ORDER
Gowri Shankar, Member (T)
1. Applications E/Stay-2744/98-Bom of M/s. Mahindra & Mahindra Ltd. (Mahindra for short) for waiver of deposit of penalty of Rs. 15.00 lacs imposed under Rule 209A and application E/Stay-2754/98-Bom is by M/s. SRC Roll Forming Pvt. Ltd. for waiver of pre-deposit of duty Rs. 33.80 lacs penalty of an equal amount under Section 11A of the Act.
2. The Advocate for M/s. SRC Roll Forming Pvt. Ltd. explains that it was a job worker for Mahindra. It received steel sheet and fabricate them into parts for light commercial vehicle. Duty was paid on the value of raw material and job charges. In the impugned order the Commissioner has found short payment of duty in that various elements were not included in the assessable value as below.
3. A sum of Rs. 24.47 lacs is demanded on account of the difference in the cost of material. Applicant declared the value of raw material on the basis of a Chartered Accountant’s certificate furnished by Mahindra, which had taken the weighted average as the actual cost. The remaining of the duty is on account of excise duty paid on raw material, sales tax, octroi, handling charges, drawing and designing charges. 10% of profit of margin has also been added. He contends that the Central Excise duty paid on the raw material and taken as Modvat credit by the applicant will not be included in the cost of raw material, citing the Tribunal’s decision Dai Ichi Karkaria Ltd. v. Collector of Central Excise 1996 (81) E.L.T. 676. There was no sale of goods and sales tax was not paid. Octroi and handling charges were included in the value declared. A profit of Rs. 22/- had already been included under job charges. Applicant also did not incur any drawing charges. The drawings were provided by Mahindra.
4. It is further contended that extended period under Section 11A would not be available. The department had carried out inquiries in 1994 into the cost of the raw material. The Chartered Accountant’s certificate had been given to the department in the reply to those inquiry. It is further contended that even if it is held that there was suppression, the lapse of time between these facts coming to be known and the issue of demand excludes the availability of the extended period. Although this particular question is pending before the Larger Bench of the Tribunal, this very fact shows that there is considerable benefit of the doubt. It is further contended that Section 11 AC will not apply since the period involved was prior to enactment of this section. Financial hardship is claimed on the ground that applicant on 31-3-1998 had a loss of Rs. 3 crores. A receiver has also been appointed and suit filed by Bank recovery of the loan given by it. However as the gesture bona fide he offered deposit Rs. 2.00 lacs.
5. The Departmental Representative contends that at no time did the applicant inform the department that the Chartered Accountant’s certificate did not reflect the actual value of the goods. Applicant has not been able to show that the value declared was an average, by showing cases the declared value was higher than the actual cost. The ambiguous wording in the Chartered Accountant’s certificate and the applicants avoiding mentioning the average indicated the suppression of the relevant facts. Therefore the extended period has been rightly invoked. He opposes the grant of stay.
6. The representative of Mahindra contends that the contract provided that the excise duty was to be reimbursed by it. Therefore there would be no intention to evade payment of duty. The fact that duty would be available as Modvat credit adds emphasis to this point. Rule 209A under which penalty has been imposed would not apply because it has been shown in the Commissioner’s order that the notice do not say anything about liability to confiscation of the goods.
7. Departmental Representative answers by pointing out that there is no evidence to show that the excise duty was to be reimbursed by Mahindra.
8. On merits, applicant has a prima facie case with regard to all elements except difference in raw material cost of drawing and designing charges. The Tribunal’s decision cited in its favour in regard to the duty on raw material; there is no question of notional sales tax, sales tax not having been paid. The basis for the 10% profit margin in a situation where it appears that an element of profit is already included has not been shown. It appears prima facie octroi paid by SRC Roll had been included and prima facie cost of raw material has not been determined on actuals. There are no details of the working out. Prima facie drawing and designing charges would have been included in the cost of material but the fact that they would have to be amortised also has to be taken into account. The balance sheet for 1997-98 of SRC Roll shows losses Rs. 3.37 crores it is stated that accumulated loss due to the fact that the applicant for 5 years losses cannot be shown it is economic liability taking this account and taking note where the pre-deposit of question of applicant to deposit Rs. 3.00 lacs.
9. We do not find a prima facie case for Mahindra. The invoice does not show that duty was paid and that the purchase order does not mention excise duty is to be reimbursed. The fact that the certificate was provided by Mahindra to SRC Roll is significant and cannot be overlooked while it may be true that the duty is payable of SRC Roll available as credit. That by itself does not justify misdeclaration of duty. Rule 209A does not require actual confiscation of goods. In these circumstances, we direct the applicant to deposit Rs. 2,00,000/- (Rupees Two lakhs only). On such deposit being made within three months from today, we waive deposit of the remaining amounts of penalty and duty and stay their recovery.
11. Compliance on 15-6-1999.