India thermit Corpn. Ltd. Vs. Commissioner of C. Ex. - Court Judgment

Excerpt:
1. these two applications are praying for waiver of pre-deposit of following amount of duty confirmed and penalties imposed by the commissioner of central excise, under the impugned order no. 1/2000, dated 31-1-2000 :- name of the party duty penalty the india thermit corpn. ltd. 62,60,022/- 62,60,022/- sh. alok nagory, 2. shri v. lakshmikumaran, learned advocate submitted that the india thermit corpn. ltd. manufacture thermit portions and thermit welding equipments which were classified by them under heading 38.10 and under various sub-headings of chapter 84 of the schedule to the central excise tariff act, respectively; that around 20% of their production of thermit portion is sold by them to railways and 'remaining 80% is used by the appellants in the rail jointing work on contract basis; that the demand of central excise duty has been confirmed for the period january, 1994 to 12-9-1996 and penalties have been imposed by the commissioner holding that the price at which thermit portion and dry moulds were sold to the railways is much higher than the price adopted for the goods cleared for self use and the price paid by the railways should be adopted for determining the assessable value of the impugned goods used by the appellants themselves; that the dry moulds which are mainly made of sand would appropriately be classifiable under heading 68.07 and not under heading 84.80 of the central excise tariff; that the item shown as thermit welding equipments are only parts of thermit welding equipment/other equipments and as such would not be classifiable under heading 84.79; that on account of mis-classification duty amounting to rs. 18,65,735/- is payable as differential duty by the appellant no. 1 and differential duty amounting to rs. 43,94,287/- would be payable on account of undervaluation resorted by the appellants. the learned advocate further submitted that they had been filing the classification list from time to time which were approved by the department; that dry moulds are specifically covered under heading 84.80 of the tariff which covers "moulds for metal (other than ingots mould)", that as moulds made by them are for metal these are classifiable under heading 84.80 and not under chapter 68.3. regarding the charge of undervaluation the learned advocate mentioned that the department had taken the invoice price of thermit portion cleared for sale to the railway and the invoice price for self use on day to day basis; that most of the comparative figures are for the small quantity sold at higher price; that if the highest of the price for bulk sale to railway is taken as comparative price, no differential duty will be payable by them at all; that further they had incurred freight of rs. 50/- per thermit portion and if this transport charge is reduced from the price charged by them the price declared by them for self use will be comparable to the price at which thermit portion was being sold to the railways in bulk. regarding charge of undervaluation in respect of dry moulds, the learned counsel submitted that the assistant commissioner had issued show cause notices demanding differential duty on similar grounds and the appellants had produced copies of the orders placed by railways to third party; that the assistant commissioner ordered differential duty to be paid on the basis of normal price of rs. 25/- which has been honoured by the appellants and as such there could not be any undervaluation. finally, he submitted that the show cause notice was issued on 18-1-1999 and as such the entire demand is beyond the period of 6 months as specified in section 11a(1) of the central excise act; that in view of the classification list having been filed by them from time to time giving full description and the show cause notices issued by the jurisdictional asstt. commissioner and demand having been confirmed on taking the comparative price of rs. 25/- in respect of dry moulds for the same period, the department cannot allege suppression or mis-declaration by them with intent to evade payment of duty, and accordingly the extended period of limitation is not invocable in the present matters.4. opposing the applications for waiver of pre-deposit, shri a.k. jain, learned dr, reiterated the findings of the commissioner as contained in para l(iv) of his findings in which he had mentioned that where there is likelihood of products attracting another heading it is imperative on the part of the assessee to make a clear mention of the substance/material out of which the product is made so as to manifest clearly and completely the material information, details and particulars pertinent to the product leading to the correct classification of the products as declared in the classification list/declaration; that in the list attached to the classification list/declaration filed by the appellants such indispensible information about substance/material out of which the products were made was not given. he also relied upon the decision of the tribunal in the case of saurashtra chemicals v. collector of customs, bombay, 1986 (23) e.l.t.283, wherein it was held that the machinery parts made of carbon would fall under chapter 68 of the customs tariff and not under heading 84.65. the learned dr mentioned that the entire period of demand in the present matters is not covered by the show cause notices issued by the assistant commissioner which is evident from the synopsis given by the learned advocate at the time of hearing; that in para 6 of the synopsis it is clearly mentioned that overlapping period is only from 7-3-1995 to 31-3-1995 and not for the entire period involved in the present matters. the learned dr also mentioned that the appellants have number of contracts and there is nothing on record to show that the contracts which were before the assistant commissioner were the same contracts before the commissioner while adjudicating the impugned order; that in the price list/declaration for the products used by the appellants themselves there was no cross-reference of the prices; that generally the contract prices are less than the normal price, and therefore, adopting the contract price for the purpose of leving the duty is correct and the commissioner has rightly demanded the differential duty. the learned dr placed reliance on the decision in the case of bihar casting and chemicals ltd. v. cce, patna, 1998 (97) e.l.t. 335, wherein it was held that suppression of contract for delivery at the buyer's place is sufficient for invoking the larger period of limitation. he also relied upon the decision in the case of sanjay steel co. v. c.c., ahmedabad, 1996 (84) e.l.t. 307, wherein it was held that non-disclosure of clauses of agreement will be enough to invoke longer period of limitation.5. in reply learned advocate mentioned that they were filing right from 1978 onwards the price list. he referred to pages 597 and 598 of their paper-book which contains a summary of the price list filed by them and date of approval by the department. he also mentioned that they were filing the price list in part-1 for the goods cleared for self use as per direction of the department under letter c. no.20/misc./thermit/78/666, dated 15-6-1978. regarding the charge that they had not disclosed the substance/material of which the products were manufactured, the learned counsel drew our attention to their letter dated 27-3-1979 addressed to the assistant collector in which they had submitted details of the raw materials used and manufacturing process of each and every goods on which they had claimed exemption.these goods include a number of moulds and crucibles. he finally submitted that along with classification list they were giving a list of thermit welding equipments and spares being manufactured by them.6. we have considered the submissions of both the sides. the classification of their products can be decided only at the time of regular hearing after going in details into description of the various products and other details. however; we find that the applicants have made out a prima facie strong case on time limit as they have filed the classification list and price list from time to time declaring their products and the value and if there was any doubt in the minds of the department regarding correct valuation the same could be enquired from the applicants. the finding of the commissioner that in case is likely to attract another heading of the tariff it is imperative on the part of the assessee to make a clear mention of the substance or raw material applies more to the departmental officers who are approving classification list. it is imperative on their part in such situation to enquire substance/material out of which the product is made and other further details. we also find that the assistant commissioner has issued show cause notices determining the assessable value of the goods in question. accordingly we stay the recovery of the duty and penalty unconditionally during the pendency of the appeals.

Judgment:
1. These two applications are praying for waiver of pre-deposit of following amount of duty confirmed and penalties imposed by the Commissioner of Central Excise, under the impugned order No. 1/2000, dated 31-1-2000 :- Name of the Party Duty Penalty The India Thermit Corpn. Ltd. 62,60,022/- 62,60,022/- Sh. Alok Nagory, 2. Shri V. Lakshmikumaran, learned Advocate submitted that The India Thermit Corpn. Ltd. manufacture Thermit portions and Thermit welding equipments which were classified by them under heading 38.10 and under various sub-headings of Chapter 84 of the Schedule to the Central Excise Tariff Act, respectively; that around 20% of their production of Thermit portion is sold by them to Railways and 'remaining 80% is used by the appellants in the Rail jointing work on contract basis; that the demand of Central Excise duty has been confirmed for the period January, 1994 to 12-9-1996 and penalties have been imposed by the Commissioner holding that the price at which Thermit portion and dry moulds were sold to the railways is much higher than the price adopted for the goods cleared for self use and the price paid by the railways should be adopted for determining the assessable value of the impugned goods used by the appellants themselves; that the dry moulds which are mainly made of sand would appropriately be classifiable under heading 68.07 and not under heading 84.80 of the Central Excise Tariff; that the item shown as Thermit Welding equipments are only parts of Thermit Welding equipment/other equipments and as such would not be classifiable under heading 84.79; that on account of mis-classification duty amounting to Rs. 18,65,735/- is payable as differential duty by the appellant No. 1 and differential duty amounting to Rs. 43,94,287/- would be payable on account of undervaluation resorted by the appellants. The learned Advocate further submitted that they had been filing the classification list from time to time which were approved by the department; that dry moulds are specifically covered under heading 84.80 of the Tariff which covers "Moulds for metal (other than ingots mould)", that as moulds made by them are for metal these are classifiable under heading 84.80 and not under Chapter 68.

3. Regarding the charge of undervaluation the learned Advocate mentioned that the department had taken the invoice price of Thermit portion cleared for sale to the Railway and the invoice price for self use on day to day basis; that most of the comparative figures are for the small quantity sold at higher price; that if the highest of the price for bulk sale to Railway is taken as comparative price, no differential duty will be payable by them at all; that further they had incurred freight of Rs. 50/- per Thermit portion and if this transport charge is reduced from the price charged by them the price declared by them for self use will be comparable to the price at which Thermit portion was being sold to the Railways in bulk. Regarding charge of undervaluation in respect of Dry Moulds, the learned Counsel submitted that the Assistant commissioner had issued show cause notices demanding differential duty on similar grounds and the appellants had produced copies of the orders placed by Railways to third party; that the Assistant Commissioner ordered differential duty to be paid on the basis of normal price of Rs. 25/- which has been honoured by the appellants and as such there could not be any undervaluation. Finally, he submitted that the show cause notice was issued on 18-1-1999 and as such the entire demand is beyond the period of 6 months as specified in Section 11A(1) of the Central Excise Act; that in view of the classification list having been filed by them from time to time giving full description and the show cause notices issued by the jurisdictional Asstt. Commissioner and demand having been confirmed on taking the comparative price of Rs. 25/- in respect of Dry Moulds for the same period, the department cannot allege suppression or mis-declaration by them with intent to evade payment of duty, and accordingly the extended period of limitation is not invocable in the present matters.

4. Opposing the applications for waiver of pre-deposit, Shri A.K. Jain, learned DR, reiterated the findings of the Commissioner as contained in para l(iv) of his findings in which he had mentioned that where there is likelihood of products attracting another heading it is imperative on the part of the Assessee to make a clear mention of the substance/material out of which the product is made so as to manifest clearly and completely the material information, details and particulars pertinent to the product leading to the correct classification of the products as declared in the classification list/declaration; that in the list attached to the classification list/declaration filed by the appellants such indispensible information about substance/material out of which the products were made was not given. He also relied upon the decision of the Tribunal in the case of Saurashtra Chemicals v. Collector of Customs, Bombay, 1986 (23) E.L.T.283, wherein it was held that the machinery parts made of carbon would fall under Chapter 68 of the Customs Tariff and not under Heading 84.65. The learned DR mentioned that the entire period of demand in the present matters is not covered by the show cause notices issued by the Assistant Commissioner which is evident from the synopsis given by the learned Advocate at the time of hearing; that in para 6 of the synopsis it is clearly mentioned that overlapping period is only from 7-3-1995 to 31-3-1995 and not for the entire period involved in the present matters. The learned DR also mentioned that the appellants have number of contracts and there is nothing on record to show that the contracts which were before the Assistant Commissioner were the same contracts before the Commissioner while adjudicating the impugned order; that in the price list/declaration for the products used by the appellants themselves there was no cross-reference of the prices; that generally the contract prices are less than the normal price, and therefore, adopting the contract price for the purpose of leving the duty is correct and the Commissioner has rightly demanded the differential duty. The learned DR placed reliance on the decision in the case of Bihar Casting and Chemicals Ltd. v. CCE, Patna, 1998 (97) E.L.T. 335, wherein it was held that suppression of contract for delivery at the buyer's place is sufficient for invoking the larger period of limitation. He also relied upon the decision in the case Of Sanjay Steel Co. v. C.C., Ahmedabad, 1996 (84) E.L.T. 307, wherein it was held that non-disclosure of clauses of agreement will be enough to invoke longer period of limitation.

5. In reply learned Advocate mentioned that they were filing right from 1978 onwards the price list. He referred to pages 597 and 598 of their paper-book which contains a summary of the price list filed by them and date of approval by the Department. He also mentioned that they were filing the price list in Part-1 for the goods cleared for self use as per direction of the Department under letter C. No.20/Misc./Thermit/78/666, dated 15-6-1978. Regarding the charge that they had not disclosed the substance/material of which the products were manufactured, the learned Counsel drew our attention to their letter dated 27-3-1979 addressed to the Assistant Collector in which they had submitted details of the raw materials used and manufacturing process of each and every goods on which they had claimed exemption.

These goods include a number of Moulds and Crucibles. He finally submitted that along with classification list they were giving a list of Thermit Welding equipments and spares being manufactured by them.

6. We have considered the submissions of both the sides. The classification of their products can be decided only at the time of regular hearing after going in details into description of the various products and other details. However; we find that the applicants have made out a prima facie strong case on time limit as they have filed the classification list and price list from time to time declaring their products and the value and if there was any doubt in the minds of the Department regarding correct valuation the same could be enquired from the applicants. The finding of the Commissioner that in case is likely to attract another heading of the Tariff it is imperative on the part of the Assessee to make a clear mention of the substance or raw material applies more to the departmental officers who are approving classification list. It is imperative on their part in such situation to enquire substance/material out of which the product is made and other further details. We also find that the Assistant Commissioner has issued show cause notices determining the assessable value of the goods in question. Accordingly we stay the recovery of the duty and penalty unconditionally during the pendency of the appeals.