TMI Blog2011 (9) TMI 779X X X X Extracts X X X X X X X X Extracts X X X X ..... - It does not make sense that the appellant-companies who were claiming their business transactions with SMT as if in the normal course of business, could afford to pay amounts of freight in excess ranging from 69% to 258% - The mere fact that the jurisdictional Superintendent of Central Excise might be aware that the SMT has been used for transport of goods and freight was claimed as abatement may not lead to any conclusion to say that the department was aware of intricate manipulation by the appellant-company - Appeals are rejected - E/885-890, 876-877 and 878-884/2008 - 540-554/2011 - Dated:- 6-9-2011 - S/Shri S.S. Kang, M. Veeraiyan, JJ. REPRESENTED BY : S/Shri B.V. Kumar and B. Venugopal, Advocates, for the Appellant. Shri Ganesh Havnur, SDR, for the Respondent. [Order per : M. Veeraiyan, Member (T)]. The eight (08) appeals listed in S. No. 1.1 to 1.8 arise out of common order of the Commissioner of Central Excise, Customs Service Tax, Tirupathi Adjudication Order No. 9, 10 11/2008, dated 28-8-2008 by which Commissioner confirmed demand of duty along with interest against M/s. M.M. Cylinders (P) Ltd. and imposed penalties on M.M. Cylinders (P) Ltd. an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mand on M/s. M.M. Cylinders (P) Ltd. In the later case, there is one more appellant, Shri K. Subramaniam, C.A. on whom a penalty of Rs. 10,000/- stands imposed. Therefore they are being dealt with by this common order. 4. The relevant facts in brief are as follows : (a) The appellant-companies are manufacturers of new and empty LPG Cylinders for the oil marketing companies namely, Indian Oil Corporation Ltd., Bharath Petroleum Corporation Ltd. and Hindustan Petroleum Corporation Ltd. They entered into agreements with the aforesaid companies for supply of LPG Cylinders. (b) Prior to August 2001, the purchasing oil companies were paying freight charges equal to the standard Railway freight rate per cylinder, irrespective of the amount of actual freight involved in the transportation. (c) From August 2001, the price per cylinder was fixed on Gross Delivery Price (GDP)/Net Delivery Price (NDP) inclusive of all taxes and freight. (d) As per investigation conducted by the department, the appellant companies were found to have used a front organization, M/s. Sri Mehala Transport, for the purpose of inflating the freight amount and to reduce the assessable value with i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced duty that would have been paid was available as credit to the oil companies and therefore it is revenue neutral. (e) The transportation is a distinct activity unconnected to the sale of goods and any profit earned on transportation is liable to be included in the assessable value of the goods as held in the following decisions : (i) Baroda Electric Motors Ltd. v. CCE [1997 (94) E.L.T. 13 (S.C.)] (ii) CCE v. Inox Air Products [2002 (147) E.L.T. 621 (Tri.-Chennai)] (iii) Apollo Tyres Ltd. v. CCE [2003 (160) E.L.T. 836 (Tri.-Bang.)] (iv) PSL Ltd. v. CCE [2005 (185) E.L.T. 59 (Tri.)] (f) The appellant-companies have indicated the transportation charges separately in the invoices and the same were accounted in the books of accounts also properly. The appellant-companies were subject to audit by the audit team of Central Excise Offices. The department was aware of the entire facts. Therefore, invocation of extended period of limitation was not justified. Further, once a show cause notice has been issued invoking extended period of limitation, subsequent notices invoking extended period of limitation on the same set of facts were clearly not permissib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce Sheets as per the directions of the Directors of appellant-company and it was also stated that the figures could have been manipulated by the Directors of the company. The matter was referred to Joint Director (Cost), Hyderabad who has opined that excess freight charges have been claimed for deduction. (g) There are three show cause notices in each covering different periods. The first two notices are invoking the extended period of limitation. The contention of the appellants that once extended period has been invoked in the first show cause notice, the ground of suppression could not have been invoked in the second show cause notice is not acceptable in the facts of the present case. The learned DR submits that investigation continued even after the issue of first show cause notice, and additional evidences in the form of documents like Balance Sheets, purchase orders of oil companies placed on other manufacturers, statements and reports of enquiries with the other transporters and Transport association were relied upon in the second set of show cause notices. The third set of show cause notices were issued within the normal limitation period prescribed under Section 11A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of transport to Cochin, the deductions of freight charges claimed per cylinder were Rs. 21.24, 76.29, 116.62, 167.40, 167.96, 64.35 during the period 2001-02, 2002-03, 2003-04, 2004-05, April 2005 to June 2005 and 2006-07 respectively. Similarly deductions were for other destinations as recorded in para 13 of the impugned order. In other words, the freight charges claimed as deduction steadily increased from the year 2001-02 to June 2005 and thereafter, there was sudden drop in the amounts of deduction claimed apparently after the commencement of the investigations. (c) While the deductions of freight charges were increasing the assessable value started decreasing. The assessable value of the LPG cylinder was Rs. 505 during June 2001, Rs. 468 in December 2001, Rs. 365 in October 2002, Rs. 410 in February 2003, Rs. 350 in August 2003 and Rs. 470 in April 2004 and later, in July 2005, it increased to Rs. 625 as detailed in para 15.2 of the impugned order. (d) The decrease in assessable value as mentioned above was effected even though cost of HR sheet, the main raw material, used for cylinder appears to have increased from Rs. 163 in November 2001 to 301 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges from Rs. 148.61 in 2004-05 to 27.08 during 2006-07. Similarly no explanation is forthcoming for such sudden variation in respect of other destination. 9.3 It is also noticed that the appellant-companies have utilized the services of other transport companies on many occasions. In all these occasions, the transport has been arranged only through SMT. However, the charges paid to SMT for using third party transport and the actual charges paid by SMT to such third party transport have interesting revelations. For transport of 560 cylinders to 24 Paraganas of West Bengal in January 2005, the freight charges claimed as deduction in invoice to the oil company was Rs. 1,17,403/- as against an amount of Rs. 33000/- only paid to the actual transporter and thus an increase of more than 250%. Similarly, in respect of despatch of 298 Nos. cylinders to Jharkand the freight claimed was Rs. 62,774/- whereas the payment paid to the actual transporter was Rs. 21,000/- only. Thus nearly a 200% increase. Several such instances have been discussed in para 10.8 of the impugned order. It does not make sense that the appellant-companies who were claiming their business transactions with SMT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the process of fermentation of molasses after taking note of the fact that, on identical issue, an earlier show cause notice dated 28-2-84 demanding duty for the period Feb. 78 to Sep. 82 on identical facts has been issued, Hon ble Supreme Court held that - Allegation of suppression of facts against the appellant cannot be sustained. When the first SCN was issued all the relevant facts were in the knowledge of the authorities. Later on, while issuing the second and third show cause notices the same/similar facts could not be taken as suppression of facts on the part of the assessee as these facts were already in the knowledge of the authorities. (b) ECE Industries Ltd. In the said case, after issue of show cause notices dated 28-5-93 and 4-11-93 proposing demand of duty and imposition of penalty, for having not reversed the Modvat credit in respect of parts required for repair and replacement, a third show cause notice dated 27-5-94 was issued. In view of the above facts, it was held that - As earlier proceedings in respect of same subject matter was pending adjudication it could be said that there was any suppression and the extended period under Section 11A was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Undisputedly, further detailed investigations were undertaken and lot of fresh evidences have been gathered and many documents/records/registers etc. were relied upon in the subsequent show-cause notices for example, 38 documents as duly noted in para 34 of the said show cause notice dated 27-2-2009 issued to M.M. Cylinders and as many as 29 documents relied upon in the show cause notice dated 5-2-07 issued to GDR Cylinders (P) Ltd. Under these circumstances, subsequent show cause notices issued to the appellant-companies cannot be treated as based on identical facts or on identical evidences as in the case of first set of show cause notices. 10.4 As already noted, these are cases whereas the appellant-companies have shown drastically reduced assessable values even when there was steep increases in the cost of HR sheets, the main raw material. While retaining the composite sale price fixed, they have systematically and steeply enhanced the amount of freight charges so that the assessable values were reduced. The department has undertaken painstaking investigation even after the issue of first set of show-cause notices, to unearth the various dimensions of the manipulations unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count, we are of the view that some leniency can be shown on quantum of penalties imposed on them. 11.3 SMT has knowingly involved in abetting the appellant-companies to inflate the freight charges (and substantial amounts of freight charges were not even received) and thus helped the appellant reduce the assessable value. In view of above, we are of the view that the charges of abetment by SMT is proved that they are also rightly held liable for penalty. However, taking the entire facts and circumstances of the case into account some leniency can be shown on the quantum of penalty imposed on them. 11.4 However, there is no specific and significant role warranting penalties on Shri M.P. Krishnamachari, General Manager, Shri M. Ramanathan, Despatch In-charge and Shri K. Subramaniam, Chartered Accountant. They deserve to be set aside. 11.5 The penalties imposed on Shri Muthuramalingam, partner of SMT also deserve to be set aside in view of penalties being sustained on SMT, the partnership firm. The facts and circumstances of the case, in our view, do not justify separate penalties on the partner in addition to penalties on the firm. 12. In view of the above, (a) Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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