Full Judgment Text
'REPORTABLE'
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7642 OF 2004
NIRLON LTD. ... Appellant
VERSUS
COMMISSIONER OF CENTRAL EXCISE, MUMBAI ... Respondent
J U D G M E N T
A. K. SIKRI, J.
The appellant herein is the manufacturer of Tyre Cord
Yarn (TCY) and Tyre Cord Fabric (TCB) falling under Chapter
54 and 59 of the Central Excise Tariff Act respectively.
The aforesaid goods TCY and TCB are manufactured by the
appellant at its Goregaon factory. The products so
manufactured are sold by the appellant at the factory gate
as well as removed for captive consumption to its another
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factory at Tarapur. At Tarapur factory, the said yarn are
utilised for manufacturing final products.
The dispute has arisen in respect of the valuation of
the TCY which are removed for captive consumption and to be
used at Tarapur factory of the respondent.
The appellant has been filing the price list proforma
under Section 4(1) of the Central Excise Act, 1944,
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(hereinafter referred to as 'Act') declaring the wholesale
price of TCY for such goods by showing the same price at
which the goods are sold by the appellant at the factory
gate to the third parties. Such price list in Proforma
Part I under Section 4 of the Act was filed on 01.03.1994
and 28.03.1994. It was again filed on 01.03.1998. The
price declaration so made was looked into by the
Superintendent of Central Excise and he was not satisfied
with this declaration as according to him, the price could
not be declared at the same rate at which the goods are
sold by the appellant at the factory gate to others.
According to him, there was a difference between the goods
which were cleared at the factory gate to be sold to the
third parties and removed for captive consumption by the
appellant itself for its Tarapur factory. This resulted in
the appointment of a cost accountant by the Commissioner to
go into this issue.
JUDGMENT
It appears that the cost accountant had given some
report in which he had opined that the two goods are
different from each other and therefore, price declaration
which was filed by the appellant in terms of Section 4(2)
of the Act read with Rule 6(b)(i) of Central Excise
Valuation Rules, 1975 (hereinafter referred to as Rules)
was incorrect. This led to the issuance of two show cause
notices to the appellant. First show cause notice is dated
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25.02.2000 covering period from August, 1999 to January,
2000. In this show cause notice, amount of Rs.78,20,365/-
for the aforesaid period was demanded as differential duty
under Rule 6(b)(ii) of the aforesaid Rules. The second
show cause notice was issued on 03.03.2001 which was for
the period from February, 1996, to June, 2000. Both these
notices resulted in confirmation of the demands mentioned
in the show cause notices as well as imposition of
penalties upon the appellant. The appellant filed appeal
against the orders passed by the Commissioner. However,
the Customs, Excise and Service Tax Appellate Tribunal
(hereinafter referred to as 'CESTAT') has dismissed this
appeal by the common judgment dated 01.10.2004. It is
against this judgment, present appeal is preferred by the
appellant.
After going through the material on record as well as
the orders of the Commissioner and the CESTAT, we find that
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findings of facts are recorded by the authorities below
that the two kinds of goods were not comparable with each
other and therefore, the goods which were removed for
captive consumption to be used by Tarapur Factory were to
be valued under Rule 6(b)(ii) of the Rules and the price
declaration given by the appellant applying Rule 6(b)(i) of
the said rules was erroneous. We also find that the
appellant had even admitted some variations in the two
types of goods in its reply to the show cause notices
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itself. In these circumstances, insofar as the opinion of
the authorities with regard to different nature of the
goods is concerned, that does not call for any interference
by this court.
Faced with the aforesaid situation, Mr. S. K. Bagaria,
learned senior counsel appearing for the appellant, has
pressed the issue of limitation. His submission is that
the second show cause notice dated 03.03.2001 covered the
period from February, 1996 to June, 2000, and most of this
period would be time barred if extended period of
limitation is not invoked in the present case. His
argument is that there was no mala fide on the part of the
appellant and no intention to evade the duty. In order to
buttress this submission, the learned senior counsel has
pointed out the following aspects in his favour: -
(i) The products sold at the factory gate and the products
transferred to Tarapur factory were using identical raw
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materials and identical process. For this reason, the
appellant believed that the products were comparable goods
in terms of Rule 6(b)(i).
(ii) Both the goods fall under the same sub-heading of the
tariff entry as both are admittedly TCY.
(iii) The price list which was filed by the appellant in the
year 1994, and thereafter repeatedly, was accepted by the
Central Excise Department after scrutiny and this gave a
reasonable impression in the mind of the appellant that the
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price declarations filed by the appellant was correct.
(iv) The appellant could not have taken any undue
advantage, in any case, by filing declaration under Rule
6(b)(i) instead of Rule 6(b)(ii) inasmuch as even if there
was higher duty payable in terms of declaration under Rule
6(b)(ii) of the Rules, the appellant was entitled to take
credit thereof in its entirety. Therefore, the entire
exercise was revenue neutral.
(v) In order to support his submission, it is pointed out
that as soon as the second show cause notice was issued and
the Revenue wanted the appellant to file price declaration
under Rule 6(b)(ii) the appellant complied therewith and
with effect from 01.04.2000, i.e., immediately after the
issuance of the show cause notice dated 25.02.2000, it is
paying duty accordingly and taking credit thereof, as well.
This is so accepted by the Department in the second show
cause notice dated 3.3.2001 itself.
JUDGMENT
From the aforesaid circumstances narrated by the
learned senior counsel, we are inclined to accept the
submission of the appellant that there could not have been
any mala fides on the part of the appellant in filing the
declaration under Rule 6(b)(i) in order to evade the excise
duty.
We may note that Mr. K. Radhakrishnan, learned senior
counsel appearing for the Revenue, vehemently countered the
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aforesaid submission of the appellant and argued that there
was clear intention to evade the excise duty. His
submission was that the clearance of the goods which were
sold at the factory gate were totally different as they
differed in technical specifications from those removed for
captive consumption which was confirmed by the appellant
itself vide its letter dated 21.02.2000 and this would
depict clear intention on the part of the appellant to
remove the goods by paying lesser duty.
We have ourselves indicated that the two types of
goods were different in nature. The question is about the
intention, namely, whether it was done with bona fide
belief or there was some mala fide intentions in doing so.
It is here we agree with the contention of the learned
senior counsel for the appellant, in the circumstances
which are explained by him and recorded above. It is
stated at the cost of repetition that when the entire
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exercise was revenue neutral, the appellant could not have
achieved any purpose to evade the duty.
Therefore, it was not permissible for the respondent
to invoke the proviso to Section 11A(1) of the Act and
apply the extended period of limitation. In view thereof,
we confirm the demand insofar as it pertains to show cause
notice dated 25.02.2000. However, as far as show cause
notice dated 03.03.2001 is concerned, the demand from
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February, 1996 till February, 2000 would be beyond
limitation and that part of the demand is hereby set aside.
Once we have found that there was no mala fide intention on
the part of the appellant, we set aside the penalty as
well.
The appeal is allowed in part and disposed of in the
aforesaid terms.
No costs.
.........................., J.
[ A.K. SIKRI ]
.........................., J.
[ ROHINTON FALI NARIMAN ]
New Delhi;
April 23, 2015.
JUDGMENT
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