TMI Blog2006 (8) TMI 461X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 to 5-1-2000 and Rs. 2.65 per unit thereafter. However, the KEB itself purchased power from JTPCL at the rate of Rs. 2.60 per unit pursuant to formal Orders and Notifications issued by the Government of Karnataka. This is definitely sufficient to accept that the power rate adopted by the appellant reflects the power cost. The Commissioner has not at all examined these documents and has adopted some weighted average cost of power as indicated in Annexure III of his findings. In our view, there is no case for demanding duty by taking a higher value for power when KEB itself was purchasing at a lower value from JTPCL. Therefore, the demand of Rs. 6,63,30,535/- is not sustainable. Thus, it is seen that the entire demand of Rs. 12,62,13,125/- on account of (a) Facility charges, (b) MTOP Charges, and (c) Electricity charges is not sustainable. Hence, the demand is set aside. The consequence of such a decision is that the penalty under Section 11AC is also not sustainable and the same is set aside. Hence, interest u/s 11AB, penalty on M/s. JPOCL under Rule 173Q(1) and the penalties under Rule 209A on (a) Shri Sajjan Jindal, Chairman, JPOCL (b) Shri Indarjit Mookerjee, Non-Execut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 11A was invoked in the Show Cause Notice. After considering the submissions of the appellants, the then Adjudicating Authority passed an Order-in-Original No. 3/2001 dated 27-2-2001. The gist of the above order is given below:- (i) Confirmation of duty of Rs. 14,63,51,143/- (ii) Appropriation of Rs. 3,04,71,194/- already paid by the appellants under 'protest' under Rule 233B of CE Rules, 1944. (iii) Penalty of Rs. 14,63,51,143/- under Section 11AC. (iv) Demand of interest under Section 11AB on the duty confirmed. (v) Penalty of Rs. 1,00,00,000/- on M/s. JPOCL under Rule 173Q(1). (vi) Penalty under Rule 209A on the following persons:- (a) Rs. 1,00,00,000/- on Shri Sajjan Jindal, Chairman, M/s. JPOCL. (b) Rs. 50,00,000/- on Shri Inderjeet Mookerjee, Non-Executive Director, M/s. JPOCL. (c) Rs. 25,00,000/- on Shri Raaj Kumar, Managing Director, M/s. JPOCL. (d) Rs. 25,00,000/- on Shri V.S. Kumar, General Manager(Finance),and Company Secretary, M/s. JPOCL. Aggrieved by the above order, the appellants approached the CEGAT. The CEGAT passed the Final Order No. 1421 to 1425/2002, dated 8-11-2002 [2003 (161) E.L.T. 562 (T)] remanding the case for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for each increase of Rs. 2.4 crores in the Project cost. The Project Cost increased to Rs. 283.12 crores w.e.f. July, 1999. However, the appellant and the buyer JVSL came to an understanding that project cost would be treated as 227.32 crores. In the Final Order Shri G.A. Brahma Deva, the Hon'ble Member (Judicial) observed as follows:- 7. When the parties to a contract agree to substitute a new contract for it, the original contract is discharged and need not be performed. It is necessary for the application of this principle that the original contract must be subsisting and unbroken. When once they enter into a new contract with varied terms and conditions, which is called novation, automatically old contracts disappears and new contract emerges in its place. In the instant case* Clause was amended with reference to the determination of price and both the parties mutually agreed that project cost of Rs. 227.32 crores fixed for, applying price escalation formula. As long as contract is valid, it is only for the parties to enforce their rights and obligations under the respective contract. Further, Shri Brahma Deva made the following observations on the above issue: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to CEGAT s above mentioned order, the Adjudicating Authority passed the impugned order dated 11-1-2005. The gist of the impugned order is as follows :- (i) Demand of duty to the tune of Rs. 12,62,13,125/- in the following manner :- (a) Facility charges Rs. 5,22,47,703/- (b) MTOP charges Rs. 76,34,887/- (c) Electricity charges Rs. 6,63,30,535/- (As per para 20) Total 12,62,13,125/- (ii) Appropriation of the amount of Rs. 3,04,71,194/- which has been already paid, (iii) Penalty of Rs. 12,62,13,125/- on M/s. JPOCL under Section 11AC. (iv) Interest under Section 11AB on the duty confirmed, (v) Penalty of Rs. 50,00,000/- on M/s. JPOCL under Rule 173Q(1). (vi) Penalty under Rule 209A on the following persons:- (a) Shri Sajjan Jindal, Chairman, JPOCL - Rs. 25,00,000/- (b) Shri Inderjeet Mookerjee, Non-Executive Director - Rs. 10,00,000/- (c) Shri Raaj Kumar, Managing Director - Rs. 5,00,000/- (d) Shri V.S. Kumar, General Manager (Fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arise under this item since the same duty on the cost recovery charges also forms part of the demand under the next item relating to power charges, as can be seen from column 5 of Annexure-IIIB attached to the impugned order, leading to patent duplication of amounts. (v) As regards the differential duty of Rs. 6,63,30,535/- consequent to re-computation of power cost of the power received by the appellant from JTPCL and for which reimbursements were made by it to JVSL, the Commissioner's order is arbitrary and does not disclose any proper basis and is only to be set aside on this ground alone. The power rate of Rs. 3.05 per unit adopted by the appellant for the period 1-7-1999 to 5-1-2000 and Rs. 2.65 per unit adopted thereafter could not be doubted as representing a proper value for the power received by the appellant. The Commissioner has ignored completely the fact that KEB itself was purchasing power from JTPCL at a rate of Rs. 2.60 per unit, pursuant to formal Orders and Notifications issued by the Government of Karnataka, which is even lower than the rate at which reimbursements were being made by the appellant to JVSL. This fact alone is sufficient to accept the power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant period, the price to be taken was the normal price at which the goods would, in the normal course, be supplied between two independent parties. There is no finding that the appellant and JVSL are related to each other, or that the transaction between them are not on a principal to principal basis or are not at arm s length. The question of additional consideration does not arise because the so called payments or notional payments had no bearing on either the cost or the price of the goods supplied by the appellant. The Courts and Tribunals have held that only those payment (actual or notional) can be added which have a direct impact on the price of the goods to be assessed and the burden of proving such direct impact lies on the Revenue. In the present case, the Revenue has not discharged this burden and, therefore, the entire additional duty demands are based on extraneous and irrelevant considerations and is, therefore, not sustainable. (viii) A huge penalty of Rs. 12,62,13,125/- under Section 11AC and Rs. 50,00,000/- under Rule 173Q have been imposed without any findings at all to justify the imposition. There is not even a mention in the findings made by the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which they had reason to believe were liable to confiscation is incorrect and is not supported by any evidence on record. Therefore, the levy of huge penalty on these persons cannot be justified. (xii) In the absence of any finding that any particular goods are liable to confiscation, no penalty could be imposed on any individual under Rule 209A of the Central Excise Rules. 5. The learned JDR reiterated the departmental view. 6. We have gone through the records of the case carefully. The impugned order contains 34 pages. The findings of the Commissioner including his order occupy only 3 pages. In our view, the findings appear to be cursory. Though the CEGAT, in the Final Order, has directed the original authority to examine limitation, in view of the appellant s contention that substantial portion of the demand is barred by limitation, the Adjudicating Authority, in the impugned order, has not at all discussed the same. Paras 12 to 16 of the findings are only re-statement of the facts already mentioned up to page 30 of the order. Therefore, the actual findings are just limited to four paragraphs from 17 to 20. We are in agreement with the appellant that the Commissioner h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of costrecovery charges and facility charges appears to be erroneous. The Commissioner s observation in para 17 is as follows: Thus, I find that the assessee has adopted a lower project cost as compared to the actual project cost for gas price calculation. According to the provisions of the Articles of PISA, M/s. JVSL have an unconditional obligation for payment of certain amount on a prorata basis. The said amount is termed as facility charges and the same are payable with reference to the production facility of M/s. JPOCL. The above observations show not only non-application of mind but also disregard to the observations of the Tribunal with regard to the contract between the parties. The Revenue cannot rigidly stick to the original contract ignoring the two amendments. This has been made amply clear in the order of the CEGAT. Hence, demand of Rs. 5,22,47,703/- is not sustainable. It is on record that the appellant had already paid the duty on cost recovery charges and facility charges much before the issue of Show Cause Notice. 6.2 As regards the MTOP charges, the Commissioner simply makes a statement that it is an additional consideration. The appellants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er unit for the period from 1-7-1999 to 5-1-2000 and Rs. 2.65 per unit thereafter. However, the KEB itself purchased power from JTPCL at the rate of Rs. 2.60 per unit pursuant to formal Orders and Notifications issued by the Government of Karnataka. This is definitely sufficient to accept that the power rate adopted by the appellant reflects the power cost. The Commissioner has not at all examined these documents and has adopted some weighted average cost of power as indicated in Annexure III below para 19 of his findings. In our view, there is no case for demanding duty by taking a higher value for power when KEB itself was purchasing at a lower value from JTPCL. Therefore, the demand of Rs. 6,63,30,535/- is not sustainable. 6.4 From the above, it is seen that the entire demand of Rs. 12,62,13,125/- on account of (a) Facility charges, (b) MTOP Charges, and (c) Electricity charges is not sustainable. Hence, the demand is set aside. The consequence of such a decision is that the penalty under Section 11AC is also not sustainable and the same is set aside. Hence, interest under Section11AB, penalty on M/s. JPOCL under Rule 173Q(1) and the penalties under Rule 209A on (a) Shri Sajj ..... X X X X Extracts X X X X X X X X Extracts X X X X
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