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TMI Blog2018 (9) TMI 1948X X X X Extracts X X X X X X X X Extracts X X X X ..... se arising out of the Show Cause Notice SCN No. 34/ATT/ADC/B.1/2016 (C. No. IV/06/38/2015-16 HPU B-I (PF)), dated 27-4-2016 issued by the Additional Commissioner of Central Excise, Bangalore-I Commissionerate, inter alia, demanding Central Excise duty to the tune of Rs. 31,00,460/- (Rs. 17,92,936/- + Rs. 13,07,524/-) along with interest. Penal action was also proposed under the Section 11AC of the Central Excise Act, 1944 and personal penalty was also proposed under Rule 26 of the Central Excise Rules, 2002 on the co-applicants. 1.2 The applicant were engaged in the manufacture of Double/Triple Axle Articulated Trailers, Tippers, General Cargo Bodies, Bulk Semi Trailers, etc. falling under Chapter 87 of the Central Excise Tariff Act, 1985. Based on the specific intelligence to the effect that the applicant were evading payment of Central Excise duty by resorting to undervaluation in respect of the Double/Triple Axle Articulated Trailers manufactured and cleared by them, simultaneous searches were conducted by the officers of the HQRS Preventive Unit, Bangalore-I Commissionerate at their factory premises and the residential premise of Shri Gopala Reddy, Managing Partner (one o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... naging Partner, he is taking care of the day-to-day activities of the firm, which includes production, marketing and general administration and one Shri Velmurugan who looks after the manufacturing activity, * As per the requirement of their client the design department prepares the design of the bodies/trailers and accordingly Bill of Material will be prepared and thereafter, the required material will be purchased and manufacturing activity would be launched; * With respect to the Tipper, the input materials are steel, hydraulic kit, machined component, paints and consumable; with respect to trailers, steel axle and suspension kit, break kit, tyres and paints and consumables; * In either case, they receive the chassis for tipper/Cargo bodies and in case of trailers, they receive prime movers; * 'Tyres' are indispensable to any trailer. Manufacture of trailer would not be complete without tyres. However, in this case where they had billed with the remark, 'without tyres', the tyres are supplied by the clients themselves. Hence, such value is not included in the assessable value; 1.6 On scrutiny of the records/documents of M/s. Aditya, Bangalore seized on 26-5-2015 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as per the terms of Section 2(f)(i) of the Central Excise Act, 1944; * They had claimed Nil rate of duty in terms of Sl. No. 276 of Notification No. 12/2012-C.E., dated 17-3-2012 (Condition 27) in respect of Tippers/Load Bodies/Bulkers, * Their customers do not supply them any of the input like steel, consumable, paint and other components for fabrication; * The tippers/load bodies were fabricated as per the specification of the customers with the material that is procured by their unit only; * However, the customers supply them Chassis, on which they do not avail any Cenvat credit, * The practice of non-reversal of Cenvat credit on the value claimed as 'Labour Charges' followed by them is incorrect; * He admitted that they had under-invoiced the actual cost of the Trailers manufactured and removed to their clients and thereby, knowingly evaded the payment of legitimate Central Excise duty, * Being the Managing Partner, he was directly responsible for the purchases, production, marketing, removal and sales activities of the applicant firm. They had to resort to such practice owing to tough competition from the unorganized sector; * He undertook to make complete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicant under the proviso to sub-section (1) of Section 11A/sub-section (4) of Section 11A of the Central Excise Act, 1944; (ii) an amount of Rs. 13,07,524/- being the differential amount payable on account of suppression of the actual value in terms of Rule 6(3) of Cenvat Credit Rules, 2004, in respect of Tippers/Load bodies/Bulkers manufactured and removed during the years 2012-13, 2013-14, 2014-15 and 2015-16 claiming exemption in terms of Notification No. 12/2012-C.E., dated 17-3-2012 under Sl. No. 276 (Condition 27) (as detailed in the Annexures 12, 13, 14 & 15 to the SCN) should not be demanded and recovered from them under the proviso to sub-section (1) of Section 11A/sub-section (4) of Section 11A of the Central Excise Act, 1944, (iii) Appropriate interest should not be paid by the applicant under the Section 11AB/Section 11AA of the Central Excise Act, 1944; (iv) penalty equivalent to the duty as per (i) to (ii) above should not be imposed on the applicant under the Section 11AC of the Central Excise Act, 1944 and/or Rule 25 of the Central Excise Rules, 2002. 1.13 Shri Gopala Reddy B., and Shri K. Ramesha, Partn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * The applicant have paid the admitted amount of Rs. 16,05,691/- towards differential duty involved in respect of the clearance of the excisable goods viz. Double/triple Axle Articulated Trailers, Tippers, General Cargo bodies, Bulk Semi-Trailers, etc. falling under Chapter 87 of the CETA, 1985 during the period from 2011-12 to 2014-15 and an amount of Rs. 13,15,449/- towards interest under Section 11AB/Section 11AA of the Central Excise Act, 1944; 2.2 The applicant humbly requested the Hon'ble Settlement Commission to kindly and carefully examine their submissions and settle the case to the extent of the admitted duty liability and drop the proceedings in respect of the alleged incorrect adoption of AV in respect of removals made under Notfn. No. 12/2012-C.E., dated 17-3-2012. The applicant has also prayed for granting them immunity from penalty and prosecution. Admissibility of the application 3.1 The applications filed by the applicant and the Co-applicants were allotted with the numbers SA(E) 07-09/2018-SC respectively and was allowed to be proceeded with by the Hon'ble Bench on 4-4-2018. Report from the Jurisdictional Commissioner 4.1 The Jurisdictional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant waiver of penalty to the applicant. This view is supported by the Hon'ble Supreme Court's decision in the case of Union of India v. Dharamendra Textile Processors [2008-TIOL-192-SC-CX-LB = 2008 (231) E.L.T. 3 (S.C.)], and also in the case of Union of India v. Rajasthan Spinning and Weaving Mills Ltd., vide Order dated 12-5-2009 [2009 (328) E.L.T. 3 (S.C.)]. * The partners Sri Gopala Reddy and Sri Ramesha K. who were in full control of the affairs of the applicant firm have resorted to evasion of duty and have admitted that they have done so owing to tough marketing compulsions and competitions. In view of this, personal penalties may also be imposed on them in terms of Rule 26 of the Central Excise Rules, 2002. * Further, Shri Gopala Reddy. B., Partner was also involved in another case where the application has been filed with Settlement Commission as Managing Director of another company M/s. Aditya Auto Engineering Pvt. Ltd. In view of this owing to the active involvement of these two partners in evasion of duty by the assessee being clearly proved, Settlement Commission may be requested not to grant immunity from penalty on them. Following judgments are relied in this reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty in terms of Sl. No. 276 of the impugned Notification in respect of the said goods. 5.3 The Learned Advocate submitted that the applicant has accepted a differential Central Excise duty of Rs. 16,05,691/- towards undervaluation, as against the amount of Rs. 31,00,460/- demanded in the show cause notice; they admitted the clearances of excisable goods without adopting correct assessable value during the period 2011-12 to 31-3-2016; the applicant does not dispute the quantification in respect of the alleged clearances, however, they are eligible for cum-duty benefits, as they have not collected Central Excise duty from their clients and also paid Service Tax @ 12.36% instead of paying duty @ 6%. With regard to incorrect adoption of assessable value on account of non-inclusion of labour charges, the applicant submitted that they had paid Service Tax at the applicable rate on such value claimed as labour charges. The differential excise duty had been calculated @ 6% on the value of labour charges, whereas they have paid Service Tax @ 12.36% on such value. 5.4 With regard to non-inclusion of the value of the tyres, the applicant submitted that they had not received any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retrieved from the applicant and statements recorded from various senior functionaries corroborates the failure of the applicant, as narrated above. Accordingly, they are liable for penalty. Findings of the Bench 6.1 The Bench had carefully gone through the case and taken note of the submissions made on behalf of the applicant and the Revenue. Duty and Interest 6.2 This is a case where the applicant who was engaged in the manufacture of excisable goods such as Double/Triple Axle Articulated Trailers, Tippers, General Cargo Bodies, Bulk Semi-Trailers etc. falling under Chapter 87 of the Central Excise Tariff Act, 1985 had resorted to undervaluation in respect of the above said excisable goods that were manufactured and cleared by them and non-adoption of correct and complete value in terms of Rule 6(3) of the Cenvat Credit Rules, 2004. 6.3 Investigations conducted by the Officers of Headquarters Preventive Unit, Bangalore-I Commissionerate, resulted in issue of show cause notice in the impugned case demanding Central Excise duty to the tune of Rs. 31,00,460/- along with applicable interest. Penal provisions were also proposed on the applicant and co-applicants. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... secution also stated that they will not seek any refund on account of payment of Service Tax @ 12.36% instead of Central Excise duty @ 6%. 6.8 The Bench also noted that on the same issue of payment of Service Tax @ 12.36% on labour charges instead of Central Excise duty @ 6% in the case of M/s. Aditya Auto Engineering Ltd. wherein the co-applicant in the instant case is the Managing Director, an order was already passed by this Bench vide Order No. 12-13/2017-C.EX., dated 29-5-2017 based on the report of the Principal Commissioner of Central Excise, Bangalore-I Commissionerate in C. No. V/87/15/38/2016-Adjn. B1, dated 23-2-2017 wherein it was reported that "Since the Department has accepted the payment of Service Tax, though wrongly paid, without raising any objection, it is felt that the demand @ 6% on the same value may be adjusted from the amount paid @ 12.36% as Service Tax". 6.9 In view of the foregoing, considering the report of the Revenue in the instant case which reiterated the earlier stand of the Principal Commissioner to consider the applicant's request to adjust the payment made as Service Tax against the demand of 6% of differential Central Excise duty, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement Commission, the co-applicant has not provided any comments but has only remarked as 'Not applicable'. 6.13 On the above issue of filing subsequent application before the Settlement Commission again by the co-applicant, was examined by the Bench and the Bench has come to the conclusion that penalty was proposed to be imposed on Shri Gopala Reddy B., the Managing Director of the applicant company under Rule 26 of the Central Excise Rules, 2002 and not on the ground of concealment of particulars of his own duty liability, penalty under Section 11AC of the Central Excise Act, 1944 and Rule 25 of CER, 2002 was proposed in respect of concealment of duty liability only on M/s. Aditya Auto Engineering (P) Ltd. 6.14 In this regard, the Bench observes that bar on subsequent application for settlement in certain cases is governed by the provisions of Section 32-O of the Central Excise Act, 1944, which reads as follows :- "Where, - (i) an order of settlement provides for the imposition of a penalty on the applicant under Section 32E for settlement, on the ground of concealment of particulars of his duty liability, or &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitting the practice of non-reversal of Cenvat credit on the value claimed as 'Labour charges' followed by them as incorrect, he undertook to rectify the mistake in respect of such clearances immediately. 6.17 From the case records it is ascertained that both the partners of the applicant firm, Shri Gopala Reddy B. and Shri K. Ramesha were the key persons fully involved in the day to day activities of the firm and had masterminded the modus operandi to evade payment of Excise duty. Hence penalty is imposable on the co-applicants. However, considering the co-operation extended in the proceedings before the Bench true and full disclosure made before the Bench, and the applicant had paid Service Tax @ 12.36% instead of 6% CED (this 2nd component of the demand comes to Rs. 13,07,524/-), the Bench is inclined to take a lenient view and grants partial immunity from penalty to the co-applicants. Prosecution 6.18 Considering the facts and circumstances of the case, the Bench is inclined to grant immunity from prosecution to the applicant and the co-applicant. ORDER 7.1 In the light of the above, the Bench settles the case under Section 32F(5) of the Central Excise Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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