ORDER
Jyoti Balasundaram, Member (J)
1. The above appeal arises out of the order of the Commissioner of Central Excise, Mumbai, who has confirmed the duty demand of Rs. 9,43,43,035/- on cowl and chassis fitted with engines captively consumed for the manufacture of motor vehicle cleared to UN agencies at nil rate of duty claiming exemption of under notification No. 108/95 dated 28.8.1995 during the period November 1995 to February 1997 on the ground that the products in dispute (intermediate products) are not covered by exemption under Notification 67/95 dated 16.3.1995 as the final products i.e. motor vehicles were cleared at nil rate of duty and imposing penalty of an amount equal to duty upon the appellant.
2. We have heard Shri Sridharan, Ld. Advocate and Shri Parlekar, Ld. DR.
3. We have that show cause notice dated 28.11.2000 invokes the extended period of limitation of five years under the proviso to Section 11A of the Central Excise Act, 1944. The charge of suppression in the show cause notice is that the appellant did not file any classification declaration under Rule 173D and price declaration under Rule 173C for the intermediate products captively consumed in the manufacture of motor vehicle with a view to avail inadmissible benefits under Notification 67/95 and to evade payment of duty on such captive consumption. Further charge is that although the appellant availed of the exemption under notification 108/95 for clearances of final products without payment of duty to UN agencies, they had failed to claim the exemption vide their classification list dated 8.5.1995, with a deliberate intention to evade payment of Central Excise duty. In the reply to the show cause notice, the appellant rebutted the charge of suppression by stating that the process of manufacture of motor vehicles including the emergence of cowl and chassis fitted with the engine was within the knowledge of department, as seen from the correspondence exchanged between the assessee and the department and that the department had issued a show cause notice in November 1996 itself demanding duty on such chassis captively consumed in the manufacture of motor vehicle manufactured and cleared under notification 108/95. The Commissioner’s findings on the issue of limitation are reproduced hereunder below:
Close scrutiny of these documents reveals that RT-12 Returns no where reflects clearances under Notification No. 108/95 and/or 67/95, clearance invoice carries the remark w.r.t. Notification No. 108/95 only, Department knowledge as to process of manufacturing cannot be equated with legal responsibility of furnishing information, more so, when chassis is incorporated in registration certificate as one of the product. Further Superintendent’s letter regarding reversal of modvat credit does not strengthen the assessee’s position as at no stage did they disclose (i) the existence/manufacturing of intermediate product i.e. Cowl and Chassis and (ii) the fact that they were simultaneously availing exemption under Notification No. 67/95.
I also find it wrong on the part of the assessee to say that information called for us already available in the RT-12 filed as no RT-12 Return filed by them with the Department even disclosed the details regarding the ‘Cowl and Chassis fitted with engine’, in question in this show cause notice.
Assessee’s contention that information relating to quantity of motor vehicles cleared was furnished vide letter dated 26.11.1996 does not hold good as contradictory information was furnished vide their letter dated 1.11.1999. Moreover, information in letter dated 26.11.1996 was incomplete as neither emergence of intermediate product was disclosed nor its valuation was given as promised in their letter dated 4.11.1996. nor complete number of cowl and chassis involved was furnished to the department till the year 1999. It only goes to demonstrate the assessee’s conscious and persistent design to thwart any attempt by the Department to collect the duty due.
The important issue to be decided in this case is whether extended period of limitation would be applicable in this case or not. Through various arguments, the assessee has tried to cast the onus for ascertaining the truth on the department. This attempt is not legally sustainable. The fact to be borne in mind is that the assessee is not operating under the system of ‘physical control’. They are operating under ‘self removal procedure’. Under this system, the assessee gets full faith placed in him by the tax administration. The department in ‘self removal procedure’ does not maintain a constant physical vigil on the clearances being effected by the assessee. The assessee is expected to disclose full and precise details about goods being manufactured and cleared by him. He is expected to make a true and full disclosure to the department. Thereby, a greater burden is thrust on the assessee to live up to the confidence reposed in him since unlike physical control, the department is not constantly rechecking the information being furnished by the assessee. In addition, it is also an undisputed fact that at the material time Rule 173B was in force, which enjoined upon the assessee to file a classification list/declaration of the final product(s) being manufactured by them. A proper form had been prescribed by the government Rule 173B. In terms of instructions applicable at the material time, it was incumbent upon the assessee to declare even such of assessee’s final products such as ‘cowl and chassis fitted with the engine’ which were meant for captive consumption. Even if the assessee wanted to claim benefit of duty free clearance for captive consumption of these goods, it was obligatory upon them to declare the fact of manufacture of the product along with its classification and therefore claim benefit of exemption under notification No. 67/95 for duty free clearance for captive consumption. The assessee neither filed the classification list/declaration of product being consumed captively nor ever informed the department of their intention to claim the benefit under the proceeding paragraphs of this adjudication order, a conscious and deliberate attempt has been made by the assessee to obfuscate the issue and somehow avoid the burden cast on them by law to make a full declaration of the facts to the department. The argument by them that the impugned final product namely, ‘cowl and chassis fitted with the engine’ was declared in their RT 12 returns is nothing short of a blasphemous lie since it is a matter of record that no such declaration was ever made by them. Since the assessee have failed to discharge the burden of making true and full declaration of products being manufactured, cost upon them by the provisions of Rule 173B, it is absolutely clear that extended period of limitation would be applicable in the present case. It has been held by Hon’ble CEGAT in Hindustan Playing Cards v. Collector in that “We are inclined to agree with the Collector (Appeals) that the failure on the part of the Appellants to file the revised classification list in terms of Rule 173C claiming exemption under Notification No. 144/82 and no furnish the information sought by the Superintendent in the numerous letters addressed by him to the appellants amounted to suppression of facts. Under these circumstances, we are inclined to uphold the finding in the impugned order that the extended period of five years was invokable under the proviso to Section HA. Hence, we answer the second question in the negative”. Applying the ratio of the above CEGAT decision, it is clear beyond doubt that since the assessee had failed to file a classification list in the present case as well and also the fact that they had taken inordinate time in furnishing the information sought by the department from them from time to time, it leads to only one inescapable conclusion that extended period of time would be applicable in the present case. I, therefore, answer this question in the affirmative.
4. From the above, it is clear that the department was fully aware of the emergence of the intermediate products during the course of manufacture of motor vehicle. It is also clear that the department had knowledge that motor vehicle (in this case, jeeps) were being cleared to UN agencies without payment of duty by availing the benefit of exemption under notification 108/95. Therefore, the number of cowls and chassis fitted with the engine on which the duty has been confirmed by the Commissioner could have been obtained by the department from the RT-12 returns filed for the motor vehicles cleared under notification 108/95, and the notice issued within the normal period of limitation. We have also perused the correspondence between the assessee and the department in this regard. In November 1987, the Assistant Collector rejected the request for permission to remove partially processed motor vehicles under Rule 57F(ii) of the Central Excise Rules on the ground that partially processed vehicles i.e. cowls and chassis are neither input nor semi-finished goods. In October 1990, a show cause notice was issued to the appellant wherein it was observed that the appellant had manufactured cowl and chassis in their factory and cleared them on payment of duty to the body builders (Ld. Counsel for the appellant states that the earlier practice of clearance of cowl and chassis to outside body builders was subsequently discontinued and that the appellant themselves started to build bodies in their factory premises). In July 1991 demand for duty on cowl and chassis was raised by the department. The appellant’s application in August 1991 for removal of chassis and cowls under 56B was rejected by the Superintendent of Central Excise in September 1991. We also find that in an earlier appeal by the revenue to the Tribunal, it has been specifically mentioned that chassis and cowls were manufactured by the appellant and cleared on payment of duty to body builders (during the period when cowl and chassis were sent to outside body builders). All these shows that all along the department was aware of the emergence of cowl and chassis fitted with the engine in the course of manufacture of motor vehicles. We also find that the RT-12 returns filed for the manufacture from November 1995 onwards included those vehicles cleared by availing exemption under Notification 108/95. The returns record reversal of credit and as seen from the letter dated 13.3.1996 of the Superintendent of Central Excise to the appellant, the clearances of jeeps to UN agencies under notification 108/95 was recognised. We also note that excise invoices showing the details of clearances under notification 108/95 were filed with the RT-12 returns. The above facts establish the knowledge of the department of both the emergence of cowls and chassis fitted with the engine as intermediate products in the appellant factory for the manufacture of motor vehicles and clearance of motor vehicle to UN agencies without payment of duty by availing of the benefit of the exemption in terms of notification 108/95. We also note that during the relevant period the department itself was of the view that reversal of modvat credit on inputs used in the manufacture of exempted final products amounts to sufficient fulfilment of the provisions of law. In other words, even when the final product namely motor vehicle was being cleared without payment of duty, there was no demand of duty on products emerging at intermediate stage, but there was only requirement of reversal of modvat credit as seen from the letter dated 23.3.1993 (at page 272 of the paper book).
5. In the light of the above discussion we hold that the entire demand is barred by limitation and accordingly we set aside the impugned order confirming duty and imposing penalty and allow the appeal without pronouncing upon the merits of the case.