Jacs Metals Private Ltd. and Chaks Vs. Cce - Court Judgment

Excerpt:
1. in order-in-original no. 39/96 dt. 14.3.96, the commissioner of central excise had confirmed demand of duty of rs. 45,42,232/- against m/s. jacs metals private ltd. [jmpl, for short] (appellants in appeal nos. 700 & 722/96) in respect of aluminium sheets and circles found to have been manufactured by them and cleared without payment of duty during the period 1.3.94 to 17.1.95. the above demand of duty was quantified on the basis of the assessable value which was determined by the commissioner without allowing deduction of excise duty from invoice price of the goods under section 4(4) (d) (ii) of the central excise act. the commissioner, however, held that m/s. jmpl were eligible for modvat credit of the duty paid on the inputs used in the manufacture of the said final products......

Judgment:
1. In Order-in-Original No. 39/96 dt. 14.3.96, the Commissioner of Central Excise had confirmed demand of duty of Rs. 45,42,232/- against M/s. Jacs Metals Private Ltd. [JMPL, for short] (appellants in appeal Nos. 700 & 722/96) in respect of Aluminium sheets and circles found to have been manufactured by them and cleared without payment of duty during the period 1.3.94 to 17.1.95. The above demand of duty was quantified on the basis of the assessable value which was determined by the Commissioner without allowing deduction of Excise Duty from invoice price of the goods under Section 4(4) (d) (ii) of the Central Excise Act. The Commissioner, however, held that M/s. JMPL were eligible for Modvat credit of the duty paid on the inputs used in the manufacture of the said final products. Quantification of this credit was left to be done by the divisional Asst. Commissioner in accordance with the relevant Rules. In the above order, learned Commissioner also confiscated certain quantities of Aluminium circles and vessels under Rule 173Q of the Central Excise Rules, 1944, but M/s. JMPL were given an option to redeem the goods on payment of a fine of Rs. 25,000/- in lieu of confiscation. A penalty of Rs. 5 lakhs was imposed on the party under Rulesl73Q and 226 of the Central Excise Rules, 1944. A separate penalty of Rs. 25,000/- was imposed on M/s. Chaks Vessels Private Ltd. (CVPL, for short) [appellants in appeal No. E/701/96] under Rule 209A.M/s. JMPL filed appeal Nos. 700 & 722/96 challenging the Commissioner's order on the grounds (a) that the price charged by them was a cum-duty price and hence Excise duty should have been deducted from the price under Section 4(4)(d) (ii) for arriving at the assessable value; (b) that the Commissioner himself should have quantified the admissible Modvat credit and should not have directed the Asst. Commissioner to do the job; (c) that, if the benefit of Modvat credit and that of Section 4(4)(d) (ii) had been allowed, the quantum of duty recoverable would have been far below the amount of duty demanded by the Commissioner and (d) that, on the facts and circumstances of the case, penalty of Rs. 5 lakhs was very heavy vis-a-vis the amount of duty if so quantified.

M/s. CVPL filed appeal No. 701/96 against the penalty imposed on them by the Commissioner, contending mainly that Rule 209A was not applicable to them on the facts of the case. Subsequently, the divisional Asst. Commissioner quantified the admissible Modvat credit in his order dated 17.9.96. Against his order, M/s. JMPL filed an appeal with the Commissioner (Appeals) and that appeal is still pending. The department also filed an appeal with the Commissioner (Appeals) challenging the grant of Modvat credit to M/s. JMPL by the AC and that appeal also is pending. The department also filed two appeals, Nos. E/1352 & 1353/97 before this Tribunal against the grant of Modvat credit to M/s. JMPL by the Commissioner and these two appeals were disposed of by this Bench as per Final Order No. 1014-1015/2001 dt.

29.6.2001 remanding the case to the Asst. Commissioner for considering the Revenue's objections before quantifying the Modvat credit admissible to the assessee. It appears that the present appeals were not considered by this Bench while passing the above final order in the departments appeal Nos. 1352& 1353/97.

2. After hearing both sides and considering their submissions, we find that the final order dated 29.6.2001 passed by this Bench has not been challenged by the department or the assessee and, therefore, neither side is entitled to question the correctness of the said final order.

What is under challenge in the present appeals is the original order passed by the Commissioner. That order had directed the divisional Asst. Commissioner to quantify the Modvat credit on inputs, admissible to the assessee (M/s. JMPL) and, accordingly, the AC quantified the credit in his order dated 17.9.96. This order of the AC stood impliedly set aside when the Tribunal, in final order dated 29.6.2001, directed that the Revenue's objections against grant of Modvat credit to the assessee also be considered by the AC before quantification of credit.

There is no indication of the AC having passed fresh order in terms of the Tribunal's final order dated 29.6.2001.

3. It is not in dispute that the AC's order dated 17.9.96 quantifying the Modvat credit pursuant to the Commissioner's direction was passed without considering the objections of the Revenue, which are required to be considered by him in terms of final order dated 29.6.2001 of the Tribunal. It is in these circumstances that we have found the AC's order dated 17.9.96 to have been set aside impliedly by the Tribunal in the above final order. A necessary consequence of this finding of ours is that the appeals filed by the assessee and the department before the Commissioner (Appeals) against the AC's order dated 17.9.96 are not maintainable.

4. Coming back to the present appeals, we have found force in the case of the appellants that the Commissioner ought to have finalized the demand of duty. The Commissioner, being adjudicating authority, did not have any power of remand and hence it was erroneous on his part to direct the AC to quantify the Modvat credit admissible to the assessee.

The Commissioner's direction to the AC reads thus - The quantum and the extent of modvat credit admissible to them would be decided by the concerned jurisdictional Asst. Commissioner of the division after examining the duty paying documents presented by the noticees and after ensuring that the inputs have been utilized in the manner prescribed under the relevant rules.

Obviously, a piece of adjudication was being delegated to the Asst.

Commissioner. No adjudicating authority, so constituted under the Central Excise Act, can delegate its adjudicatory function to any subordinate officer. Hence the above direction issued by the Commissioner to the AC was not legal. At best, the Commissioner could have collected from the AC the requisite materials, data or other information for the purpose of determining the quantum of Modvat credit admissible to the assessee.

5. Another valid challenge in the appeals of M/s. JMPL is the one against denial of the benefit of Section 4(4)(d) (ii) by the Commissioner, who held that the party was not eligible for deduction of duty from the value of clearance of the goods as they had not paid any duty. This view taken by learned Commissioner cannot be sustained inasmuch as it is settled law that, whether duty has been actually paid or not, the value of clearance of excisable goods should be treated as cum-duty price under Section 4(4)(d)(ii). The apex court's decision in the case of CCE Delhi v. Maruti Udyog Ltd. Accordingly, we hold that the duty element is liable to be deducted from the invoice value of the goods for the purpose of determination of its assessable value.

6. Again, it was not correct on the part of the Commissioner to impose a penalty on the assessee under Rule 173Q without finalizing the demand of duty inasmuch as the extent of duty evasion by the assessee had a bearing on their penal liability. This finding is more or less applicable to the penalty imposed on M/S. CVPL also.

7. In the result, bearing in mind the letter and spirit of the final order dated 29.6.2001 passed by this Bench, and, with the consent of both sides, we set aside the Commissioner's order and direct him to pass a fresh speaking order in adjudication of the SCN after taking into account any order passed by the Asst. Commissioner pursuant to the Tribunal's Final Order No. 1014 & 1015/2001 dt. 29.6.2001 and after giving the appellants a reasonable opportunity of being heard on all issues. It is clarified that any such "order of the AC" shall be treated only as a report for quantification of Modvat credit.

(Operative part of the order was pronounced in open court on 25.10.2006)