The calculations were made on the basis of the figures supplied by their own people. The cost of production was not the normal price but taken as assessable value and hence no deductions were permissible;
(4) Proceedings under Section 11A could be initiated without challenging the price lists. Section 11A was independent of the assessments;
(5) Value have to be determined under Section 4. If the competitors evade duty it does not mean that the assessee should also evade;
(6) As the facts had been suppressed, the penalty was rightly imposed. Material facts were not disclosed. The accessories whose value was not included were not optional. She referred to the Tribunal’s decision in the case of Ice and Diesel Engineering Works v. Collector, Central Excise, 1991 (53) E.L.T. 70 (Tribunal), wherein it has been held that extended period was applicable if assessee makes a mis-declaration or suppresses facts in the price list.
(7) Flow-back in this case was in the form of inflated higher prices of non-dutiable accessories.
(8) Normal price was something more than the cost of production and manufacturing profit. In this connection, she relied on the Supreme Court’s decision in the case of Bombay Tyre International – 1983 (14) E.L.T. 1896 (SC).
9. On the conclusion of the arguments, both sides were directed to file written arguments with copy to other side.The appellants were to file written arguments within 15 days from 12-10-1993, and respondent within 25 days. The appellants filed written arguments on 27-12-1993.
10. We have carefully gone through the facts and circumstances of the case and have given our due consideration and thought to the submissions made by both the sides, and written submissions filed by the appellants.
11. The appellants were issued the show cause notice on 17-11-1987 by the Collector, Central Excise, Ahmedabad. They challenged the show cause notice in the Gujarat High Court. The Hon’ble Gujarat High Court on 22-9-1988 asked the appellants to file reply to the show cause notice, and allowed the adjudication proceedings to go ahead, subject to the condition that the findings recorded by the Collector shall not be implemented without their express permission. After the adjudication order was passed by the Collector, Central Excise, Ahmedabad, the Hon’ble Gujarat High Court on 21-2-1990 granted interim relief to the petitioners with certain conditions. On 10-9-1991, the Hon’ble Gujarat High Court permitted the petitioners to withdraw their petition. However, the interim orders granted earlier were allowed to continue upto 30-10-1991.
12. The Hon’ble Gujarat High Court directed the Tribunal to dispose of the appeal preferably within a period of 4 months from 10-9-1991. A stay application was also to be filed before the Tribunal as stay granted by High Court was only upto 30-10-1991. On 24-10-1991 the appellants’ stay application was partly argued by the learned Advocate for the appellants, and the matter was adjourned to 13-11-1991. On 13-11-1991, the appellants sought the adjournment on the ground that their advocate had to attend some religious ceremony on that day at Ahmedabad. The case was fixed for 13-12-1991 when the stay application was heard by Tribunal, and stay was granted subject to certain conditions. The case was then listed for 6-2-1992. On 6-2-1992, a request was made on behalf of the appellants for adjournment on the ground that their advocate was tied up with some wedding in his family. The case was adjourned to 4-3-1992. On 4-3-1992, the case was adjourned to 18-5-1992 for nonavailability of time. On 18-5-1992, a request was made on behalf of the appellants that their advocate was having some personal difficulty and was not in a position to appear before the Bench. On 1-9-1992, the advocate for the appellants argued the matter, but the arguments were not concluded. The matter was adjourned to 15-10-1992 as part heard matter. On 15-10-1992, the matter was adjourned to 22-1-1993 on the request of the appellants on the ground that their advocate was held up before the Gujarat High Court. In the meanwhile, Ms. S.V. Maruthi, Member (Judicial) who had heard the case earlier left the Tribunal on her being elevated as a Judge of the Andhra Pradesh High Court, and the matter was released from the list of part heard matters. On 22-1-1993, again an adjournment was sought by the appellants on the ground that their advocate was not in a position to reach Delhi due to disturbed situation and dislocation of flights. On 14-4-1993, a request was received from the appellants for fixing the case after middle of June, 1993. The case was fixed for 25-6-1993. On 11-6-1993, adjournment was sought on the ground that their advocate was on summer vacation. On 1-9-1993, again a request for adjournment was made by the appellants on the ground that their advocate has to go abroad. On the request of the appellants, the matter was fixed on 8-10-1993, and finally the matter was heard on 8-10-1993 and 12-10-1993.
13. The Hon’ble Gujarat High Court while granting interim relief to the petitioners have made some observations with regard to the order passed by the adjudicating Collector of Central Excise. With due respects to the Hon’ble High Court, we find that the observations made by the Hon’ble High Court were with a view to grant interim relief to the petitioners. The interim relief was granted with certain conditions, laid down by the Hon’ble High Court in their order, which was in the nature of an interlocutory order. Subsequently, the petition on which the interim orders were passed, was withdrawn by the petitioner, and the permission for withdrawal was granted by the Hon’ble High Court. The interim relief itself expired on 30-10-1991, and for the subsequent period the appellants approached the Tribunal for grant of stay, and the Tribunal had granted interim relief with certain conditions as laid down by them in their stay order dated 13-12-1991. Accordingly, we proceed to decide the matter on merits.
14. The appellants were engaged in the manufacture of parts of refrigerating and air conditioning appliances and machinery, all sorts, falling under sub-item (3) of Item No. 29A of the old tariff upto 28-2-1986, and under Heading 84.14 of the Schedule to the Central Excise Tariff Act, 1985, with effect from 1-3-1986. While the tariff entry covered all parts of refrigerating and air conditioning appliances and machinery, all sorts, by an exemption Notification No. 80/62-C.E., dated 24-4-1962 (as amended), issued by the Central Government in exercise of the powers conferred on them by Sub-rule (1) of Rule 8 of the Rules, all parts other than the specified parts mentioned in that notification, were exempted from the duty leviable thereon. Compressor was one of the parts on which duty was leviable.
15. The appellants were manufacturing both the dutiable and non-dutiable parts. Both dutiable and non-dutiable parts were supplied to the same parties, and two bills were being issued simultaneously – one for the compressors, and the other for the parts. The prices of compressors were got approved from the Central Excise department.
16. In the case of Frick India Limited v. Union of India, 1990 (48) E.L.T. 627 (SC), the Hon’ble Supreme Court had occasion to discuss the scope of Item No. 29A(3) of the old tariff, and that of Notification No. 80/62-C.E., dated 24-4-1962 (as amended), and that of the trade advice dated 30-9-1969 given by the Central Board of Excise and Customs, in respect of the classification of refrigerating machinery and ice making plant which are not sold or offered for sale as ready assembled unit for purposes of countervailing duty under the Customs Act. The Hon’ble Supreme Court held that sub-entries (1) and (2) of Entry 29A could not control or restrict the meaning of sub-entry (3). They observed in para 5 of their judgment as under :-
“The legislative history and the notifications of the Government shows that sub-item (3) of Item 29A is a comprehensive provision encompassing within it parts of all sorts of air conditioning and refrigerating appliances and machinery and the Government of India was issuing notifications and of exemption on the understanding that such parts are covered by sub-item (3). The language used in sub-item (3) is also wide and comprehensive in its application and could not be given a restricted meaning. Sub-items (1), (2) and (3) are independent of each other and mutually exclusive. The scope of sub-item (3) is neither restricted nor controlled by the provisions of sub-items (1) and (2).”
17. The emphasis by the Hon’ble Supreme Court in their historic judgment in the case of Union of India v. Bombay Tyre International, 1983 (14) E.L.T. 1896 (SC) has been on “the real wholesale cash price”, “the true value of the excisable article”, “the price should be the sole consideration for the sale” (Para 42), and that no “extra commercial considerations” should enter into the transaction (Para 31). Even in the cases of A.K. Roy v. Voltas Limited, 1977 (1) E.L.T. (J 177) (SC), and the Atic Industries v. Assistant Collector, Central Excise, 1978 (2) E.L.T. (J 444) (SC), the criteria is of “the real value” (Paras 19 and 20 of Voltas case, and para 13 of the Atic case).
18. The appellants have argued that the fact that their normal price may have been below cost price is irrelevant for the purpose of Secton 4 of the Act, and in support of their argument, have referred to the observations of the Hon’ble Supreme Court in the case of Bombay Tyre International.
19. The Hon’ble Supreme Court in their judgment in the case of Bombay Tyre International have very succinctly ruled that the value of an excisable article could not be limited to the manufacturing cost plus the manufacturing profit. They were of the opinion that” a broader based standard of reference may be adopted for the purpose of determining the measure of the levy.” (Para 13). They held that “the price of an article is related to its value (using this term in a general sense), and into that value have poured several component including those which have enriched its value and given to the article its marketability in the trade. Therefore, the expenses incurred on account of the several factors which have contributed to its value upto the date of sale which apparently would be the date of delivery are liable to be included. Consequently, where the sale is effected at the factory gate, expenses incurred by the assessee upto the date of delivery on account of storage charges, outward handling charges, interest on inventories (stocks carried by the manufacturer after clearance), charges for other services after delivery to the buyer, namely after-sale service and marketing and selling organisation expenses including advertisement expenses cannot be deducted.” (Para 49). It is in the light of these inclusions that the observations in para 40 of their judgment that the value of an article for the purpose of the excise levy must not be confined to the manufacturing cost and the manufacturing profit in respect of the article, have to be seen.
20. The matter has also been dealt with by the Allahabad High Court in the case of Geep Industrial Syndicate Limited v. Union of India, 1982 (10) E.L.T. 857 (All.) wherein it has been observed in para 18 as under :-
“We are of the view that all costs which the manufacturer incurs for putting an article in a marketable condition so that it can be delivered at the factory gate to wholesale purchasers have to be included in the manufacturing costs. This would include charges for transporting the excisable goods from the factory to the factory gate, the cost of packing so as to render the article marketable in the wholesale market and may be certain other costs, which are necessary for putting it in a marketable condition.”
21. In the case before us, the charge is that the additional consideration was equivalent to the extra price loaded on to the exempted goods.
22. During investigations, it was revealed that the appellants were manufacturing complete compressor, and after testing the complete compressor, were packing the compressor without stop valve, safety valve, oil stainer, electric heater, gauges and switches, which were packed and billed separately. It was seen that the compressors were sold at 20% to 30% of their cost price, and that the parts were sold at about 300% more than their cost price.
23. In the case of Collector, Central Excise v. United Glass, 1989 (40) E.L.T. 901 (Tri.), it was noticed that the prices declared by the respondents were much below the cost of production and that the cost data furnished to the department by the respondents, was incomplete and vague. The respondents appeared to be unwilling to come out with the full cost data including the overheads and the margin of-profit (Para 7). The Tribunal held that the value below cost could be either for inferior goods or were manipulated prices, and not bona fide, and hence not acceptable (Para 14).
24. The appellants have submitted that it was their business strategy to sell the compressors at any price, and to make profit on parts.
25. When setting the price of a product, most manufacturers start with their unit production cost, the expense of making one unit of the item (prime cost). Both direct and indirect (production overheads) costs are taken into account. They add a percentage of these costs to provide a profit for themselves. One of the chief reasons for carrying a business is to make a profit. Competition does not eliminate profits. There could be no marketing strategy to sell the saleable products without costing.
26. Splitting of the price as between the compressor and its parts, including those essential for the working of the compressor, could not be considered as for commercial considerations. In case of State of Uttar Pradesh v. Union of India, 1985 (20) E.L.T. 6 (All.) in para 12, the Allahabad High Court had observed that “where contrary to trade practices in the dealing of particular goods in wholesale the manufacturer enters into an agreement with the producer splitting up the consideration for which the property in goods are transferred with a view to reduce the amount of duty payable, he will be doing so for extra commercial consideration, and the price indicated in such agreement may not indicate the wholesale price, and the excise authority may not feel itself bound by such splitting.”
27. The lower prices for the dutiable compressors were not for any commercial considerations, but for evading Central Excise duty leviable on such compressors, while at the same time, recouping their own loss by charging higher prices for the non-dutiable parts. They got whatever ex-duty price they wanted to get. The customer was benefited as he got his requirements of compressors and parts, taken together, at reduced price, to the extent of duty evaded on the compressors. Such a device could not be considered as in the normal course of business, and is obviously for extra commercial considerations, and the price charged for such sales would not be the wholesale cash price for levying Central Excise duty under Section 4 of the Act.
28. There is no doubt that as held by the Supreme Court in the case of A.K. Roy v. Voltas Limited, 1977 (1) E.L.T. (J 177) (SC), the wholesale cash price has to be ascertained only on the basis of transactions at arm’s length (Para 18). The transaction should, however, be at arm’s length, and the arms should be straight and not twisted. If the arms are twisted then the transaction could not be considered as fair and could not be considered for pure commercial considerations.
29. Thus, we find in the case before us that there was a single transaction in which the property in the compressor and parts was transferred to the customer. Although the transaction was one, the assessee splitted up the transaction in two parts – one for the compressor and the other for the parts. The assessee raised two invoices – one for the dutiable compressor and the other for the non-dutiable parts. A lower price was shown for the compressor while a high price was shown for the parts. In the process, while the assessee realised what he willed to realise, and the customer paid a lower price (on account of the dutiable compressor being undervalued), the public exchequer has alone been cheated. Parts being non-dutiable, no Central Excise duty was leviable irrespective of the higher price shown. A lower duty was, however, paid by under-valuing the dutiable compressor. The appellant has called it their business tactics and marketing strategy. But in these so called business tactics and marketing strategy, only the public exchequer has been cheated. The declared value of dutibale compressor was below its cost. It was not a case of distressed sale or sale of defective goods. The circumstances of the case establish that it was a manipulated price. Such a price could not be considered as the normal price for the purpose of Section 4 of the Act. The fact that some of the customers who got extra legal benefit were public sector undertaking, will make no difference to the legal issues.
30. Item No. 29A of the old Tariff covered refrigerating and air conditioning appliances and machinery, all sorts, and parts thereof. Sub-item (1) covered refrigerators and other refrigerating appliances; sub-item (2) covered air conditioners and other air conditioning appliances; sub-item (3) covered parts of refrigerating and air conditioning appliances and machinery all sorts. As held by the Hon’ble Supreme Court in the case of Frick India Limited v. Union of India, 1990 (48) E.L.T. 627 (SC), sub-item (3) of Item 29A is a comprehensive provision encompassing within it, parts of all sorts of air conditioning and refrigerating appliances and machinery. The language used therein is wide and comprehensive in its application and could not be given a restricted meaning. It was also added that the scope of sub-item (3) was neither restricted nor controlled by the provisions of sub-items (1) and (2).
31. Under sub-item (3) of Item No. 29A, read with Notification No. 80/62-C.E., dated 24-4-1962, among others, compressors, strating relay, controls (including expansion valve and solenoid valves) and pressure switches and overload protection/thermal relay were dutiable. As compressor as such was a dutiable part, no part of the value of any of its part, was excludible from the value of the compressor, for the purposes of arriving at its assessable value. Compressor is an identifiable, specific and a vital part in any refrigerating system, including low temperature refrigeration. In mechanical refrigeration, a compressor brings about the refrigeration cycle of refrigerating by changing a refrigerant from a liquid to a gas and back to a liquid again. In electric refrigeration the compressor pumps the refrigerant from the freezing unit, as a vapour, and raises its pressure. It, then, discharges high pressure gas into the air cooled condenser. The assessee with a view to misdeclare the value of compressor, declared some of the essential parts of compressor separately, and sought to avail of the exemption thereon. Refrigeration compressors were declared “without spares and accessories”. It was not declared and specified as what parts were excluded. They had different models of their compressors and obviously no model could be complete if any of the essential parts were not fitted therein. Such parts as stop valves, safety valves, cut-off switches, gauges, heater, stainers etc. are essential parts of the compressors, and their separate listing for exempted parts and vague exclusion from the dutiable compressors, and thus splitting up the value, is obviously for evading the Central Excise duty.
32. The appellants have referred to their earlier disputes to plead that the department was aware of their modus operandi. Under half margin memo, dated 21-7-1976, reasons were sought as to why the prices of compressors have remained unchanged since 1973. Show Cause Notice dated 30-7-1976, read with communication dated 20-12-1976, related to the reduction of excisable value per compressor by Rs. 1000/-. In the earlier communications and disputes, the fact that certain parts of the compressors after fitting and testing, were packed and billed separately with a view to evade payment of Central Excise duty on the real value of the compressors, had not been noticed. In reply to the show cause notice vide their letter 7-9-1977, the appellants have themselves complained that “no grounds or evidences have been produced in support that declared prices were not based on cost prices”. (Page 138 of the paper book). The facts came to light only after the searches and seizures leading to the present proceedings in which the impugned order before us was passed. The impugned order before us deals with the specific charges. On the basis of these half margin memo and the show cause notice, it cannot be said that the department was aware of the contraventions as alleged in the show cause notice dated 17-11-87, which has been adjudicated under the impugned order. As held by the Hon’ble Supreme Court in the case of Binod Bihari Singh v. Union of India, AIR 1993 SCW 475, Limitation Act is a statute of repose and bar of a cause of action because of undesirable lapse of time. In the case before us, there has been no undesirable lapse of time. Show cause notice could not have been issued without mustering and examining all the relevant facts and materials, and without establishing a prima facie case.
33. In the matter before us there has been no undesirable delay in issuing the show cause notice. Further, show cause notice has been issued with proper investigation/enquiry, and the appellants were associated with such enquiry/investigation. As per show cause notice the fresh facts had come to light, and they had been brought on record. The Tribunal in the case of Bramec Surie Pvt. Ltd. v. C.C.E., 1986 (25) E.L.T. 79 (Tribunal) had held that issues already concluded in earlier proceedings could be reopened in subsequent proceedings for another period of time if emerging fresh materials give a new dimension to the matter. It was added that limitation in such cases was to be computed from the date of issue of the last show cause notice.
34. Delhi High Court in the case of J.K. Synthetics Ltd. v. Union of India, 1981 (8) E.L.T. 328 (Delhi), and Metal Forgings Pvt. Ltd. v. Union of India, 1985 (20) E.L.T. 280 (Delhi), had held that the principle of res judicata or estoppel is not applicable to tax matters.
35. In the show cause notice it has been alleged in para 16 that various contraventions on the part of the assessee appeared to have been committed by them by reason of fraud, wilful misstatement and suppression of facts with an intent to evade payment of duty. The arguments of the assessee with regard to limitation were not found as tenable by the adjudicating Collector, Central Excise.
36. The appellants were working under the self removable procedure which reposes a good deal of trust in the tax payers. While filing of a price list in the prescribed form was obligatory under Rule 173C, the requirement of prior approval was limited to only few situations. The assessee was required to declare in the price list that the particulars furnished therein were true and complete to the best of their knowledge and belief. The Law does not protect the one whose actions are tainted, and no approval procured by false declarations could protect the guilty. We have to see on the basis of evidence on record whether the appellants honestly and reasonably believed that the prices declared by them were true.
37. The show cause notice dated 17-11-1987 is a very detailed one. It explains that enquiries had revealed that the assessee during the period 1982-86 had intentionally declared the lesser price of compressors without considering the cost of materials and overhead expenses on it, with an intent to evade payment of Central Excise duty, in a planned and systematic manner. The details of the differential Central Excise duty were shown in the work sheet annexed to the show cause notice. (Para 14 of the show cause notice). According to the assessee “there was no procedure to work out the cost of their compressor,” and that “they had never been keen to work out the cost of production” (Para 6 of the show cause notice). It was noticed based on scrutiny of assessee’s accounts/records, statements of their own officials, and the working of cost data in the presence of their own personnel, deputed by their Vice President, that the “Company had been undervaluing the compressors with an intent to pay lower duty and simultaneously, were recovering differential cost of the compressors from the sale price of accessories which were being compul-sorily supplied and which were much overpriced.” (Para 8 of the show cause notice). According to Shri Manohar Lal Rattan Lal Gandhi, Section Incharge of compressor assembly “after completing the assembly, they were testing the compressors on test load; that after completing the said operation, they were undertaking a final look test during the said operation, that they were fitting stop valve for maintaining the air pressure during final look test; that they sent it for printing; that thereafter on receiving the packing list from their planning department, they packed their compressors after removing two valves; that in the packing list, they showed the accessories separately and packed it separately; that they were showing the two stop valves, safety valves, oil stainers, electric heater, different types of gauges and cut-off switches as accessories in their despatch advises so the same were not available to their department; that the production programme was also destroyed after completing the job so the same was also not available with them” (Para 3 of the show cause notice). Before the adjudicating Collector, Central Excise, they did not desire to cross examine any witness (page 13 of the Order-in-Original). It was also observed that the assessee were preparing two invoices – one for compressor and the second for the accessories of compressor (Para 4 of the show cause notice). On the basis of the material on record it appeared to the department that the assessee had intentionally suppressed the facts and had with an intent to evade payment of amount of Central Excise duty, deliberately undervalued the compressors manufactured and cleared by them (Para 15 of the show cause notice).
38. Having gone through the details briefly set out above, there could be no doubt that the notice issued was clearly the one on the basis of which a notice could be issued within the extended period of limitation under the proviso to Section 11A of the Act, as observed in similar circumstances, by the Hon’ble Supreme Court in the case of Union of India v. Maheshwari Woollen Mills, AIR 1993 SCW 483. With reference to the period of demand beyond the period of 5 years, the Hon’ble Supreme Court held in that case that “the effect of this will not be to invalidate the notice in its entirety. At worst the effect will be that the department will not be entitled to collect the duty beyond a period of 5 years from the date of issue of the Section 11A notice”. (Para 9). In the case before us, the Collector, Central Excise, Ahmedabad had already held the demand beyond the period of 5 years i.e. 1-4-1982 to 30-10-1982 as time-barred.
39. The present show cause notice has been issued after examining the facts properly. There have been detailed enquiries and investigations by the department, and evidence in support of the allegations had been collected. The grounds and the evidence on which the allegations are based, have been fully explained in the show cause notice. The assessee was associated with the investigations leading to the calculations of differential duty demanded.
40. In the case – Creative Cosmetics v. Collector of Central Excise, 1993 (63) E.L.T. 348 (Tribunal), the Tribunal had observed that the second show cause notice in respect of the same goods but with different scope consequent upon new facts coming to light, was not barred.
41. The appellants had contested that after approval the price lists became final and it was not open for the department to reopen the issue and that no show cause notice could have been issued. The approval of assessable values was granted on the basis of the statements made in the price lists by the assessee. The Hon’ble Gujarat High Court have held in the case of Alembic Glass Industries v. Union of India, 1992 (59) E.L.T. 207 (Guj.) in para 24, 25 and 26 that the price list approved can be reopened under Section 11A of the Act, in case of short levy, non-levy or erroneous refund, and that it was neither necessary nor practical to have the price list approval set aside in appeal or revision first»
42. With regard to the scope and ambit to provision of Section 11A of the Act, the Calcutta High Court in the case of I.T.C. Ltd. v. Union of India, 1988 (34) E.L.T. 473 (Calcutta), did not accept the proposition that unless the price list is set aside on appeal, the question of refund will not arise. They observed that under the scheme of the Act, Section 11A of the said Act was provided as a substantive provision and a complete code for realisation of excise duty in case of short levy or short payment.
43.1 In the case of Neyveli Lignite Corporation Ltd. v. Collector, Central Excise, 1992 (58) E.L.T. 76 (Tribunal), on the same facts parallel proceedings had been initiated. In the case before us, neither the facts were the same in the instant show cause notice and the earlier proceedings, nor the proceedings could be considered as parallel proceedings.
43.2 In the case – Zenith Tin Works v. C.C.E., 1990 (47) E.L.T. 295 (Tribunal), the Tribunal’s observations with regard to limitation were in the context of appellants stay application.
43.3 In the case of Collector, Central Excise v. Muzaffarnagar Steels, 1989 (44) E.L.T. 552 (Tribunal), it was observed by the Tribunal that extended period of limitation was not invokeable in the absence of deliberate suppression or misstatement of facts with the intention to evade duty or to avail of the benefit of exemption notification. In the case before us deliberate suppression and misstatement of facts with the intention to evade duty, have been alleged and established.
43.4 In the case of Swan Mills Ltd. v. Union of India, 1989 (44) E.L.T. 601 (Bom.), the matter related to the assessment orders under Rule 173-1 of the rules and the execution of those orders under Section 11A of the Act. While the issues before us are different, we may refer that the Bombay High Court in that case had held that merely because the authorities have under a mistaken view of the law or otherwise, issued notices under Section 11A, there was no reason why the revenue should be prevented from collecting the amount due under the assessment orders, which have already become final.
43.5 The issues before the Andhra Pradesh High Court in the case of CEAT Ltd. v. Assistant Collector, 1991 (56) E.L.T. 718 (AP) related to the revocation of the approved classification list and re-classification of the goods. The Andhra Pradesh High Court observed that there is no legal bar against issuing a show cause notice for revocation of an approved classification list in the first instance and after re-classification, issuing a show cause notice separately under Section 11A for the recovery of the excise duty. Here we are not concerned with the revocation of the classification list or the price list but with the demand of duty short levied on account of suppression of facts, for which the provisions of Section 11A of the Act are applicable, and have been invoked.
43.6 In the case of Electric Lamp Manufacturers India Ltd. v. C.C.E., 1991 (51) E.L.T. 619 (Tribunal), the Collector had found that there was no ground to allege suppression of facts by the appellants, and in those circumstances the Tribunal observed that the ground of suppression of facts not being established, personal penalty on assessee was not justified. In the case before us, the adjudicating Collector of Central Excise had not found tenable the party’s arguments for limitation and the demand being time barred.
44. As observed by the Hon’ble Supreme Court in the case of Jaishri Engineering Company Pvt. Ltd. v. C.C.E., 1989 (40) E.L.T. 214 (SC), the question whether there was any fraud, collusion, wilful misstatement or suppression of facts for the department to be justified to claim duty beyond a period of 6 months, is a question of fact. The Hon’ble Supreme Court held in that case that having come to the conclusion that there was deliberate suppression or wrong statement it follows automatically that the Tribunal was justified in upholding the imposition of penalty. It was added that the quantum of penalty was a matter which the Tribunal was free to fix as they thought fit as the justice of the case demanded. The Hon’ble Supreme Court observed that “the fact that the department visited the factory of the appellant and they should have been aware of the production of the goods in question were no reason for the appellant not to truly and properly describe those goods.”
45.1 As regards the calculations regarding costing as incorporated in the show cause notice, it has been argued that the prices ascertained were more than the invoice prices. In this connection, we find that:-
(1) the cost of various models of compressors was worked out in the presence of the officials deputed by the Vice President of the company;
(2) the various principles/factors adopted are discussed in detail in para 7 of the show cause notice;
(3) the allocation of various expenses had been made with reference to the statement of allocation produced by the Assistant Manager (Accounts) of the company (Para 8 and 8A of the show cause notice);
(4) the company could not supply data for the full period;
(5) the company pleaded that they had no cost data of their compressors;
(6) the various cost calculations were supplied to the appellants;
(7) the appellants have not put up their version of the cost and had maintained that no costing was done by them;
(8) in the grounds of appeal only general observations have been made in para 3.4, and no specific costing details have been furnished.
45.2 The Collector, Central Excise, Ahmedabad had discussed the costing in detail in his Order-in-Original. As regards the total price of compressor and accessories, we do not find that the assessable values adopted for compressors by the Collector, Central Excise are more than the invoice value, for both compressors and parts. As discussed in the show cause notice and in the Order-in-original, certain parts which were fitted with the compressors have been packed and billed separately, and value thereof had been added back to the value of the compressors.
45.3 Thus, this point made by the assessee had no force and we consider that the demand of Central Excise duty of Rs. 1,55,22,150.60 has been correctly confirmed by the adjudicating Collector of Central Excise.
46. Keeping in view the totality of the circumstances however, we reduce the penalty from Rs. 40 lakhs to Rs. 20 lakhs.
47. The Tribunal while disposing of the stay application of the appellants on 13-12-1991, although observed that they have got no power to order the payment of interest, had accepted the offer of the learned Sr. Advocate for the appellants, for payment of interest by the appellants, at the rate of 12 per cent in the event of their losing the appeal. We accordingly, exercising our inherent powers in view of the decision of the Hon. Supreme Court in the case of Income Tax Officer, Cannanore v. M.K. Mohammed Kunhi, reported in AIR 1969 SC 430, accept the offer of the learned Senior Advocate as to the payment of interest at the rate of 12 per cent from the date of the order dated 21-2-1990 of the Hon. Gujarat High Court, on the duty demanded.
48. Subject to above, the appeal is otherwise rejected and the impugned order is confirmed.