TMI Blog2005 (11) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... cts : 2. By the show cause notice dated 14-2-2000, the appellant ITI Ltd. were called upon to show cause as to why the assessment of RT-12 finalized, should not be reopened and the amount of Rs. 11,03,11,879/-, being the differential amount of duty payable on the value of clearances, realized as per commercial invoices for the period from March, 1995 to August, 1999 in respect of sale of OCB 283 Telephone Exchanges and the value of technical charges, should not be demanded from them under Rule 9(2) of the said rules read with the proviso to Section 11A(1) of the said Act; and why interest should not be demanded, as indicated in the show cause notice. 3. The appellant is manufacturer of Telecom Equipments having its registered corporate office at Bangalore. The appellant had manufacturing units at Bangalore, Mankapur, Raibarelly and Srinagar. From 1994-95 onwards, the appellant company was manufacturing its improved version of Exchanges which were of different types such as Local Tax, and Tandem Exchanges. Various components of an OCB 283 Exchange were CORE, CSN, MDF, Interconnecting Equipments and DTS items like power plant, battery, inverter, etc. 3.1 On information being re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000/- and furnish a bank guarantee for Rs. 2,50,000/-. 3.4 It was alleged in the show cause notice that the assessee had on 14-3-97, requested the Range Superintendent to finalize the clearances from 1-4-94 onwards since the excise duty was payable only on the invoices, as declared in the Budget of 1994-95 by the Government of India. It was also alleged that the Assistant Commissioner was requested by the noticee to clear the excisable goods beyond 11-7-97 without execution of the bank guarantee and bond till such time RT.12 assessments were not finalized and they had even requested for return of the expired bank guarantee on the footing that the assessments up to October, 1997 had been finalized. According to the stand taken by the Revenue, as was reflected in paragraph 34 of the show cause notice, the finalization of the assessment was carried out with the constructive participation of the assessee who accepted the finalization of provisional assessment for the period from September, 1989 to October, 1996 and also claimed refund of duty, which was granted on 16-12-98. It was then alleged in paragraph 36 of the show cause notice that, the assessee neither made any formal request ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Since the price indicated in the purchase order was "cum-duty" price and was inclusive of freight and transit insurance, the expenses representing taxes, freight and transit insurance were required to be deducted for arriving at the assessable value. It was also stated that invoices at the time of clearances of the goods were purely provisional or tentative and were prepared on the basis of the prices quoted by them in the tender, which was submitted to the DOT. The provisional price offered in the P.O. was based on the average "per line" price of the tender and the provisional assessments could be finalized only after the price to be paid to the assessee was finalized by DOT. Moreover, at the time of finalizing the assessment, it would be necessary to deduct from the final price the expenses representing the taxes, freight and transit insurance, as per the settled law. It was pointed out while denying the allegations regarding evasion of excise duty that, the consolidated invoices issued by ITI, Palakkad unit did not represent the consideration or the sale value of the goods manufactured by them, but they also included the value of "bought out" items supplied direct to site as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod 1994-95 to 1999-2000, while the department had taken into consideration the data only in respect of 180 exchanges and omitted the other transactions where the consolidated bills were raised and the amount was much lower than the accounting bills at the time of clearing the goods. On the basis of the revised work-sheet, the differential duty payable was worked out at Rs. 5,99,82,211/- which was inclusive of the amounts claimed by way of refund under fifteen claims submitted to the department. The assessee requested for finalizing the provisional assessments in terms of Rule 9B(5) and for determining the duty finally payable by them taking into account the refund claims made by the assessees which were not honoured till then. In their further reply dated 3-10-2000, revised work-sheets were submitted in respect of the differential duty which according to them was payable to them, as per which the amount was reduced to Rs. 5,61,99,693/-. It was submitted that the duty of Rs. 11,03,11,879/- proposed to be demanded in the show cause notice stood revised to Rs. 4,00,84,153/-, because of the price finalization and that they had already submitted evidence in their reply to the show caus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he procedure under Rule 9B was warranted. It was held that there could not be any provisional assessment without a bond or bank guarantee and that the bank guarantee earlier executed had expired and the assessee had requested for return thereof. It was held that there was no conditional assessment of RT. 12 up to October, 1996 and that these were finally assessed. The contention of the assessee that the assessments were required to be finalized under Rule 9B(5) and dues, if any, could thereupon be recovered under the law was, therefore, rejected. 5.1 On the question of wilful suppression of facts relating to actual realization against clearances through the commercial invoices as per the purchase orders and payment of duty of the lower value shown in the excise invoices, it was held in paragraph 60 of the order that the assessable value was required to be arrived at on the basis of all inclusive "per line" price as per the commercial invoice, and duty was to be paid accordingly. It was observed that Palakkad factory of the assessee was manufacturing the most important part, namely, CORE of OCB exchanges and therefore, billing of OCB exchanges was centrally done at Palakkad unit, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and the amount received from customers was the higher amount indicated in the commercial invoice and entered in the Bills Realization Register; that the difference worked out to Rs. 29.14 crores in respect of 24 cases; that the procedure of issuing two types of invoices with different amounts and realization of higher amounts from the customers and retaining duty portion was not made known to the department; that at the time of finalization of RT 12 up to October, 1996, this position was suppressed from the department resulting in short payment of duty and that this position was brought to light only because of investigations; that the internal correspondence revealed that the assessee was aware of the consequences (for two types of invoices) but in spite of that they had resorted to the course of undervaluation with intent to evade payment of duty and defraud the Government; and, that the persons involved in the day to day financial matters were aware of such procedure, but did not inform the department and did not rectify their mistake resulting in the losses to the exchequer. Arguments on behalf of the appellants : 6. The learned Counsel appearing for the appellants in all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Commissioner on 10-3-97 were in the context of those price lists and the assessments after 1994-95 were still to be finalized even according to that order. He argued that the endorsement which was made on the RT.12 registers by the Superintendent referred to the condition on which the finalization was made. On this aspect, he also submitted that the order finalizing the provisional assessment was required to be made by the same officer, namely the Assistant Commissioner, who had made the initial order, and the Superintendent could not have made any order for finalizing the assessment under Rule 9B(5) of the said rules. He further submitted that there was no need to make any formal request for provisional assessment after the amendment made in Rule 9B(5) of the said rules on 20-11-96. He contended that after the said date, since the price lists were not finalized, the appellant was entitled to resort to provisional clearances subject to the directions of the Assistant Commissioner and that such provisional clearances continued until the rejection order came to be made by the Commissioner on 21-9-2001. Till that date, since admittedly, there was no direction from the Assistant Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment effected during finalization of classification list or price list. Such payment during the interregnum will also be provisional even if Rule 9B was not followed. In paragraph 6 of the judgment, it was held that the decision of the Supreme Court in Samrat International (P) Ltd. envisaged that payment of duty on provisional basis pending decision of classification list or price list would be treated as provisional even if the procedure contemplated by Rule 9B was not followed. (B) The decision of the Tribunal in Commissioner Central Excise, BBSR v. India Flogates Ltd., reported in 2000 (122) E.L.T. 537 (Tribunal) = 2000 (40) RLT 303 (CEGAT), was cited for the proposition that Section 11B of the Act would not be applicable to credit or adjustment of excess determinations paid as permissible under Rule 173-I and there was no time limit for completion of assessment fixed under Rule 173-I. It was held that when assessments were provisional under Rule 173-B, 173-C read with Rule 9B or deemed to be so under Rule 173CC, the time limit prescribed under Section 11B would arise only from the date of payment of duty i.e. the finalization of assessment. However, the position would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the assessment order made in 1991 was made at the assessee's request, as they were not sure about the final prices that the DOT would fix, and it was at the instance of the assessee as reflected from their letters dated 30-3-97 and 14-3-97 that, the assessment came to be finalized up to October, 1996 on the basis of the excise invoices price reflected in RT.12. It was submitted that the fact that a formal order of the nature contemplated by Rule 9B(5) was not made, was merely a technical lapse, because even if such final order were to be issued, the result would have remained the same, namely, the acceptance of the invoice prices, as mentioned in RT.12 (returns) by the assessee. It was also submitted that an order of assessment as endorsed on RT.12 could have been made by the Superintendent, under Rule 173-C(6) of the said rules. He further argued that the assessee allowed the guarantee to expire and asked the authority to return it by treating the provisional assessment as having become final till October, 1996. He pointed out that the amendment in Rule 9B was effected only from 20-11-96 and that the prior provision was different, under which the assessee could not have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue when no evidence was produced to prove that such was actually rendered to the customers. These words reflected in the catch note in context of paragraph 6 of the order do not appear in that paragraph. It appears that the catch note is formulated on the basis of the Tribunal not finding any infirmity in the Commissioner's order in which the Commissioner had held that the installation/training charges were all includible in the assessable value, because, in the absence of evidence the contention of the assessee that they had actually provided services to the customers, could not be accepted. REASONS : 8. The main controversy centres around the question whether after the passing of the provisional assessment order on 6-8-91, the assessments continued to be provisional even on the date of issuance of the show cause notice, and, therefore, the show cause notice was pre-mature. There is no dispute about the fact that the provisional assessment order was made on 6-8-91 by the Assistant Commissioner in response to the request made by the assessee, for provisional assessment under Rule 9B. It was noted in paragraph 2 of that order that the assessee had been filing price lists in part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the condition that they (assessee) should pay the consequential differential duty along with interest thereon irrespective of the statutory time limit prescribed under Section 11A of the Central Excise Act, 1944, and any other law for the time being in force without waiting for a notice from the department. Compliance report was required to be furnished within a week of that order. It is evident from the wordings of the said order that it was not a final order under Rule 9B, and was only a direction for finalizing the provisional assessment orders and seeking compliance report. Pursuant to this direction, it appears that the Superintendent wrote to the assessee the letter dated 12-3-97 requiring the documents/details regarding various issues enumerated therein to be furnished by the assessee "for finalization of provisional assessment". Final price lists for each period from 1989 with invoices, gate passes and PLA were required to be made available immediately and particulars of the depot sales figures with corresponding clearance particulars, where the goods were removed from the factory, were required to be furnished. Details of octroi deductions claimed were sought year-wise. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject to the condition that the assessee should pay the consequential differential duty with interest, if any, as per the provisions of the said Act and the rules. It was further stated that the provisional assessment pending for the period from "August, 89 to March, 94", and "April, 94 to till date", may be finalized subject to the said condition. It will be seen from the said order dated 10-3-1997 of the Assistant Commissioner that final price lists for the period August, 89 to March, 94 were approved subject to the condition mentioned therein and there was a direction that the provisional assessments may be finalized for the pending periods. This order was clearly not a final assessment order made under Rule 9B(5), as has been sought to be assumed by the concerned authorities. The endorsements made below RT 12s which were returned to the assessee though purporting to have been passed on the basis of the said "final assessment order" dated 10-3-97 made by the Assistant Commissioner, cannot be construed as final assessment order, as contemplated by Rule 9B(5) of the said rules. We may here, again note that on 12-3-97 the Superintendent had sent a communication to the assessee stati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisional assessments. The final price lists of subsequent period were also sought, because the earlier final price lists were submitted only till March, 1994. Therefore, there was no question of any final assessment order having been issued on 10-3-97, when the Superintendent was still trying to collect the relevant material for the purpose of reporting to the Assistant Commissioner in the process of making of an order of final assessment, as contemplated by Rule 9B(5) of the said rules. 9.4 In this context, we may also refer to the letters written by the assessee to the Revenue authorities, which would indicate that finalization of assessment after 1994-95, was still pending. In the letter dated 13-3-97, on the issue of price escalation, it was stated that the Department of Telecom had finalized the prices up to 1993-94 only and that supplementary escalation claim bills were raised wherever applicable as per the agreement up to 1993-94, and the necessary excise duty had been paid then and there and reflected in the RT.12 returns of the relevant months. It was stated that the final price lists up to 1993-94 with necessary certification by the Chartered Accountant was being su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Superintendent, as reflected from the endorsement. This leads us to a consideration of the provisions of Rule 9B(5). The said sub-rule (5) of rule 9B is the same before and after the amendment which was made on 20-11-96 and is reproduced hereunder :- "9B-Provisional assessment to duty- (1) Notwithstanding anything contained in these rules, - x x x x x x x x x x x x x x x x x x x x (5) When the duty leviable on the goods is assessed finally in accordance with the provisions of these rules, the duty provisionally assessed shall be adjusted against the duty finally assessed, and if the duty provisionally assessed falls short of, or is in excess of the duty finally assessed, the assessee shall pay the deficiency or be entitled to refund, as the case may be." The scheme of Rule 9B indicates that the provisional assessment to duty would ultimately be finalized in accordance with sub-rule (5) of Rule 9B. Duty leviable on the goods is required be finalized in accordance with the provisions of the rules, and when it is so finalized, the provisionally assessed duty is required to be adjusted against the duty finally assessed. The expression "shall be adjusted against the duty final ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f RT-12s which were sent back to him relying upon the erroneous endorsements of the Superintendent. Mistaken concession of an assessee cannot substitute a lapse in exercise of statutory duties which are mandatory in nature. 11. It was submitted that there was an amendment made in Rule 9B(1) with effect from 20-11-96 and that the earlier corresponding provision required prior permission for provisional assessment and, therefore, without following the procedure again, the assessee could not have claimed the benefit of the provisional assessment under Rule 9B. 11.1 Rule 9B(1), as it existed prior to amendment on 20-11-96, read as under : "9B. Provisional assessment to duty,- (1) Notwithstanding anything contained in these rules,- (a) where the proper officer is satisfied that an assessee is unable to produce any document or furnish any information necessary for the assessment of duty on any excisable goods; or (b) where the proper officer deems it necessary to subject the excisable goods to any chemical or any other test for the purpose of assessment of duty thereon; or (c) where an assessee has produced all the necessary documents and furnished full i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te or at such value as declared by the assessee, till the date when the direction of the proper officer is issued and communicated to the assessee. Provided further that the proper officer where he is satisfied that the self assessment made by the assessee is not in order, he may direct him to resort to provisional assessment and on receipt of such directions the assessee shall comply with such directions." 11.3 It will be noticed from the pre-amended rule that the proper officer, on a request made by the assessee or suo motu, was empowered to direct that the duty leviable on the goods shall, pending the production of the documents or furnishing of the information or completion of the test or enquiry, as contemplated in the rule, be assessed provisionally at such rate or such value, as may be indicated by him, if the assessee executed a bond in the prescribed form with such surety or sufficient security in such amount, or under such conditions as the proper officer deemed fit, binding himself for payment of the difference between the amount of duty as provisionally assessed and as finally assessed. 11.4 The post amendment provision of Rule 9B(1) operated, where the assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the bank guarantee was so revived and both, the bond and the bank guarantee were continued all throughout. The Assistant Commissioner did not send any communication rejecting the request of the assessee till 21-9-2001, as noted in paragraph 56 of the impugned order. In other words, there was no contrary direction issued on the assessee till 21-9-2001, so as to deny it the benefit of the first proviso to Rule 9B(1) under which clearances of the excisable goods covered under the request by the assessee were to be deemed to be cleared as provisionally assessed to duty. In this view of the matter, as on the date of issuance of the show cause notice dated 14-2-2000 all the clearances made by the assessee were deemed to have been cleared as provisionally assessed to duty, since at no point of time prior to 21-9-2001 either was there a contrary direction, as contemplated under Rule 9B(1) first proviso, or was there any final assessment order made under Rule 9B(5) of the said rules. The show cause notice was, therefore, clearly pre-mature and the findings reached to the contrary by the Commissioner in the impugned order, cannot be accepted. 12. The Commissioner has proceeded on the foo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s direct to the site as well as items supplied by the other units. It is also evident from the inter office note dated 8-6-95, a copy of which is on record, that the OCB supplies consisted of supplies from Palakkad, and "direct to site" supplies from various manufacturers to site, based on their POs of respective manufacturers, and that some more equipments were supplied from Bangalore and Mankapur units of the assessee. It was stated that their corporate office had decided that Palakkad Unit had to claim realization on behalf of all units by raising a commercial invoice based on "per line" cost basis. It was proposed to number these commercial invoices in separate serial Nos. The office note reflects the concern of the assessee to observe all the formalities of Central Excise. By letter dated 16-10-95, the assessee informed the Assistant Commissioner in continuation of their communication dated 7-8-95, that for the purpose of consolidated invoices they were now to use serial Nos. 5920001 to 5921000 instead of the serial Nos. intimated earlier. In their internal communication of March 20, 1998, which is on record, there was a reference to the fact that the despatches of the CSN/OCB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly indicated that the assessee was to supply goods and services including the items which were not to be manufactured in the Palakkad factory of the assessee. Excise duty could be levied in respect of excisable goods manufactured and removed from the Palakkad factory while assessing that unit and not for the goods not manufactured there and supplied from elsewhere, or those manufactured from the other factory units of the assessee and removed and accounted for by raising proper excise invoices. 13.1 The Bid documents and purchase order which are on record clearly indicate that the contract was for supply of goods and services. The word "goods" as defined in the Bid documents meant all the equipment, machinery, and/or other materials which the supplier was required to supply to the purchaser under the contract. The expression "contract price" was defined in clause (g) so as to mean the price payable to the supplier under the purchase order for the full and proper performance of its contractual obligations. Though as per clause 6.3 of the general conditions, technical assistance for installation, commissioning and monitoring of equipment was to be provided by the bidders at no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t including associated equipment accessories, iron works, spares etc. and also shall be inclusive of power plant, battery, MDF associated accessories, spares, etc. Any increase in taxes/duties and other statutory levies etc. after expiry of the delivery schedule shall be on the contractor's account while benefit of any decrease in these taxes/duties etc. shall be passed on to the purchaser by the contractor. 8.2 (1) Any statutory variation affecting the prices within the scheduled delivery period shall be to purchaser's account. Any increase beyond scheduled delivery period shall be to supplier's account, but the benefit of any downward revision shall be to purchaser's account. The effect of variation shall be allowed by way of adjustment invoice/contract value. 8.2 (2) It has been further stated that due adjustment is to be made for any item in the material list which was not originally quoted in the tender by M/s. ITI. The provisional cost works out to Rs. 18,63,84,000/- (Eighteen crores sixty-three lakhs eighty-four thousand) only. This is subject to fixation of final cost on finalisation of the price/itemized price as per Telecom Commission Letter No. 113-223/96 MMD/III d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total purchase price for the exchange unit which were bound to be higher than the separate excise invoices, which were prepared in respect of the excisable goods manufactured in the respective units of the assessee. Mere comparison of the consolidated commercial invoices showing the total purchase price of the composite unit to be supplied with the excise invoices of the items manufactured and removed from the respective factories, for holding that duty was evaded, was an erroneous short cut adopted, by failing to consider the fact that the consolidated commercial invoices included several items which could not have been subjected to excise duty in the hands of the assessee in respect of its Palakkad unit which did not manufacture them. It was incumbent on the part of the assessing authority to consider the consolidated commercial invoices for the purpose of finding out what was excisable in the hands of the assessee and what was not, in the light of the excise invoices, to work out the duty liability. 15. For the foregoing reasons, the impugned order confirming the duty demand and imposing penalties on the appellants of these appeals cannot be sustained since, the show caus ..... 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