Orissa Construction Corporation Vs. Commissioner of Central Excise, - Court Judgment

Excerpt:
1. both the appeals are being disposed of by a common order, as they arise out of the same order of the commissioner vide which he has confirmed the demand of duty of rs. 82,11,690.00 against m/s. orissa construction corporation ltd. (here-in-after referred to as occl) and has imposed a personal penalty of an equivalent amount on them under the provisions of section 11ac along with the confirmation of interest under the provisions of section 11ab of the central excise act, 1944.penalty of rs. 85.00 lakh (rupees eighty-five lakh) has been imposed upon the other appellant firm, m/s. national thermal power corporation ltd. (here-in-after referred to as ntpc) under the provisions of rule 209a of central excise, 1944.2. m/s. occl were awarded with a contract by m/s. ntpc for laying cold water circulating duct system which included escavation of earth for digging trenches, plinths, laying foundations and underground structures in layers/concrete beds for fixing the cwcd liners, fabrication an laying of mild steel cw liners of different diameters in underground trench with concrete bed. the demand of duty was confirmed against m/s. occl by treating them as manufacturer of goods in question. the period involved in their present appeal is 1.1.92 to 31.3.95. the appellants have advanced arguments on the point of limitation inasmuch as the show cause notice was issued on 30.12.96. it is their contention that the entire facts were before the revenue and there was no suppression, mis-statement or any other contravention by them with an intention to evade payment of duty.3. arguing on the point of limitation, shri l. pangari, learned advocate for the appellant firm, m/s. occl, submits that in the year, 1993 itself, the assistant commissioner of central excise & customs, bhubaneswar sought clarification from them and made enquiry regarding the nature of job executed by the appellants. the said letter of the assistant commissioner dated 11.6.93 was duly replied to by the appellants vide their letter dated 16.6.93 when the copies of the contracts in the book form with ntpc were duly submitted. subsequently, on 20.8.93, they had written another letter to the assistant commissioner forwarding therewith certain documents and contending that m/s. occl were not required to pay any central excise duty on fabrication of c.w. liners. they contended that c.e. duty being leviable, is to be paid by m/s. ntpc. to the similar effect, there letter dated 2.8.93 (sic). m/s. occl had reiterated their stand that as per their work contract with m/s. ntpc, they were not required to pay excise duty on materials fabricated by them on m/s. ntpc premises and they should be exempted from payment of excise duty and the matter be taken up with ntpc authorities.3.1. in this background, a show cause notice was issued to m/s. ntpc on 9.2.94 alleging that they were the manufacturer of c.w. liners and were liable to observe the central excise formalities. reply was filed by m/s. ntpc and a personal hearing was conducted on 13.7.94. it seems that thereafter, the said show cause notice was not proceeded ahead and no order passed on the same.3.2. after a gap of about 2 1/2 years, another show cause notice dated 30.12.96 was issued to m/s. occl calling upon them to pay duty on the fabrication/manufacturing activity undertaken by them during the period 1.1.92 to 31.3.95. the said show cause notice also proposed imposition of personal penalty upon m/s. ntpc under the provisions of rule 209a of the central excise rules, 1944. the said show cause notice is the one which culminated into the impugned order passed by the commissioner of customs & central excise, bhubaneswar-i.3.3. from the sequence of events as narrated above, it has been strongly argued by the learned advocate appearing on behalf of the appellant firm, m/s. occl that the entire demand of duty is barred by limited of six months, as provided under section 11a of the act and resort to proviso to section 11a by the central excise authorities is neither justified nor warranted inasmuch as there was no suppression of fact and wilful misstatement by the appellants with intention to evade payment of duty. from the correspondence exchanged between m/s. occl and the department, it is evident that the department was not sure as to whether m/s. ntpc was to be considered as a manufacturer or m/s.occl. in these circumstances, the invocation of longer period cannot be upheld.4. shri b.s. tripathy, learned advocate for the appellant firm, m/s.ntpc submitted that for the similar reason, the penalty imposed upon them under the provision of rule 209a is unsustainable.5. we have considered the submissions made form both sides. during the course of arguments, departmental representative has placed on record a letter dated 13.6.2001 by the joint commissioner of customs and central excise, bhubaneswar admitting that the earlier show cause notice dated 9.2.94 was issued to m/s. ntpc considering them as the manufacturer of excisable goods; that the whole tenor of the show cause notice indicate that assistant commissioner, central excise, cuttack had wrongly issued the show cause notice, in a mistaken belief that m/.s ntpc was the manufacturer of excisable goods. it has been further mentioned in the said letter that the facts of the case clearly indicate that m/s. occl was the manufacturer of excisable goods and liable to pay central excise duty. the said letter further discloses that the earlier shoe cause notice issued by the assistant commissioner, ipso-facto, becomes infructuous and ceases to have any legal validity. it has been further informed that the show cause notice is still pending for adjudication.6. the contents of the above letter are indicative of the revenue's mind during the relevant period. it seems that the revenue was itself not sure about the manufacture of the goods i.e. whether m/s. occl or m/s. ntpc have to be held as a manufacturer (though it has been pleaded that laying down of cold water circulating duck system does not amount to manufacture inasmuch as the goods are permanently attached to earth). in any case, we find that there is a lot of correspondence between m/s. occl and the revenue reflecting upon the appellants stand right from the beginning that it is m/s. ntpc who have to pay the duty, in case the same is leviable. in the year, 1993 itself, the superintendent had directed m/s. occl to take out central excise registration and start observation with the central excise formalities.the appellants opposed the above direction by way of reply to the said letter of the superintendent indicating that the show cause notice was issued in 1994 to m/s. ntpc considering them as the manufacturer. thus it shows that the revenue itself was not sure about the legal position.in any case, the inevitable conclusion which emerges from the above facts is that the department was aware of the activities undertaken by both the appellants as far back as in the year, 1993. even then the revenue took about three years in issuing the present show cause notice to the appellants invoking longer period of limitation. in these circumstances, no suppression, fraud, misstatement or contravention of any provision of law with intent to evade payment of duty, can be attributed to m/s. occl who has been held to be manufacturer of the goods in question. as such without expressing any opinion on the merits of the case, we hold that the demand in question is barred by limitation. for the similar reason, imposition of penalties upon both the appellants, are not justified.7. as a result of our above discussion, we set aside the impugned order on the point of limitation and allow the appeals with consequential reliefs to the appellants.

Judgment:
1. Both the appeals are being disposed of by a common Order, as they arise out of the same Order of the Commissioner vide which he has confirmed the demand of duty of Rs. 82,11,690.00 against M/s. Orissa Construction Corporation Ltd. (here-in-after referred to as OCCL) and has imposed a personal penalty of an equivalent amount on them under the provisions of Section 11AC along with the confirmation of interest under the provisions of Section 11AB of the Central Excise Act, 1944.

Penalty of Rs. 85.00 lakh (Rupees eighty-five lakh) has been imposed upon the other appellant firm, M/s. National Thermal Power Corporation Ltd. (here-in-after referred to as NTPC) under the provisions of Rule 209A of Central Excise, 1944.

2. M/s. OCCL were awarded with a Contract by M/s. NTPC for laying Cold Water Circulating Duct System which included escavation of earth for digging trenches, plinths, laying foundations and underground structures in layers/concrete beds for fixing the CWCD liners, fabrication an laying of mild steel CW liners of different diameters in underground trench with concrete bed. The demand of duty was confirmed against M/s. OCCL by treating them as manufacturer of goods in question. the period involved in their present appeal is 1.1.92 to 31.3.95. The appellants have advanced arguments on the point of limitation inasmuch as the show cause notice was issued on 30.12.96. It is their contention that the entire facts were before the Revenue and there was no suppression, mis-statement or any other contravention by them with an intention to evade payment of duty.

3. Arguing on the point of limitation, Shri L. Pangari, learned Advocate for the appellant firm, M/s. OCCL, submits that in the year, 1993 itself, the Assistant Commissioner of Central Excise & Customs, Bhubaneswar sought clarification from them and made enquiry regarding the nature of job executed by the appellants. The said letter of the Assistant Commissioner dated 11.6.93 was duly replied to by the appellants vide their letter dated 16.6.93 when the copies of the Contracts in the book form with NTPC were duly submitted. Subsequently, on 20.8.93, they had written another letter to the Assistant Commissioner forwarding therewith certain documents and contending that M/s. OCCL were not required to pay any Central Excise duty on fabrication of C.W. Liners. They contended that C.E. duty being leviable, is to be paid by M/s. NTPC. To the similar effect, there letter dated 2.8.93 (SIC). M/s. OCCL had reiterated their stand that as per their Work Contract with M/s. NTPC, they were not required to pay excise duty on materials fabricated by them on M/s. NTPC premises and they should be exempted from payment of excise duty and the matter be taken up with NTPC authorities.

3.1. In this background, a show cause notice was issued to M/s. NTPC on 9.2.94 alleging that they were the manufacturer of C.W. Liners and were liable to observe the Central Excise formalities. Reply was filed by M/s. NTPC and a personal hearing was conducted on 13.7.94. It seems that thereafter, the said show cause notice was not proceeded ahead and no Order passed on the same.

3.2. After a gap of about 2 1/2 years, another show cause notice dated 30.12.96 was issued to M/s. OCCL calling upon them to pay duty on the fabrication/manufacturing activity undertaken by them during the period 1.1.92 to 31.3.95. The said show cause notice also proposed imposition of personal penalty upon M/s. NTPC under the provisions of Rule 209A of the Central Excise Rules, 1944. The said show cause notice is the one which culminated into the impugned Order passed by the Commissioner of Customs & Central Excise, Bhubaneswar-I.3.3. From the sequence of events as narrated above, it has been strongly argued by the learned Advocate appearing on behalf of the appellant firm, M/s. OCCL that the entire demand of duty is barred by limited of six months, as provided under Section 11A of the Act and resort to proviso to Section 11A by the Central Excise Authorities is neither justified nor warranted inasmuch as there was no suppression of fact and wilful misstatement by the appellants with intention to evade payment of duty. From the correspondence exchanged between M/s. OCCL and the Department, it is evident that the Department was not sure as to whether M/s. NTPC was to be considered as a manufacturer or M/s.

OCCL. In these circumstances, the invocation of longer period cannot be upheld.4. Shri B.S. Tripathy, learned Advocate for the appellant firm, M/s.

NTPC submitted that for the similar reason, the penalty imposed upon them under the provision of Rule 209A is unsustainable.

5. We have considered the submissions made form both sides. During the course of arguments, Departmental Representative has placed on record a letter dated 13.6.2001 by the Joint Commissioner of Customs and Central Excise, Bhubaneswar admitting that the earlier show cause notice dated 9.2.94 was issued to M/s. NTPC considering them as the manufacturer of excisable goods; that the whole tenor of the show cause notice indicate that Assistant Commissioner, Central Excise, Cuttack had wrongly issued the show cause notice, in a mistaken belief that M/.s NTPC was the manufacturer of excisable goods. It has been further mentioned in the said letter that the facts of the case clearly indicate that M/s. OcCL was the manufacturer of excisable goods and liable to pay Central Excise duty. The said letter further discloses that the earlier shoe cause notice issued by the Assistant Commissioner, ipso-facto, becomes infructuous and ceases to have any legal validity. It has been further informed that the show cause notice is still pending for adjudication.

6. The contents of the above letter are indicative of the Revenue's mind during the relevant period. It seems that the Revenue was itself not sure about the manufacture of the goods i.e. whether M/s. OCCL or M/s. NTPC have to be held as a manufacturer (though it has been pleaded that laying down of Cold Water Circulating Duck System does not amount to manufacture inasmuch as the goods are permanently attached to earth). In any case, we find that there is a lot of correspondence between M/s. OCCL and the Revenue reflecting upon the appellants stand right from the beginning that it is M/s. NTPC who have to pay the duty, in case the same is leviable. In the year, 1993 itself, the Superintendent had directed M/s. OCCL to take out Central Excise Registration and start observation with the Central Excise formalities.

The appellants opposed the above direction by way of reply to the said letter of the Superintendent indicating that the show cause notice was issued in 1994 to M/s. NTPC considering them as the manufacturer. Thus it shows that the Revenue itself was not sure about the legal position.

In any case, the inevitable conclusion which emerges from the above facts is that the Department was aware of the activities undertaken by both the appellants as far back as in the year, 1993. Even then the Revenue took about three years in issuing the present show cause notice to the appellants invoking longer period of limitation. In these circumstances, no suppression, fraud, misstatement or contravention of any provision of law with intent to evade payment of duty, can be attributed to M/s. OCCL who has been held to be manufacturer of the goods in question. As such without expressing any opinion on the merits of the case, we hold that the demand in question is barred by limitation. For the similar reason, imposition of penalties upon both the appellants, are not justified.

7. As a result of our above discussion, we set aside the impugned Order on the point of limitation and allow the appeals with consequential reliefs to the appellants.