TMI Blog2019 (8) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... AG takes part in such conduct of audit. In spite of these repeated audits, the department did not raise any objection or query to the appellant as to why they have adopted cost of production on the basis of cost details given by their Senior Manager. Only in 2010, the department has raised this query. Immediately on being pointed out, appellants appointed a Cost Accountant and the costing details of accountant was furnished to the department. The demand in these cases have been raised on the basis of such costing details furnished by Cost Accountant appointed by appellant. It is very clear that the department was fully aware that appellant was discharging duty on the basis of cost of production as per the details of the Senior Manager (Costing). When all the documents were put forward before the department, it cannot be said that the costing certificate issued by the Senior Manager (Costing) of the appellant was an act of suppression or misstatement on the part of appellant with an intention to evade payment of duty. Further when the department made enquiries in 2010, the appellant has sufficiently cooperated and appointed a Cost Accountant on their side and obtained a cost cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is required to be levied at relevant rate on the assessable value to be arrived at after including all cost components under CAS-4. 2.2 Accordingly, proceedings were initiated by way of the following Show Cause Notices for the period from 01.04.2005 to 31.03.2010: Sl No. Appellant SCN No. Dt. Proposed demand (in Rs.) Ground alleged 1. M/s. Titan Industries Ltd., Watch Division SCN No. 37/2010 dt. 05.05.2010 read with corrigendum dt. 28.03.2011 3,63,73,973/- Clearance of watch parts and components manufactured by them to their units at Dehradun, Baddi and Roorkee for captive consumption; under Rule 8 of the Central Excise Valuation Rules, 2000. 2. M/s. Titan Industries Ltd., Jewellery Division SCN No. 38/2010 dt 20.05.2010 read with corrigendum dt. 28.03.2011 78,43,016/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been made to justify invocation of extended period of limitation. In any case, the Department could have raised the demand at the time of finalization of assessment; (iii) The Department had conducted audit for the disputed units (for all the three units of the appellant) and therefore, there is no question of suppression. Hence, the extended period of limitation cannot be invoked. (iv) She also submitted that the question of suppression of facts does not arise for the following reasons : (a) For the period from 01.02.2005 to 31.01.2006, audit of the appellant's entire books and records were done between 22.02.2006 and 25.02.2006; (b) For the period from 01.02.2006 to 28.02.2007, the appellant's records were also audited; (c) For the period from 11.03.2007 to 31.01.2008, audit had been done between 12.02.2008 and 13.02.2008; (d)For the period from 01.02.2008 to 28.02.2009, audit was conducted on 20.03.2009. (v) So also, office of the Accountant General (CERA) pursuant to their letter dated 10.11.2006, conducted audit for the period 2003-04, 2004-05 and 2005-06. Pursu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mple, in paragraphs 24 and 25 of the Order-in-Original No. 13/2011 dated 21.04.2011, it has been contended as under : 24. That the question of suppression of fact does not arise at all for the following reasons: (i) They are registered under Central Excise Law duly filing their monthly returns in which the value as well as duty is reflected. (ii) An audit was conducted by the Central Excise Department during February 2006 completely examining all their records and accounts including their removals for the period of three years prior to the audit. (iii) An audit was conducted during February 2007 completely examining all their records and accounts including all our removals for the period of three years prior to the audit. (iv) CERA Audit was conducted and all the revenue particulars for 2002-2003; 2003-2004 and 2004-2005 and all relevant records were examined by the Audit Team from 12.06.2006 to 16.06.2006. The audit took place and all records were verified including their costing statements, calculation of value, calculation of duty and no adverse objections or comments were raised. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Dehradun, Baddi and Roorkee or to its Hosur unit would not have come to the attention of the audit officers. After all, these are very 'standout' clearances that would be effected by any manufacturing unit. 10. This being so, we are of the considered opinion that all these audits should have brought out enough procedural and valuation discrepancies to light, which could have been brought to the notice of the appellants as and when the audits were done. If this had been done, it may well have been possible that the appellants would have accepted any differential duty liabilities as pointed out by the Department and also corrected their valuation methodology. Certainly, this was not done. 11.1 On the other hand, Show Cause Notices have been issued as late as May, 2010 and to enable coverage of the disputed period from 01.04.2005 to 31.03.2010, the extended period of limitation has been invoked. The raison d' tre given in all these Show Cause Notices for invocation of such extended period of limitation is that they have wilfully suppressed the fact from the Department that they were clearing the goods at a lower value from their unit at Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Law would come to the rescue of a bona fide litigant, but here, I do not see anywhere the appellant acting in good faith and even on being pointed out, it has only very conveniently ignored the same by not even responding to any of these specific allegations of technical breach. 3. Circular issued in 2003 is very much on board. Still, from 2005, the appellant happily/blissfully and conveniently continued with its old practice, not because of ignorance or innocence, since undoubtedly, it had a team of very able and well qualified/specialised hands for assistance and legal compliances. Tt is not a one man company but a reputed/respected one. It is important to note here that, the SCN points out to not only the non-compliance with the conditions of Notification/Circular statutory requirements, but also the technical breach in the certificate (CAS-4) which was prepared/issued NOT by a qualified person, but by an employee who was admittedly, just a graduate. 4. The non-compliance with conditions of Notification, non-furnishing of proper CAS-4 certificate, but an obviously interested employee preparing CAS-4 certificate and furnishing the same as complia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s realised and thus was raised in the SCN. Thus, when a statutory requirement is to be complied with, it is only as per the procedures laid down or known to law and not in short cuts, camouflaged manner, by hood-winking the revenue. The action clearly tantamount to taking advantage of a trust placed by the revenue on the brand name, which is difficult to pardon. 9. For the above reasons therefore, I am of the view that the SCN is proper and the larger period is rightly invoked. The appeal will have to be decided only on merits. In view of the above, the following difference of opinion is proposed:- (i) Even though a SCN is issued by invoking larger period of limitation with an accusation of not following a certain mandatory legal procedure which impacts the valuation, whether the burden is on the assessee to rebut/ discharge/justify its adherence or otherwise, to the mandatory legal procedure, but also to at least reply on its stand to such legal points and only thereafter does the onus shifts to the Revenue to justify invoking larger period? (ii) Whether the CESTAT can ignore the allegations of non-compliance with legal p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee, either in its reply to SCN or during adjudication proceedings, for the reasons best known to the appellant, tantamount to : (c) wilful mis-statement; (d) suppression of facts; and (e) contravention of any of the provisions of this Chapter or of the Rules made thereunder with an intent to evade payment of service tax, of Section 73 (1) of the Finance Act, 1994, and accordingly justify invoking the larger period of limitation? 4. In the second question framed as above, there is an error in indicating the provision of law since in the present case, the issue is with regard to demand of short payment of duty under Central Excise Act, 1944 whereas in the issue framed by the Member it is noted as Section 73 (1) of Finance Act, 1994. This being only an error can be ignored. Although the questions formulated above are lengthy and appear less easy to comprehend, the crux of the difference of opinion as reflected from the interim order passed by both the Members is that Member (Technical) placed reliance on series of audits conducted to hold that there is no evidence of suppression of facts with intent to evade payment of duty. Member (Judicial) has placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y asked clarification from the appellants whether they were following CAS-4 norms and adopting valuation on the basis of costing certificate issued by Cost Accountant. Appellant had given statement that the Senior Manager (Costing) was issuing certificates for the past seven years and on such basis they were doing the costing for arriving at the assessable value. This fact that appellant was arriving the assessable value on the basis of certificates issued by the Senior Manager and discharging duty on this method of costing was very much in the knowledge of the department as there were series of audits conducted by them. It is also stated by her that when department pointed out in 2010 that the costing has to be done as per the certificate of a Cost Accountant, appellants themselves appointed Cost Accountant and did the costing. These details were furnished to the department. On the basis of such costing done by the Cost Accountant appointed by the appellant, department quantified the duty and raised demand in respect of present SCNs. It is stressed by her that since there were no objections raised pursuant to audits the appellants were under bonafide belief that costing done by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of certificate by the Senior Manger (Costing) cannot be accepted since these documents may have been accepted by the department on the face value at the time of audit. The department had no occasion to understand that these are not certificates issued by a qualified Cost Accountant. He adverted to the discussion made by Member (judicial) that the said certificate has been used by the appellant to evade payment of duty. The reliance placed by the appellants on such certificate which is not in accordance with law, itself amounts to suppression and misstatement of facts Later in 2010, it came to the knowledge of the department that appellants were not complying with the requirement of CAS-4 certificate and were discharging duty on the basis of costing done by their own Manager. In the statement of the Senior Manager he has categorically deposed that he is not a qualified Cost Accountant. These facts indicate suppression of facts with intention to evade payment of duty. Therefore, the demand raised invoking extended period is correct and proper and has been rightly concluded so by the Member (Judicial). 10. Heard both sides. 11. From the submissions made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchase, manufacture, storage, sales or delivery of the goods including inputs and capital goods, as the case may be; (ii) all the records prepared and maintained for accounting of transaction in regard to payment for input services and their receipt or procurement; and (iii) all the financial records and statements (including trial balance or its equivalent) (3) Every assessee, an importer who issues an invoice on which CENVAT credit can be taken and first stage and second stage dealer shall, on demand make available to the officer empowered under sub-rule (1) or the audit party deputed by the [Principal Commissioner or Commissioner, as the case may be] or the Comptroller and Auditor-General of India, or a cost accountant or chartered accountant nominated under section 11A or section 14AA of the Act. - (i) the records maintained or prepared by him in terms of sub-rule (2); (ii) the cost audit reports, if any, under section 233B of the Companies Act, 1956 (1 of 1956); and (iii) the income-tax audit report, if any, under section 44AB of the Income-tax Act, 1961 (43 of 1961) for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may please be forwarded along with acknowledgement. 5. Request for postponement will not be entertained, 6. The receipt of this letter may please be acknowledged immediately. Yours faithfully, For Senior Audit Officer / CERA No.AG(C RA)/CERA-Special Party I /2006-07/1115 Date:10-11-2006 To Titan Industries (Watch) Hosur Sir, Sub : Central Excise Revenue Audit- Intimation - Reg. Please refer to Rule 22 (3) of Central Excise Rules, 2002 1. The audit of the accounts of the Central Excise Receipts and Remittance in respect of your concern/company is programmed to conducted by the Central Excise Revenue Audit Party of this office from 27-11-2006 to 1-12-2006. 2. The assessee may see the identity cards of the party members and authority letter issued by CERA Headquarters and in case of any problem/difficulties with CERA Party, the assessee may contact the undersigned / the Deputy Accountant General personally or by telephone. 3. Necessary facilities may ple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption of main / crucial raw materials for the production of each final product during the last THREE years. 8A. Value of Raw Material purchased - Cenvat Credit availed. 8B. Additions of Capital goods since last audit - Cenvat availment. 8C. Other Income - Sales 9. Details of power consumption per unit of production. 10. If both excisable goods / exempted goods are manufactured using common inputs, furnish details. 11. Declaration of marketing pattern 12. Details of various abatements claimed and typed and rate of discount allowed. 13. List of Branches / Depots Consignments Agents / Dealers and a copy of the agreement of consignment Agents / Dealers 14. Quality and Value of production / Clearance of each excisable goods separately for the last THREE years along with the details of duty payment in PLA and through CENVAT credit with reasons for decrease / increase 15. List of reports and returns filed to other departments like Income Tax, Sales Tax, etc. 16. Copy of Articles of Memorandum / Association 17. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7, 2007-08 and 2008-09 separately may please be forwarded along with acknowledgement. Yours faithfully, Assistant Audit Officer Programme C.No.III/10/50/2004-IA Dated: 28.01.2010 To (Speed Post) M/s. Tital Industries Ltd. (Precision Engg. Dn) Door No:28, SIPCOT Industrial Complex, Hosur PIN : 635126 Gentlemen, Sub : Central Excise - Information relevant for the New Audit System in respect of your unit called for- Regarding **************** Since it is proposed to conduct Audit of accounts of your factory under New Audit System, you are requested to furnish the following information which is relevant for the Audit within ten days from the date of receipt of this letter to this office to enable us to conduct Audit during the period from 1. Nature of business of the unit 2. Details of the goods manufactured (excisable and non-excisable) 3. Details regarding the process of manufacture and a flow chart of the proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation received within a weeks time prior to the date of the audit shall not be entertained. Receipt of this letter may be acknowledged Yours faithfully, Asst. Commissioner (Audit), Chennai-III Commissionerate No.AG (C RA)/CERA-Party-XII/2009-10/895 Date:18-01-2010 To Titan Industries Limited Watch division Hosur - 635 126 Sir, Sub Central Excise Revenue Audit- Intimation - Reg, Please refer to Rule 22 (3) of Central Excise Rules, 2002 1. The audit of the accounts of the Central Excise Receipts and Remittance in respect of your concern/company is programmed to conducted by the Central Excise Revenue Audit Party of this office from 08-02-2010 to 12-02-2010. 2. The assesse may see the identity cards of the party members and authority letter issued by CERA Headquarters and in case of any problem/difficulties with CERA Party, the assessee may contact the undersigned / the Deputy Accountant General personally or by telephone, 3. Necessary facilities may plea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any intention to evade payment of duty, they would not have taken initiative to appoint a Cost Accountant. Had the department raised this query in any of the audits during the disputed period, the appellant would have done this exercise of appointing a Cost Accountant then itself. It is well settled law that when the facts were within the knowledge of the department, the allegation that appellants suppressed facts cannot sustain. For the omission on the part of the audit officers to find out the mistake in the method of valuation adopted by appellant cannot be a reason to saddle the appellant with intention to evade payment of duty. 16. The decisions relied by the Ld. Counsel for appellant have held that when the department was aware of facts the extended period cannot be invoked. Similar view was taken in Visen Industries Ltd. Vs CCF vapi - 2009 (235) ELT 280 (Tri.-Ahmd.). 17. From the above discussions, I agree with the view taken by Member (Technical) that the demand is barred by limitation. Registry is directed to place the matter before the Division Bench for recording majority / final orders accordingly. (order dictated and pronoun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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