ORDER
R.K. Abichandani, J. (President)
1. The appellant challenges the order of the Commissioner made on 22.4.2004, confirming demand of central excise duty amounting to Rs. 1,18,39,818/- and imposing a penalty of the like amount as also requiring the interest to be paid on the delayed payment of duty.
2. The appellant is engaged in the manufacture of telephone instruments and parts thereof classifiable under chapter heading 8517 of the Central Excise Tariff Act, 1985. From 1.3.2000, the Notification No. 9/2000-CX., required the instruments meant for retail sale, to show the MRP on their packages. The appellant supplied telephone instruments to the Department of Telecommunications (DOT) and MTNL who gave them to the customers on rental basis, to the subscribers by retaining the ownership of the instruments. The appellant also sold some telephone instruments in the open market on MRP basis. According to the Revenue, the appellant had declared the pattern of sale in their letter dated 27.3.2000, that they would sell the instruments on contract prices to the DOT/MTNL and there would be no MRP involved. However, they cleared instruments on MRP basis to DOT/MTNL and it appeared on enquiry, that they had not declared prices of the bulk supplies to DOT/MTNL. In their show cause notice dated 21.1.2004, the Revenue alleged that the appellant had willfully suppressed the facts by clearing the instruments to DOT/MTNL on MRP by taking abatement, with an intent to evade payment of duty. It was alleged that the appellant had willfully suppressed and cleared the telephone instruments to DOT/MTNL on MRP basis availing the benefit of Notification No. 9/2000-CX., dated 1.3.2000, which involved central excise duty to the tune of Rs. 1,18,39,818/-.
3. In their reply, the appellant contended that the department itself was in doubt about the application of Section 4A in cases where the telephone sets were sold to institutional buyers and that the appellant had maintained complete transparency by keeping the department informed about their doubts. It was pointed out that the Central Board of Excise and Customs by their circular No. 625/16/2002-CX. had informed that the Ministry had accepted the opinion of the Law Ministry that the valuation of telephone instruments supplied in bulk to telephone department will be done as per Section 4 of the Central Excise Act, 1944, and the instruments sold in the market with printed MRP would be assessed under Section 4A of the Act. In answer to the allegation of suppression of facts, the appellant replied that, information was furnished to the department about the clearances with effect from 1.3.2000 to 31.3.2000, and there was no suppression of facts. In paragraph 5.12 of the reply, it was specifically contended that the demand for the period from 1.3.2000 to 31.3.2002 was raised on 21.1.2004, which was beyond the period of one year from the “relevant date” and, therefore it was barred by limitation.
4. The Commissioner held that the extended period was rightly invoked since the party had willfully tried to create confusion to evade central excise duty, though Section 4A was amply clear in itself. It was held that the appellant had actually determined and paid the duty on the basis of the value determined under Section 4A on the clearances against the contract orders, though they were required to pay duty on the value determined under Section 4 of the Act on their bulk-sale under the contract orders, and therefore, the demand was sustainable under Section 4 of the said Act.
5. It appears from the record that the appellant had sent a communication dated 27.3.2000 which has been reproduced in the impugned order, in which a clear reference was made to the supplies of telephones to the DOT/MTNL as well as other Government departments. As regards the supplies to DOT and MTNL, it was mentioned that sale was made against the tendered prices offered by the Government departments for the department’s use only and these instruments were not sold in retail and, therefore, no MRP was involved. As regards some instruments offered for sale in retail, it was pointed out that the very small quantity was sold at the price fixed by the ITI, as per the market demand, in retail, and that they were in the process of finalizing the MRP for the same. It was further stated in this letter that since the instruments supplied to customers by the Telecom Department and the MTNL were for their own use and not sold in retail in the market, these transactions did not attract the provisions of Section 4A. The appellant in the said letter, as noted by the Commissioner, categorically stated that, since the provisions of Section 4A were not applicable in their case, they were following the procedure of valuation under Section 4 and paying the duty provisionally. The Revenue was asked to confirm the position. Despite there being ample material on record to show that all the relevant facts for assessment as may be decided upon by the department were before the Revenue, the Commissioner drew an adverse inference against the appellant from the non-mention of the letter dated 27.3.2000 in the reply to the show cause notice and observed that, the appellant had willfully tried to create confusion to evade payment of central excise duty. This was not a valid ground for invoking the extended period of limitation. The allegation that the appellant had tried to create confusion is vague, and since the matter had required taking opinion of the Law Ministry which opinion was accepted by the Ministry of Finance, it cannot be said that any confusion was created by the appellant especially when the appellant in the letter dated 27.3.2000 after narrating the relevant facts and the method that was proposed to be adopted for valuation had requested the department to confirm the correct course. It is, therefore, abundantly clear that there was no suppression of any material fact and the department did not have any valid ground to invoke the extended period of limitation. The impugned order cannot, therefore, be sustained and is hereby set aside. The appeal is accordingly allowed.
[Dictated and pronounced in the open Court on 24.01.2007]