| SooperKanoon Citation | sooperkanoon.com/40753 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT |
| Decided On | Nov-10-2005 |
| Judge | R Abichandani, J T T.K. |
| Appellant | Indian Telephone Indus. Ltd. |
| Respondent | Commissioner of C. Ex. and Cus. |
2. By the show cause notice dated 14-2-2000, the appellant ITI Ltd. were called upon to show cause as to why the assessment of RT-12 finalized, should not be reopened and the amount of Rs. 11,03,11,879/-, being the differential amount of duty payable on the value of clearances, realized as per commercial invoices for the period from March, 1995 to August, 1999 in respect of sale of OCB 283 Telephone Exchanges and the value of technical charges, should not be demanded from them under Rule 9(2) of the said rules read with the proviso to Section 11A(1) of the said Act; and why interest should not be demanded, as indicated in the show cause notice.
3. The appellant is manufacturer of Telecom Equipments having its registered corporate office at Bangalore. The appellant had manufacturing units at Bangalore, Mankapur, Raibarelly and Srinagar.
From 1994-95 onwards, the appellant company was manufacturing its improved version of Exchanges which were of different types such as Local Tax, and Tandem Exchanges. Various components of an OCB 283 Exchange were CORE, CSN, MDF, Interconnecting Equipments and DTS items like power plant, battery, inverter, etc.
3.1 On information being received to the effect that the appellant ITI was evading excise duty by undervaluation of goods supplied to DOT/MTNL by raising two sets of invoices for the same items, namely, excise invoices declaring lower value for payment of excise duty and commercial invoices claiming the actual realization, the Assistant Commissioner (Preventive), visited the Palakkad factory of thg appellant on 29-4-98. On the basis of the statements recorded and documents recovered, it appeared to the Revenue that the assessee had collected an excess amount of the excise duty, had wilfully misdeclared and suppressed actual facts about the valuation of goods cleared, manipulated books of accounts by making bogus entries, and had thereby convravgned the provisions of Sections 4, and HAD of the said Act, Rules 9(1), 49, 52A, 173-C, 173-F, 153-G and 226 of the said rules.
3.2. It was alleged that the assessee was evading excise duty by raising two sets of invoices, namely, consolidated commercial invoices which showed the actual price realized as sale proceeds in terms of the purchase Order awarded by the customers and the excise invoices declaring a lower price for payment of excise duty. According to the Revenue, the excise duty invoices were never sent to the customers DOT/MTNL and these showed the value lower than the actual amount realized under the commercial invoices which were given to the customers and shown in the sales realization register maintained by their sales Section. Moreover, the assessee was collecting additional consideration from its customers in the name of technical assistance charges, supervision charges, technical supervision charges, installation and commissioning charges, by raising installation bills and not paying any excise duty on them.
3.3 It was alleged in the show cause notice in paragraph 19 that, provisional assessment of the assessee was originally ordered by the Assistant Commissioner on 6-8-91 on the grounds that, Bureau of Industrial Cost and Pricing (BICP) Agreement had lapsed on 31-3-89 and no fresh agreement had been executed; classification of items - cable assembly, cords, wires, etc. was pending finalization, and, various documents like invoices, details of receipt of advances and interest accrued thereon were not submitted. The said provisional assessment Order directed the assessee to execute the requisite security bond for Rs. 10,00,000/- and furnish a bank guarantee for Rs. 2,50,000/-.
3.4 It was alleged in the show cause notice that the assessee had on 14-3-97, requested the Range Superintendent to finalize the clearances from 1-4-94 onwards since the excise duty was payable only on the invoices, as declared in the Budget of 1994-95 by the Government of India. It was also alleged that the Assistant Commissioner was requested by the noticee to clear the excisable goods beyond 11-7-97 without execution of the bank guarantee and bond till such time RT. 12 assessments were not finalized and they had even requested for return of the expired bank guarantee on the footing that the assessments up to October, 1997 haf been finalized. According to the stand taken by the Revenue, as was reflected in paragraph 34 of the show cause notice, the finalization of the assessment was carried out with the constructive participation of the assessee who accepted the finalization of provisional assessment for the period from September, 1989 to October, 1996 and also claimed refund of duty, which was granted on 16-12-98. It was then alleged in paragraph 36 of the show cause notice that, the assessee neither made any formal request to the jurisdictional Assistant Commissioner for provisional assessment for the period after October, 1996 nor followed other formalities required under Rule 9B and they had not declared on the face of the invoices that they were provisional, till 25-9-98. The assessee had revalidated their bank guarantee with retrospective effect from 11-7-97 only on 22-9-98 requesting for an Order from the Assistant Commissioner to allow them to continue provisional assessment from November, 1996 onwards.
According to the Revenue, the assessee was trying to confuse the concept of provisional assessment with the possibility of future revision in their awarded price, by describing the price as a provisional price. The "per line" awarded price as per the purchase Order which was collected by raising commercial invoices was required to be taken as the value for payment of duty, according to the Revenue.
It was alleged that the assessee had decided to discontinue the practice of provkskonal assessment from November, 1996 and their request made on 27-6-97 was only for allowing the clearances of their goods without bank guarantee and bond with no specific request for provisional assessment, as required by Rule 9B(1).
4. The assessee contested the show cause notice by their reply dated 16-6-2000 referring to the price specifications under the contract under which they were required to supply the goods and services. It was pointed out that the assessee was having manufacturing units located in different parts of the country, namely, Bangalore, Palakkad, Mankar, Rae Bareli and Naini, each having manufacturing facility in respect of different packages required for telephone exchanges and these were despatched to the destinations indicated by the DOT. It was further pointed out that the goods were supplied not only from the manufacturing units of the assessee, but also from other suppliers/vendors who despatched the supplies directly to the site of installation. According to the assessee, its palakkad unit cleared the goods on the basis of the specific contract awarded to the assessee, and the prices mentioned in the purchased Order were provisional and inclusive of all taxes and duties, freight, packing, forwarding, transit insurance etc. for"delivery at site. It was submitted that it took 18 to 24 months or even morg, on the part of the customer DOT to finalize the contract prices. Since the price indicated in the purchase Order was "cum-duty" price and was inclusive of freight and transit insurance, the expenses representing taxes, freight and transit insurance were required to be deducted for arriving at the assessable value. It was alqo stated that invoices at the time of clearances of the goods were purely provisional or tentative and were prepared on the basis of the prices quoted by them in the tender, which was submitted to the DOT. The provisional price offered in the P.O. was based on the average "per line" price of the tender and the provisional assessments could be finalized only after the price to be paid to the assessee was finalized by DOT. Moreover, at the time of finalizing the assessment, it would be necessary to deduct from the final price the expenses representing the taxes, freight and transit insurance, as per the settled law. It was pointed out while denying the allegations regarding evasion of excise duty that, the consolidated invoices issued by ITI, Palakkad unit did not represent the consideration or the sale value of the goods manufactured by them, but they also included the value of "bought out" items supplied direct to site as well as those goods which were manufactured by other units of the assessee and sent to the site of MTNL or DOT for the purpose of integration into a single exchange.
It was stated that unless the bill procedure introduced by the assessee's corporate headquarters was taken into consideration, it was not possible to appreciate whether there was undervaluation/short payment of duty, and that, it was only when the DOT communicated to them the final "per line" price that was payable to ITI Palakkad, the question of payment of differential duty or claiming refund could arise. It was specifically stated that the assessee had by their letter dated 7-8-95 and subsequent communications, made it amply clear to the department that the commercial invoices issued by them to the DOT, not only covered the goods supplied by their Palakkad unit, but also included costs of "bought-out" items directly sent to the site and the goods supplied by the other manufacturing units of the assessee directly to the site, and therefore, there was no question of any wilfull suppression of the facts from the department with any intention to evade payment of duty. As regards the collection of additional considerations in respect of technical assistance, supervision, installation and commissioning, it was submitted that these charges were in the nature of post-manufacturing activity and were not includible in the assessable value of goods cleared from the assessee's Palakkad factory.
4.1 It was also contended that in the process of quantification of duty, the department had taken into account only such cases where ITI, Palakkad had received additional amount based upon the collection bills raised by them, and omitted other transactions where the consolidated bills raised by them were much lower than the accounting bills raised at the time of clearing the impugned goods. It was submitted, that in respect of the transactions so omitted, they were entitled to a refund of Rs. 4,61,57,461/- on the ground that the amounts actually received by them on finalization of the price were lower than the amounts on which they had paid the excise duty at the time of the clearances. In their supplementary submissions made by their letter dated 19-6-2000, it was stated that the assessee had submitted data relating to the amounts received by them in respect of 645 exchanges and their realization during the period 1994-95 to 1999-2000, while the department had taken into consideration the data only in respect of 180 exchanges and omitted the other transactions where the consolidated bills were raised and the amount was much lower than the accounting bills at the time of clearing the goods. On the basis of the revised work-sheet, the differential duty payable was worked out at Rs. 5,99,82,211/- which was inclusive of the amounts claimed by way of refund under fifteen claims submitted to the department. The assessee requested for finalizing the provisional assessments in terms of Rule 9B(5) and for determining the duty finally payable by them taking into account the refund claims made by the assessees which were not honoured till then. In their further reply dated 3-10-2000, revised work-sheets were submitted in respect of the differential duty which according to them was payable to them, as pep which the amount was reduced to Rs. 5,61,99,693/-. It was submitted that the duty of Rs. 11,03,11,879/- proposed to be demanded in the show cause notice stood revised to Rs. 4,00,84,153/-, because of the price finalization and that they had already submitted evidence in their reply to the show cause notice and the additional submissions to prove that the assessments were provisional during the relevant period. It was submitted that whenever the prices were increased upward by the DOT due to finalization of the contractual price, they had been raising supplementary invoices and discharging the additional duty liability immediately and whenever the prices were decreased by the DOT at the time of finalization of the contractual price they had been issuing credit notes to their customers and refund claims were lodged with the department, but no refund was sanctioned.
5. On the basis of the material on record, and the contentions of both the sides, the Commissioner came to a finding that the Order dated 18-2-97 made by the Assistant Commissioner on finalization of RT. 12 assgssment (Exhibit XIII) was not a conditional Order and that the assessee by their letters dated 18-8-97 and 4-12-97 had accepted that the RT. 12s were finally assessed, and therefore, it was clear that RT.12 assessments were finalized. It was held that the contention of the assessee that the said Order of the Assistant Commissioner was conditional, and not final was, therefore, untenable. As regards the contention of the assessee that the assessment continued to be provisional even after October, 1996, it was held that from November, 1996 to 18-8-97, there was no request for any provisional assessment from the assessee. The assessee made a request for permitting them to clear the goods on provisional basis without renewal of the guarantee from 11-7-97 and the letter did not contain any specific reason for applying the provisions regarding provisional assessment. In paragraph 56 of the impugned order, the assessing authority relying on the fact that the Commissioner had declined the request for provisional assessment by his letter dated 21-9-2001 (which was issued much after the issuance of the show cause notkcg), hend that in view of the categorical rejection of the request of the request of the party for deemed provisional assessment from November, 1996 onwards, it was very clear that there was no provisional assessment during the period. The Commissioner concluded that the assessments up to October, 1996 were finalized and that thereafter, the assessee had discontinued the procedure contemplated by Rule 9B, and subsequently they had not given any request stating the grounds on which the procedure under Rule 9B was warranted. It was held that there could not be any provisional assessment without a bond or bank guarantee and that the bank guarantee earlier executed had expired and the assessee had requested for return thereof. It was held that there was no conditional assessment of RT. 12 up to October, 1996 and that these were finally assessed. The contention of the assessee that the assessments were required to be finalized under Rule 9B(5) and dues, if any, could thereupon be recovered under the law was, therefore, rejected.
5.1 On the question of wilful suppression of facts relating to actual realization against clearances through the commercial invoices as per the purchase orders and payment of duty of the lower value shown in the excise invoices, it was held in paragraph 60 of the Order that the assessable value was required to be arrived at on the basis of all inclusive "per line" price as per the commercial invoice, and duty was to be paid accordingly. It was observed that Palakkad factory of the assessee was manufacturing the most important part, namely, CORE of OCB exchanges and therefore, billing of OCB exchanges was centrally done at Palakkad unit, as authorized by the assessee's corporate office. In this connection, it was held that, they were raising two sets of invoices, namely, excise invoice at the time of clearances based on itemized prices shown, and commercial invoices subsequently prepared for realization of payment from the customers on "per line" price basis. In paragraph 61 of the impugned order, it was held that the assessable value had to be arrived at from the all inclusive price realized as per the commercial invoice which was a document for collection of amounts from the customers DOT/MTNL. Taking into account the difference between the commercial invoices and corresponding invoices, the Commissioner concluded that the assessee had consciously and deliberately manipulated the accounts by showing a portion of sale proceeds as advance and thereby evaded central excise duty on these amounts. In the context of assessee's showing a portion of actual realization as advance received from the customers, he rejected the submission of the assessee that the correct nomenclature of the account should have been "suspense account" and not advance received from the customers. In paragraph 64 of the order, it was held that the assessee had neither informed the department the fact that there existed a commercial invoice of a different value nor given copy of the consolidated invoice to the department. It was observed that the consolidated invoice means a sum total of the invoices, and that these instances were not of mere consolidation. He held that under the guise of issuance of consolidated commercial invoices, the assessee had issued invoices which were of different values. As regards installation and commissioning charges, the Commissioner held that the assessee had not brought out any facts and figures showing that installation and commissioning amounts were actually incurred for the purpose and that there was no evidence brought on record about incurring of actual expenses towards installation and commissioning charges. Summing up his conclusions, the Commissioner in paragraph 77 of the impugned Order held that, the assessee had resorted to raising two sets of invoices, i.e. one for excise purpose for payment of duty and the other (commercial invoice), indicating the actual amount to be realized from the customers; the amount of excise invoices were much lower than the amount of commercial invoice and the amount received from customers was the higher amount indicated in the commercial invoice and entered in the Bills Realization Register; that the difference worked out to Rs. 29.14 crores in respect of 24 cases; that the procedure of issuing two types of invoices with different amounts and realization of higher amounts from the customers and retaining duty portion was not made known to the department; that at the time of finalization of RT 12 up to October, 1996, this position was suppressed from the department resulting in short payment of duty and that this position was brought to light only because of investigations; that the internal correspondence revealed that the assessee was aware of the consequences (for two types of invoices) but in spite of that they had resorted to the course of undervaluation with intent to evade payment of duty and defraud the Government; and, that the persons involved in the day to day financial matters were aware of such procedure, but did not inform the department and did not rectify their mistake resulting in the losses to the exchequer.
6. The learned Counsel appearing for the appellants in all these appeals which arise from the same impugned order, contended that it was clear from the facts on record that there was no final assessment made as per Rule 9B(5) of the said rules at any point of time after the initial Order of provisional assessment came to be passed on 6-8-91. He submitted that there was specific communication sent to the department intimating to them in respect of the procedure of preparing consolidated commercial invoices which was adopted for convenience at the instance of their customers and that there was, therefore, no question of suppression of any material fact from the department. He submitted that the post importation expenses of installation, commissioning, etc. could not have been included and that the Commissioner had not taken into consideration the relevant terms of the contract, which was for supply of goods and service. He took us through the entire record including the correspondence which indicated, according to him, that the assessment continued to be provisional, notwithstanding the appellant, in one of its letters, having accepted the assessments up to October, 1996 as final. He submitted that the assessee was not aware that there was in fact no Order of final assessment which was required to be in tune with the provisions of Rule 9B(5), and, therefore, at that point of time the assessee could not have been blamed for having accepted the stand of the department reflected in the endorsements of the Superintendent that the assessments till October, 1996 were finalized by the Assistant Commissioner on 10-3-1997, particularly when the RT. 12s were pending since ten years. The learned Counsel submitted that the inference drawn by the Commissioner on the basis of that letter dated 8-8-1997 was not correct, and the proper officer was required in law to make an Order of making the required adjustments as contemplated by Rule 9B(5) at the time of finalizing the assessment. It was submitted that, the direction contained in the Assistant Commissioner's letter dated 10-3-97, a copy of which was produced on behalf of the Revenue during the hearing of these appeals, did not indicate that the assessments were finalized. He submitted that the finalization could have been made only till the year 1993-94 being the years for which the final price lists were provided to the department and that these instructions given by the Assistant Commissioner on 10-3-97 were in the context of those price lists and the assessments after 1994-95 were still to be finalized even according to that order. He argued that the endorsement which was made on the RT.12 registers by the Superintendent referred to the condition on which the finalization was made. On this aspect, he also submitted that the Order finalizing the provisional assessment was required to be made by the same officer, namely the Assistant Commissioner, who had made the initial order, and the Superintendent could not have made any Order for finalizing the assessment under Rule 9B(5) of the said rules. He further submitted that there was no need to make any formal request for provisional assessment after the amendment made in Rule 9B(5) of the said rules on 20-11-96. He contended that after the said date, since the price lists were not finalized, the appellant was entitled to resort to provisional clearances subject to the directions of the Assistant Commissioner and that such provisional clearances continued until the rejection Order came to be made by the Commissioner on 21-9-2001. Till that date, since admittedly, there was no direction from the Assistant Commissioner, the assessment continued to be provisional. It was submitted that the Commissioner could not have relied on the said rejection order, which was issued after the issuance of the show cause notice, and since on the date of the show cause notice that Order was not in existence, the assessment continued to be provisional under Rule 9B of the said rules even after its amendment on 20-11-96. It was also submitted that, the Commissioner could not have drawn any adverse inference from the fact that the guarantee had expired for some period especially when it was validated retrospectively and the guarantee and bond both remained valid all throughout. It was submitted that in the quantification done in the show cause notice, post clearance bills in respect of installation, erection, commissioning charges, etc. were included which was not permissible under the law. The learned Counsel reiterated the contentions which were raised before the Commissioner and in the reply to the show cause notice.
6.1 In support of his contentions, the learned Counsel relied on the following decisions: (A) The decision of the Larger Bench of this Tribunal in Rajeev Mardia v. Commissioner of Central Excise, Indore reported in 2001 (43) RLT 533 (CEGAT-LB), was cited for the proposition that assessments made pending approval of classification list are deemed to be provisional even if the procedure under Rule 9B was not followed. The Tribunal in paragraph 4 of its judgment referred to the decision of the Supreme Court in Samrat International (P) Ltd. v. Collector of Central Excise Supreme Court, in the context of a case where an assessee was clearing the goods by determining the duty himself and debiting the amount of duty in his personal account while the classification list was pending approval by the concerned authority without following the procedure contemplated under Rule 9B, held that the amount of duty paid by the assessee was obviously provisional and subject to the result of the final approval by the officer concerned. The Tribunal applying the said decision held that payment of duty under the Act can be treated as provisional under two situations. First situation is where payment is made in strict compliance with the condition in Rule 9B of the rules and the second one is the payment effected during finalization of classification list or price list.
Such payment during the interregnum will also be provisional even if Rule 9B was not followed. In paragraph 6 of the judgment, it was held that the decision of the Supreme Court in Samrat International (P) Ltd. envisaged that payment of duty on provisional basis pending decision of classification list or price list would be treated as provisional even if the procedure contemplated by Rule 9B was not followed.
(B) The decision of the Tribunal in Commissioner Central Excise, BBSR v. India Flogates Ltd. reported in 2000 (40) RLT 303 (CEGAT), was cited for the proposition that Section 11B of the Act would not be applicable to credit or adjustment of excess determinations paid as permissible under Rule 173-1 and there was no time limit for completion of assessment fixed under Rule 173-1. It was held that when assessments were provisional under Rule 173-B, 173-C read with Rule 9B or deemed to be so under Rule 173CC, the time limit prescribed under Section 11B would arise only from the date of payment of duty i.e. the finalization of assessment. However, the position would alter substantially after amendment made in Rule 173F w.e.f. 20-11-96 which brought the words "he shall himself assess the duty" for the words "he himself determine his liability for the duty" vide the Notification No. 36/96 which amended Rules 173-1 and 9B also.ITC Ltd. v. Collector of Central Excise, Patna proposition that finalization of provisional assessment was to be done in respect of all issues and not in piecemeal.
(D) The decision of the Tribunal in Indo Flogates Ltd. v. Commissioner of Central Excise, Bhubaneswar reported in 1997 (20) RLT 308, was cited for the proposition that the provisional assessments under Rule 9B(5) were required to be finalized under Rule 9B(5) and at that time the department was bound to give effect to that provision and if any excess payment was made by the assessee the same was liable to be refunded without the assessee being required to make any claim to that effect. It was held in paragraph 7 of the judgment that rejection of the refund claim under the provisions of Section 11B without adverting to the provisions of Rule 9B resulted in nullifying the provisions of Rule 9B, which specifically dealt with the situation arising out of the provisional assessment. It was held that Section 11B was a general Section dealing with refund claims while Rule 9B(5) was provided for a specific situation with the consequences of such situation.
7. The learned authorized representative for the department took us through the relevant record, and supporting the reasoning and findings of the Commissioner in the impugned order, he submitted that the appellant was estopped from contending that there was no final assessment till October, 1996. He submitted that the communication addressed by the assessee clearly showed that the provisional assessment had become final and was treated so, even by the assessee.
He contended that the provisional assessment, as was ordered in 1991, became final pursuant to the directions issued by the Assistant Commissioner on 10-3-97 and the fact that the assessment had become final was evident from the endorsements of the Superintendent made in RT. 12, which were returned to the assessee who acknowledged them in its communication dated 18-8-97. It was submitted that the assessment Order made in 1991 was made at the assessee's request, as they were not sure about the final prices that the DOT would fix, and it was at the instance of the assessee as reflected from their letters dated 30-3-97 and 14-3-97 that, the assessment came to be finalized up to October, 1996 on the basis of the excise invoices price reflected in RT. 12. It was submitted that the fact that a formal Order of the nature contemplated by Rule 9B(5) was not made, was merely a technical lapse, because even if such final Order were to be issued, the result would have remained the same, namely, the acceptance of the invoice prices, as mentioned in RT. 12 (returns) by the assessee. It was also submitted that an Order of assessment as endorsed on RT. 12 could have been made by the Superintendent, under Rule 173-C(6) of the said rules. He further argued that the assessee allowed the guarantee to expire and asked the authority to return it by treating the provisional assessment as having become final till October, 1996. He pointed out that the amendment in Rule 9B was effected only from 20-11-96 and that the prior provision was different, under which the assessee could not have claimed any provisional clearance without specific Order allowing the same. The learned authorized representative for the department further contended that though the consolidated commercial invoices contained some items cleared from other factories of the assessee, the facts were not substantiated by the assessee during the proceedings before the Commissioner. He, therefore, submitted that the Commissioner was fully justified in relying on the total value reflected in the consolidated commercial invoices and in holding that the assessee had suppressed the material facts of having realized higher value than the value that was reflected in the invoice prices.
7.1 The learned authorized representative for the department placed reliance on the following decisions in support of his submissions:E.S. Patanwala Indl. Estate v. Collector of Central Excise cited to point out that the assessments were treated as final. From paragraph 5 of the judgment, it will be noticed from this decision, that the action was taken under Rule 10, that is to say, upon the basis that the assessments were final assessments. The Supreme Court set aside the Order of the Tribunal as it proceeded only upon the basis that the assessments could only be a provisional, when the orders of the authorities below suggested that the assessments were final.Voltas Ltd. v. Commissioner of Central Excise, Nagpur reported in 2002 (149) E.L.T. 1047, was referred in Order to point out that in paragraph 5 of the judgment the Tribunal had referring to the earlier decision in Jay Chemical Industries v. Collector , held that (C) The decision of the Tribunal in Collector of Central Excise, Kanpur v. Hind Lamps Ltd. was cited to point out that the Assistant Collector can direct the Superintendent to finalize assessments which can be done by the Superintendent under Rule 173-1 of the rules.AGT Electronics Ltd. v. Commissioner of Central Excise, Coimbatore reported in 2001 (138) E.L.T. 90, was cited for the proposition that installation and training charges were not deductible from the assessable value when no evidence was produced to prove that such was actually rendered to the customers. These words reflected in the catch note in context of paragraph 6 of the Order do not appear in that paragraph. It appears that the catch note is formulated on the basis of the Tribunal not finding any infirmity in the Commissioner's Order in which the Commissioner had held that the installation/training charges were all includible in the assessable value, because, in the absence of evidence the contention of the assessee that they had actually provided services to the customers, could not be accepted.
8. The main controversy centres around the question whether after the passing of the provisional assessment Order on 6-8-91, the assessments continued to be provisional even on the date of issuance of the show cause notice, and, therefore, the show cause notice was pre-mature.
There is no dispute about the fact that the provisional assessment Order was made on 6-8-91 by the Assistant Commissioner in response to the request made by the assessee, for provisional assessment under Rule 9B. It was noted in paragraph 2 of that Order that the assessee had been filing price lists in part II for supply of materials to DOT on the basis of BICP agreement, which had lapsed on 31-3-89 and that no fresh agreement was produced, as a result of which provisional assessments were ordered in respect of such price lists. It was further stated that classification of the items cables, cable assembly, cords, wires etc. manufactured by the assessee was also pending finalization.
The fact that the assessments were also pending on account of the non-submission of various documents, like, invoices, details of receipt of advances and interest accrued thereon, by the assessee was also mentioned therein. In this background, the Assistant Collector, in Order to safeguard the revenue's interest and also to prevent the RT.12 assessments being delayed indefinitely, ordered in terms of Rule 173-C(6) of the Central Excise Rules that all past and future assessments of RT. 12s of the assessee shall be done provisionally under Rule 9B of the Central Excise Rules, 1944, unless otherwise ordered. It was directed that the value to be adopted for Rule 9B procedure under each price list shall be the value claimed for approval or as ordered otherwise thereafter. It was also stated that B-16 (General Security) bond for Rs. 10,00,000/- with a bank guarantee of Rs. 2,50,000/- executed by the assessee Palghat will cover the said assessments. Under the General Security Bond, the assessee had undertaken to pay up all the dues demandable on the goods, as may be ascertained after final assessment by the proper officer. Admittedly, the bond continued all throughout including the disputed period and even the bank guarantee issued on 11-7-89 was extended from time to time at least up to 10-7-2004 as per the copies which are placed on record.
9. Since there is a dispute over the question whether the provisional assessment so ordered came to be finalized till October, 1996 as asserted by the Revenue, we would now refer to the orders on the basis of which the Revenue has asserted that the provisional assessments came to be finalized under Rule 9B(5) of the said rules, and as has been held in the impugned order. In this context, we may first refer to the Order passed on 18-2-97 made by the Assistant Commissioner of Central Excise. It was stated in that Order that all the provisional assessment orders, which had been issued from his office in respect of the assessee may be finalized subject to the condition that they (assessee) should pay the consequential differential duty along with interest thereon irrespective of the statutory time limit prescribed under Section 11A of the Central Excise Act, 1944, and any other law for the time being in force without waiting for a notice from the department.
Compliance report was required to be furnished within a week of that order. It is evident from the wordings of the said Order that it was not a final Order under Rule 9B, and was only a direction for finalizing the provisional assessment orders and seeking compliance report. Pursuant to this direction, it appears that the Superintendent wrote to the assessee the letter dated 12-3-97 requiring the documents/details regarding various issues enumerated therein to be furnished by the assessee "for finalization of provisional assessment".
Final price lists for each period from 1989 with invoices, gate passes and PLA were required to be made available immediately and particulars of the depot sales figures with corresponding clearance particulars, where the goods were removed from the factory, were required to be furnished. Details of octroi deductions claimed were sought year-wise.
Details of deductions on account of transportation and insurance with particulars of actuals paid were also sought and particulars of items, namely, cables, cable-assembly, cords and wires along with value for the years 1989-90 and 1990-91 were required to be furnished. The assessee was requested to make available all these documents and details expeditiously, and required to supply final price lists, so that the department could proceed with their work meaningfully. It is at once, it is clear from this communication that the Order dated 18-2-87, was not a final assessment order, as contemplated by Rule 9B(5), and the Assistant Commissioner had only given a direction that the provisional assessment orders may be finalized subject to the condition mentioned therein.
9.1 During the course of the arguments, it was sought to be submitted that the endorsement which appeared on the RT-12s which were returned to the assessee reflected final assessments. We, therefore, would refer to one such endorsement 5-11-96 below the RT-12 for October, 1996 which reads as under: ...as per AC's Letter C. No. 8/85/1777/130/91-VCC 6-8-91 provisional assessments finalized as per AC's Letter C.NO.V/P5/17/63/9/VCC dated 10-3-97 subject to the condition agreed by M/s. ITI vide their letter MS/210/Assessment dated 14-3-97.
9.2 Since the above endorsement was made on the footing that the assessments were finalized as per AC's letter dated 10-3-97, we had called for a copy of that letter which was placed on record by the department during the proceedings with a copy duly supplied to the other side. We will, therefore, examine whether that letter dated 10-3-97, was a final assessment Order made by the Assistant Commissioner in the context of the provisional assessment Order dated 6-8-91, and if so, for what period. In the said letter dated 10-3-97, the subject matter was mentioned as, final approval of price lists for the period from 1-889 to 31-3-94 in respect of M/s. ITT Ltd. (i.e. the assessee). The Order was passed with reference to Superintendent's Letter No. OC/318/97, dated 1-3-97 submitting the final price lists of M/s. ITI Ltd. for the period from August, 1981 to March, 1994. It was stated in this Order that all the price lists submitted by the said letter dated 1-3-97 i.e. final price lists for the period from August, 89 to March, 94 were approved subject to the condition that the assessee should pay the consequential differential duty with interest, if any, as per the provisions of the said Act and the rules. It was further stated that the provisional assessment pending for the period from "August, 89 to March, 94", and "April, 94 to till date", may be finalized subject to the said condition. It will be seen from the said Order dated 10-3-1997 of the Assistant Commissioner that final price lists for the period August, 89 to March, 94 were approved subject to the condition mentioned therein and there was a direction that the provisional assessments may be finalized for the pending periods. This Order was clearly not a final assessment Order made under Rule 9B(5), as has been sought to be assumed by the concerned authorities. The endorsements made below RT 12s which were returned to the assessee though purporting to have been passed on the basis of the said "final assessment order" dated 10-3-97 made by the Assistant Commissioner, cannot be construed as final assessment order, as contemplated by Rule 9B(5) of the said rules. We may here, again note that on 12-3-97 the Superintendent had sent a communication to the assessee stating that the documents/details regarding various issues were required to be furnished by the assessee for finalization of provisional assessments.
We have already referred to the particulars which were sought for in that communication. Therefore, there was no question of the provisional assessment till October, 1996 having been finalized pursuant to the Order of the Assistant Commissioner dated 10-3-97 in which only the final price lists which were submitted for the period from August, 89 till 31-3-94 were approved. Therefore, the entire basis on which the department had proceeded and the Commissioner has passed the impugned order, namely, that the provisional assessments were finalized till October, 1996, did not exist and it becomes obvious that the authorities have acted on an erroneous footing, without even verifying the nature of the Order made by the Assistant Commissioner or keeping in view the requirement of Rule 9B(5) of the said rules.
9.3 Much emphasis was laid on behalf of the Revenue on the letter of the assessee sent on 18-8-97 to the Assistant Commissioner thanking him for forwarding "finally assessed RT. 12", through the Superintendent of Central Excise on 31-7-97. Under that letter, it was stated that RT.12s up to October, 1996 were received. It was also stated therein that, as requested by their earlier letter dated 27-6-97, the assessee may be permitted to clear the goods on provisional basis without the renewal of the guarantee from 11-7-97 onwards. It is obvious that this letter was written on the footing that the endorsement made by the Superintendent that the final assessment orders were made, was true. As noticed above, this endorsement was wholly misconceived, because, there was no Order for final assessment in fact passed in accordance with Rule 9B(5) of the said rules by the Assistant Commissioner, and the Order dated 10-3-97, which according to the Superintendent was an Order of final assessment was, in fact, only an Order approving the final price lists for a limited period from August, 89 to March, 94 and there was a direction given thereunder that steps should be taken to finalize the assessments for the period till March, 1994 and for the subsequent period.
The letter of the Superintendent written on 12-3-97 to the assessee was clearly meant to collect the requisite data from the assessee for the purpose of finalization of the provisional assessments. The final price lists of subsequent period were also sought, because the earlier final price lists were submitted only till March, 1994. Therefore, there was no question of any final assessment Order having been issued on 10-3-97, when the Superintendent was still trying to collect the relevant material for the purpose of reporting to the Assistant Commissioner in the process of making of an Order of final assessment, as contemplated by Rule 9B(5) of the said rules.
9.4 In this context, we may also refer to the letters written by the assessee to the Revenue authorities, which would indicate that finalization of assessment after 1994-95, was still pending. In the letter dated 13-3-97, on the issue of price escalation, it was stated that the Department of Telecom had finalized the prices up to 1993-94 only and that supplementary escalation claim bills were raised wherever applicable as per the agreement up to 1993-94, and the necessary excise duty had been paid then and there and reflected in the RT. 12 returns of the relevant months. It was stated that the final price lists up to 1993-94 with necessary certification by the Chartered Accountant was being submitted separately. In the last paragraph of this letter the assessee wrote to the Superintendent that the pending assessments may be finalized early, and that the assessee undertook to pay duty difference, if any, then and there as prescribed by the Act and Rules.
The assessee also wrote a letter dated 14-3-97 to the Superintendent for finalizing RT. 12 assessment from 1994-95 onwards mentioning therein that during the Budget 1994-95, the Government of India had made it clear that excise duty was payable only on the invoice value, and accordingly they were paying the excise duty on all clearances from 1-4-94 onwards in spite of the fact that the final price of the items was yet to be finalized by the DOT. The assessee requested the authorities to approve the clearances from 1-4-94 till the date of the letter finally based on the invoice value, since according to them they had correctly discharged the duty liability. They, however, undertook to pay the difference, if any, on receipt of the escalation prices. The assessee requested that, the final assessment from 1994-95 onwards may be completed. In view of this correspondence between the Superintendent and the assessee, there was no valid basis for treating all the provisional assessments till October, 1996, as having been finalized by the Order made on 10-3-97, as was erroneously assumed in the endorsements made by the Superintendent in the RT. 12s which were returned to the assessee. The letter of the assessee dated 18-8-97 expressing gratitude for "finally assessed RT. 12" was, as noted above, in the belief that there might have been some final assessment orders in view of the endorsement made by the Superintendent and the Revenue cannot rely on such communication which was addressed on the basis of erroneous endorsements on the returns which gave a wrong indication that the provisional assessments were finalized by the Assistant Commissioner under his Order dated 10-3-97. Even apart from this, the authorities cannot abdicate their function of making orders in accordance with the rules merely by referring to such communication when, in fact, no Order under Rule 9B(5) was made.
10. It was submitted by the learned authorized representative for the department that not makine mf a formal Order under Rule 9B(5) should be considered only a minor lapqe whiah gmt cured by maiilg assessment under Rule 173-1 by the Superintendent, as reflected from the endorsement. This leads us to a aonskdgrction of the provisions of Rule 9B(5). The said Sub-rule (5) of rule 9B is the same before and after the amendment which was made on 20-11-96 and is reproduced hereunder: 9B-Provisional assessment to duty- (1) Notwithstanding anything contained in these rules, - (5) When the duty leviable on the goods is assessed finally in accordance with the provisions of these rules, the duty provisionally assessed shall be adjusted against the duty finally assessed, and if the duty provisionally assessed falls short of, or is in excess of the duty finally assessed, the assessee shall pay the deficiency or be entitled to refund, as the case may be.
The scheme of Rule 9B indicates that the provisional assessment to duty would ultimately be finalized in accordance with Sub-rule (5) of Rule 9B. Duty leviable on the goods is required be finalized in accordance with the provisions od the pules, and when it is so finalized, the provisionally assessed duty is required to be adjusted against the duty finally assessed. The expression "shall be adjusted against the duty finally assessed" is a mandate to the concerned authority who makes the final assessment. There is an obligation on the assessee to pay the deficiency or he may become entitled to a refund, as the case may be, if the duty provisionally assessed falls short or is in excess of the duty finally assessed.
By its very nature, the provision docs not admit of a situation where the concerned authority may treat an assessment to be final without resorting to the adjustments of the duty provisionally assessed against the duty finally assessed, as required to be done by Rule 9B(5). In the present case since the finalized price lists were not submitted for the years 1994-95 onwards, and the Superintendent had called upon the assessee to submit them along with other details and information, the position that obtained during the currency of the provisional assessment Order dated 6-8-91, remained the same, and no order, as contemplated by Rule 9B(5), of final assessment and adjustment of provisional duty indicating excess or short fall was made by the proper officer. Any Order of final assessment contemplated by Rule 9B(5) will define consequences, raising obligations either on the part of the Revenue or on the assessee, as the case may be, to deal with the deficiencies in the provisionally assessed and the finally assessed duty. Therefore, in absence of a final assessment Order being made in accordance with Rule 9B(5), it cannot be said that there was only a minor lapse which got cured by the Superintendent making an Order under Rule 173-I. The proper authority, who admittedly was the Assistant Commissioner, alone could have made the final Order and there was no question of the Superintendent directly making an Order under Rule 9B(5) without any Order from the Assistant Commissioner making the final assessment order, when as the proper officer, the Assistant Commissioner had passed the provisional assessment Order on 6-8-91, which is also referred to in the endorsement made by the Superintendent in the RT-12 Returns.
10.1 In view of the above clear statutory position, no estoppel can be pleaded against the provisions requiring final assessment Order to be made in accordance with Rule 9B(5) on the basis of the fact that the revived guarantee had at one point of time expired, or on the ground that the assessee had expressed gratitude for finalizing the assessments in respect of RT-12s which were sent back to him relying upon the erroneous endorsements of the Superintendent.
Mistaken concession of an assessee cannot substitute a lapse in exercise of statutory duties which are mandatory in nature.
11. It was submitted that there was an amendment made in Rule 9B(1) with effect from 20-11-96 and that the earlier corresponding provision required prior permission for provisional assessment and, therefore, without following the procedure again, the assessee could not have claimed the benefit of the provisional assessment under Rule 9B.11.1 Rule 9B(1), as it existed prior to amendment on 20-11-96, read as under : 9B. Provisional assessment to duty,- (1) Notwithstanding anything contained in these rules,- (a) where the proper officer is satisfied that an assessee is unable to produce any document or furnish any information necessary for the assessment of duty on any excisable goods; or (b) where the proper officer deems it necessary to subject the excisable goods to any chemical or any other test for the purpose of assessment of duty thereon; or (c) where an assessee has produced all the necessary documents and furnished full information for the assessment of duty, but the proper officer deems it necessary to make further enquiry (including the inquiry to satisfy himself about the due observance of the conditions imposed in respect of the goods after their removal) for assessing the duty.
The proper officer may, either on a written request made by the assessee or on his own accord, direct that the duty leviable on such goods shall, pending the production such documents or furnishing of such information or completion of such test or inquiry, be assessed provisionally at such rate or such value (which may not necessarily be the rate or price declared by the assessee) as may be indicated by him, if such assessee executes a bond in the proper form with such surety or sufficient security in such amount, or under such conditions as the proper officer deems fit, binding himself for payment of the difference between the amount of duty as provisionally assessed and as finally assessed.
11.2 Rule 9B(1) as it operated after the amendment made on 20-11-96, reads as under: 9B. Provisional assessment to duty.-(l) Notwithstanding anything contained in these rules,- (a) where the assessee is unable to determine the value of excisable goods in terms of Section 4 of the Act on account of non-availability of any document or any information; or (b) where the assessee is unable to determine the correct classification of the goods while filing the declaration under Rule 173B; the said assessee may request the proper officer in writing giving the reasons for provisional assessment to duty, and the proper officer may direct after such inquiry as he deems fit, that the duty leviable on such goods shall be assessed provisionally at such rate or such value (which may not necessarily be the rate or price declared by the assessee) as may be indicated by him, if such assessee executes a bond in the proper form with such surety or sufficient security in such amount, or under such conditions as the proper officer deems fit, binding himself for payment of difference between the amount of duty as provisionally assessed and as finally assessed.
Provided that all clearances in respect of excisable goods covered under such request by the assessee; submitted with the proper officer under the dated acknowledgement shall be deemed to be cleared as provisionally assessed to duty at such rate or at such value as declared by the assessee, till the date when the direction of the proper officer is issued and communicated to the assessee.
Provided further that the proper officer where he is satisfied that the self assessment made by the assessee is not in order, he may direct him to resort to provisional assessment and on receipt of such directions the assessee shall comply with such directions.
11.3 It will be noticed from the pre-amended rule that the proper officer, on a request made by the assessee or suo motu, was empowered to direct that the duty leviable on the goods shall, pending the production of the documents or furnishing of the information or completion of the test or enquiry, as contemplated in the rule, be assessed provisionally at such rate or such value, as may be indicated by him, if the assessee executed a bond in the prescribed form with such surety or sufficient security in such amount, or under such conditions as the proper officer deemed fit, binding himself for payment of the difference between the amount of duty as provisionally assessed and as finally assessed.
11.4 The post amendment provision of Rule 9B(1) operated, where the assessee was unable to determine the value of excisable goods on account of nonavailability of any document, or any information, or where he was unable to determine the correct classification. The assessee was required to make request to the proper officer giving reasons for provisional assessment to duty, and the proper officer was empowered to direct after such enquiry as he deemed fit that the duty leviable on such goods shall be assessed provisionally at such rate, or such value, as may be indicated by him, if such assessee executed the bond with surety or sufficient security. This, however, was subjected to the proviso (which was absent in the pre-amended rule), as per which a deeming fiction was created for all clearances in respect of excisable goods covered under the request by the assessee submitted with the proper officer with a due acknowledgment, that they shall be deemed to be cleared as provisionally assessed to duty, till the date when the direction was issued by the proper officer and communicated to the assessee.
11.5 The pre-amended rule operated till 20-11-96 when the amended provision came into force. As held by us hereinabove, there was no final assessment made under Rule 9B(5) by the Order dated 10-3-97, and the assessments under the Order dated 6-8-91, continued to be provisional for the years 1994-95 onwards for which details were sought from the assessee by the Superintendent by his letter dated 12-3-97.
The assessee had also requested provisional assessments to be made for the period subsequent to 1993-94. When the amended provision came into force, since the bond and guarantee were already operative and no final assessments were made under Rule 9B(5) for the period in question, the assessee was entitled to get the benefit of the said deeming provision.
The assessee had informed the Assistant Commissioner vide letter dated 4-12-97 that under self-assessment procedure from November, 96 onwards, they were clearing the goods as per the provisional prices fixed by their major customers and that as and when prices were finalized they raised supplementary claim bills and paid the difference excise duty or claimed refund of excess excise duty paid. In their communication dated 21-9-98, the Assistant Commissioner was informed that the assessee would extend the bank guarantee from 11-7-97 onwards, being the date on which it had expired. Admittedly, the bank guarantee was so revived and both, the bond and the bank guarantee were continued all throughout.
The Assistant Commissioner did not send any communication rejecting the request of the assessee till 21-9-2001, as noted in paragraph 56 of the impugned order. In other words, there was no contrary direction issued on the assessee till 21-9-2001, so as to deny it the benefit of the first proviso to Rule 9B(1) under which clearances of the excisable goods covered under the request by the assessee were to be deemed to be cleared as provisionally assessed to duty. In this view of the matter, as on the date of issuance of the show cause notice dated 14-2-2000 all the clearances made by the assessee were deemed to have been cleared as provisionally assessed to duty, since at no point of time prior to 21-9-2001 either was there a contrary direction, as contemplated under Rule 9B(1) first proviso, or was there any final assessment Order made under Rule 9B(5) of the said rules. The show cause notice was, therefore, clearly pre-mature and the findings reached to the contrary by the Commissioner in the impugned order, cannot be accepted.
12. The Commissioner has proceeded on the footing that the assessee did not disclose that it was collecting higher amounts as per the consolidated commercial invoices reflecting the price of the purchase Order and had suppressed the material facts from the department manipulating their accounts despite being aware by their internal advice that the procedure adopted by them could be objected to by the department.
12.1 It would appear from the material on record, that the assumption that the assessee suppressed the material fact of collection of price under the consolidated commercial invoices was totally unwarranted. The record reveals clear intimations given by the assessee to the department about the raising of the consolidated commercial invoices at the instance of their consumers MTNL/DOT for the sake of convenience-, while preparing the excise invoices also, at the time of removal. In this regard, we may first refer to the letter dated 7-8-95, which was written by the assessee to the Assistant Commissioner specially in the context of issuance of commercial invoices regarding the new product, namely OCN 283 Exchange. The assessee informed the Assistant Commissioner that they were issuing invoices in the prescribed form under Rule 52A of the rules in respect of all the parts of Telephone Exchanges manufactured by them directly from their factory at Kanjikode. Invoices were also raised by them for the "bought out" items supplied direct to site. It was then stated that in the assessee's recently introduced product, i.e. "OCB 283 Exchange" there were some parts which were supplied direct to the site by the other units of the assessee. The concerned units while supplying the Telephone Exchange parts were observing all the excise formalities while clearing the goods. It was then specifically mentioned that as their customers, namely, DOT and MTNL, were requiring single invoice for making payment, they had to raise a consolidated commercial invoice/bill to all supplies made by them as well as direct to site items and other items supplied by their other units. It was informed that, the assessee would be raising a set of commercial invoices for all OCB Exchanges with SI.Nos. beginning from 5900001 to 5910000. Thus, the information conveyed was very specific to the effect that the consolidated commercial invoices were being raised only for the convenience of the said customers and that they included supplies direct to the site as well as items supplied by the other units. It is also evident from the inter office note dated 8-6-95, a copy of which is on record, that the OCB supplies consisted of supplies from Palakkad, and "direct to site" supplies from various manufacturers to site, based on their POs of respective manufacturers, and that some more equipments were supplied from Bangalore and Mankapur units of the assessee. It was stated that their corporate office had decided that Palakkad Unit had to claim realization on behalf of all units by raising a commercial invoice based on "per line" cost basis. It was proposed to number these commercial invoices in separate serial Nos. The office note reflects the concern of the assessee to observe all the formalities of Central Excise. By letter dated 16-10-95, the assessee informed the Assistant Commissioner in continuation of their communication dated 7-8-95, that for the purpose of consolidated invoices they were now to use serial Nos. 5920001 to 5921000 instead of the serial Nos. intimated earlier.
In their internal communication of March 20,1998, which is on record, there was a reference to the fact that the despatches of the CSN/OCB were done by item-wise excise invoicing at a provisional price. The billing to the customer was, however, not for the items as despatched against individual invoices, but was for the total exchange as per the purchase Order or Bill of Material (BOM). It was stated that in some cases bills were of average price per line and in some cases itemized price of the priced purchase order, and that the despatches had taken place from three units. Therefore, it was not possible that when making bill to the customer the notional amount of excise could exactly be matched with the actual amount paid by units and put together. There was, therefore, a consistent practice, as stated in this letter, that the bill to the customer was as per the all inclusive prices as finalized in the tender. A certificate was, however, submitted by the excise signatory, that for all the items despatched for the Exchange the requisite duties/taxes had been paid, since the actual despatch invoices were not given to the consignee or to the paying authority.
12.2 It is thus amply clear from the record that the proper officer was given a clear intimation of the raising of the consolidated commercial invoices by which full justification was communicated to him and no objection was raised at that time against adoption of such a procedure by the assessee. Even the reason for not supplying the excise invoices to the customers in view of the system of raising consolidated commercial invoices had been duly explained and no adverse inference ought to have been drawn by the learned Commissioner on that count against the assessee, especially when certificates were submitted by the excise signatory, for all items despatched for the Exchange, stating that the requisite duties had been paid, which aspect appears to have been overlooked. Though the procedure of raising consolidated commercial invoices for the sake of convenience of the customers DOT/MTNL was fully intimated to the concerned authorities and it was never objected to by the department, an adverse inference has been drawn, of suppression of material facts in the context of the collections made under the consolidated commercial invoices against the assessee, which is wholly unwarranted.
13. It is evident from the impugned Order that the learned Commissioner has ignored the nature of the contract and material terms of the Purchase Order which clearly indicated that the assessee was to supply goods and services including the items which were not to be manufactured in the Palakkad factory of the assessee. Excise duty could be levied in respect of excisable goods manufactured and removed from the Palakkad factory while assessing that unit and not for the goods not manufactured there and supplied from elsewhere, or those manufactured from the other factory units of the assessee and removed and accounted for by raising proper excise invoices.
13.1 The Bid documents and purchase Order which are on record clearly indicate that the contract was for supply of goods and services. The word "goods" as defined in the Bid documents meant all the equipment, machinery, and/or other materials which the supplier was required to supply to the purchaser under the contract. The expression "contract price" was defined in Clause (g) so as to mean the price payable to the supplier under the purchase Order for the full and proper performance of its contractual obligations. Though as per Clause 6.3 of the general conditions, technical assistance for installation, commissioning and monitoring of equipment was to be provided by the bidders at no extra cost during laboratory evaluation, validation/type approval and field trial, if any, and under Clause 7.1 the training for installation and maintenance staff of the purchaser was to be free of cost by the bidder where required, Clause 8, in respect of "Incidental Services" indicated that the assessee could charge separately for supervision on per day basis, as stipulated thereunder, which obviously had nothing to do with the process of manufacture of the excisable goods.
13.2 Under Clause 8.1 of the general commercial conditions of contract it was provided as under: 8.1. The supplier may be required to provide any or all the following services: (a) Performance or supervision of on-site assembly and/or start-up of the supplied Goods. The expert charges for supervision of installation shall not exceed Rs. 7000/- per manday and to and fro Airfare or the actual fare may also be paid.
(b) Furnishing of tools required for assembly and/or maintenance of supplied Goods; (c) Performance of supervision of maintenance and/or repair of the supplied Goods, for a period of time agreed to by the parties provided that this service shall not relieve the supplier of any Warranty obligations under this Contract.
13.3. Clause 12 of the Tender Documents relating to prices clearly indicated that the prices were in respect of "goods delivered and services performed", under the contract. Various schedules were prescribed in the Tender Document including price schedules for optional items and services including conventional battery sets, which were relatable to Clause 15 and 26 of the special conditions.
13.4. The Purchase Order dated 27-10-97 which related to the period 1997-99 contained a price Clause which reads as under: 8.1 The cost has been worked as per DOT letter No. 117-01/MMD/III dated 18-9-97. The total cost of the equipment ordered under this P.O at site basis is Rs. 18,63,84,000 (provisional). This price is inclusive of all taxes and levels. The provisional price will be regularized after the finalisation of the price/itemized price by the Telecom Commission. This total cost and the unit prices are inclusive of all taxes and duties, freight, packing, forwarding, transiting insurance etc. for delivery at site. This provisional unit rate shall be for complete exchange equipment including associated equipment accessories, iron works, spares etc. and also shall be inclusive of power plant, battery, MDF associated accessories, spares, etc. Any increase in taxes/duties and other statutory levies etc. after expiry of the delivery schedule shall be on the contractor's account while benefit of any decrease in these taxes /duties etc. shall be passed on to the purchaser by the contractor.
8.2 (1) Any statutory variation affecting the prices within the scheduled delivery period shall be to purchaser's account. Any increase beyond scheduled delivery period shall be to supplier's account, but the benefit of any downward revision shall be to purchaser's account. The effect of variation shall be allowed by way of adjustment invoice/contract value.
8.2 (2) It has been further stated that due adjustment is to be made for any item in the material list which was not originally quoted in the tender by M/s. ITI. The provisional cost works out to Rs. 18,63,84,000/- (Eighteen crores sixty-three lakhs eighty-four thousand) only. This is subject to fixation of final cost on finalisation of the price/itemized price as per Telecom Commission Letter No. 113-223/96 MMD/III dated 15-4-97.
13.5. It is evident from the above price Clause 8 that the total cost indicated thereunder was provisional, and that the provisional price was to be regularized after the finalization of the price/itemized price by the Telecom Commission. The total cost and the unit prices were inclusive of all taxes and its freight, packing, forwarding, transit insurance, etc. for delivery at site. The provisional unit rate was for the complete Exchange equipment including associated equipment accessories, iron works, spares, etc., and was also inclusive of power plant, battery MDF associated accessories, spares, etc. It was clarified that the provisional cost was subject to fixation of final cost on finalization of the price/itemized price as per the Telecom's Letter dated 15-4-97.
14. There was, therefore, abundant material on record to alert the revenue authorities about the fact that the consolidated commercial invoices were in respect of several items which may not have been manufactured in the Palakkad unit of the assessee and that the consolidated commercial invoices were issued in the context of the purchase Order for the goods and services which were to be supplied and could not have been made the basis for assessing the appellant on the footing as if the entire amount of the consolidated commercial invoices was subject to excise duty irrespective of the fact whether the assessee in its Palakkad factory had manufactured the items or they were manufactured elsewhere and supplied to the customer or that certain items were procured and supplied as per the terms of the tender documents, such as batteries. Clause 8 of the general commercial conditions, both in the Tender Documents and the Contract, if considered, would have shown the entitlement of the assessee to raise separate invoices for incidental services which could not be considered for computing the value of the goods manufactured. Services tendered in respect of the excisable goods supplied were not, by themselves, goods manufactured. The learned Commissioner lost sight of the fact that the consolidated commercial invoices were issued in respect of the goods and services supplied under the contract, and not only in respect of the excisable goods manufactured in the Palakkad unit of the assessee, and removed therefrom. The consolidated commercial invoices necessarily included the total purchase price for the exchange unit which were bound to be higher than the separate excise invoices, which were prepared in respect of the excisable goods manufactured in the respective units of the assessee. Mere comparison of the consolidated commercial invoices showing the total purchase price of the composite unit to be supplied with the excise invoices of the items manufactured and removed from the respective factories, for holding that duty was evaded, was an erroneous short cut adopted, by failing to consider the fact that the consolidated commercial invoices included several items which could not have been subjected to excise duty in the hands of the assessee in respect of its Palakkad unit which did not manufacture them. It was incumbent on the part of the assessing authority to consider the consolidated commercial invoices for the purpose of finding out what was excisable in the hands of the assessee and what was not, in the light of the excise invoices, to work out the duty liability.
15. For the foregoing reasons, the impugned Order confirming the duty demand and imposing penalties on the appellants of these appeals cannot be sustained since, the show cause notice was pre-mature, and the assessments continued to be provisional for the period covered by the show cause notice and were required to be finalized under Rule 9B(5), and, the quantification was erroneously made on the total price of the goods and services supplied under the purchase Order as reflected from the consolidated commercial invoices without reference to the terms of the contract and without making any effort to find out the duty payable in respect of the goods actually manufactured in the factory of the assessee at Palakkad for which the show cause notice was issued, by excluding the items which were not includible for such computation.
16. All the appeals are, therefore, allowed and the impugned Order of the learned Commissioner is hereby set aside with a direction to make final assessments under Rule 9B(5) of the said rules for the period covered under the show cause notice in accordance with law and in the light of the observations made in this judgment. It is stated by the learned Counsel for the appellant that the deposit of Rs. 1 crore (Rupees one crore only) made by the assessee may be retained by the Revenue and be adjusted as per the outcome of the final assessment.