Judgment:
1. In this appeal at the instance of the assessee two issues are involved -- one relating to an alleged clandestine removal of goods on which Central Excise duty would come to Rs. 30,467. The second relates to inclusion of freight and insurance charges collected from their customers in the assessable value.
2. As far as the second issue is concerned, it is covered in favour of the assessee by the decision of the Hon'ble Supreme Court in Escorts JCB Ltd. v. CCE,(SC) and Prabhat Zarda Factory Ltd. v. CCE, 2002 (146) ELT 497 (SC). The first issue has arisen in the following manner: 3. The appellants had in the year 1992 taken Excise registration as they were engaged in the manufacture of industrial gases in their factory at Surajpur. Later they stopped manufacturing activity and the registration was surrendered. They carried, on the activity of filling of cylinders with gases brought in bulk tankers which did not amount to manufacture. With effect from 1.3.97 Chapter Note to Chapter 28 was amended to provide inter alia that the activity of re-packing from bulk to retail packs amounted to manufacture. The appellants were directed by the departmental officers to once again get themselves registered under the Central Excise Rules on the premise that filing of cylinders from tankers amounted to packing/re-packing. Since the amendment came into effect overnight and the appellants were also in urgent need to despatch the cylinders to their customers, the appellants started clearing the goods from 5.3.97 to 9.3.97 in the old invoice book under the erstwhile registration on payment of duty. This was required to meet the delivery schedule. When Excise registration was obtained new Excise invoices were printed. In order to regularize invoices issued earlier the new invoices containing the same identical details as to the consignee's name, quantity, date and time of despatch etc. as contained in the earlier invoices issued from 5.3.97 to 9.3.97 were sent to respective buyers. The appellants thereupon received the original and duplicate of the old invoices from all the customers and they were kept in the factory. They were resumed by the officers.
Statement of the Manager (Accounts) was also recorded wherein he explained the circumstances under which old invoices were prepared and later on substituted with new invoices. It was on the above basis allegation was made in the show cause notice of clandestine removal of the goods by the appellant.
4. The original authority as well as the appellate authority did not accept the explanation offered by the appellants. But on going through the order impugned, we find that apart from resumption of the above-mentioned invoices there are no other materials relied on by the department to substantiate allegation that there was clandestine removal. While vacating the penalty imposed on the employee of the assessee Company the Commissioner himself observes that the appellants have proceeded in the business with confusion rather than ill intent.
5. The appellants had made a further submission that the activity carried on by them will not amount to manufacture and therefore, there is no excise liability. In support of the above contention the appellants placed reliance on the decision of this Tribunal in Ammonia Gas Supply Company Ltd. 2001 (45) RLT 271. In the above decision this Tribunal has taken the view that Note 10 to Chapter 28 has no application to the activity of the assessee where ammonia received by it in tankers were filed in smaller containers. Identical is the nature of the activity of the appellants also. This contention of the appellants was rejected by the Commissioner by observing that since the appellants themselves had sought registration and entered into modvat stream, it cannot now turn around and contend that the activity would not amount to manufacture.
6. The learned counsel for the appellants would submit that in respect of the actual quantity cleared to their customers the appellants have already paid excise duty. What is now being demanded is in respect of goods which were not as a matter of fact cleared to its customers.
There is nothing wrong in assessee's relying on the ratio of the decision of the Tribunal in the above-mentioned case.
7. We heard the learned counsel for the appellants and the learned DR and went through the records of the case. We find that even though the assessee was not correct in using the old invoices, as a matter of fact there are no two sets of clearances one under the old invoices and the other under the new invoices. The assessee was only rectifying the mistake by issuing the new invoices after making identical entries thereon. There is merit in the contention of the learned counsel of the assessee that if the assessee had any mala fide intention they would not have kept the old invoices got returned from their customers alongwith the records in the factory. Therefore, we hold that there is no merit in the allegation of clandestine removal. Even otherwise as was held by this Tribunal in Ammonia Gas Supply Company Ltd. v. CCE, New Delhi the activity will not amount to manufacture and there cannot be any duty liability.
8. For the above reasons, we set aside the order impugned and allow the appeal.