The Commissioner of Central Excise, Chennai vs Tenneco RC India Private Ltd. and Others

R. Sudhakar, J—Aggrieved by the order of the Tribunal in allowing the appeal filed by the assessee, the Revenue/appellant is before this Court by filing the present appeal. This Court, vide order dated 16.5.2009 admitted the appeal on the following substantial questions of law :-

" Whether on facts and circumstances of the case, the 2nd respondent Tribunal was right in holding that revenue neutral situation as the reason for allowing the 1st respondent''s appeal irrespective of the fact that the 1st respondent has wilfully suppressed the maintenance of dual accounting system and non- inclusion of profit margin in the assessable value of semi-finished goods cleared to their other unit ?"

The assessee is a manufacturer of shock absorbers falling under Chapter Heading 8708 and 8714 of the CETA, 1985. They have two more manufacturing units at Pondicherry and Gurgaon besides the unit at Alandur, Chennai. The Unit at Alandur cleared shock absorber elements on payment of duty and certain types of shock absorber elements in semi-finished condition to their sister Unit at Gurgaon on stock transfer basis which were ultimately sold to M/s. Maruthi Udyog Ltd. after adding items like spring, dust covers, etc. As the goods are in a semi-finished condition and were not of compatable nature, for the purpose of determining assessable value, valuation was resorted to under Rule 6(b) (ii) of Central Excise (Valuation) Rules, 1975 based on cost construction method. On verification, it was noticed that no profit margin was included for the purpose of arriving at the assessable value and since it was projected as if the unit was incurring losses consistently, proceedings in the form of show cause notice were initiated against the assessee demanding differential duty. After following the due process of law, the adjudicating authority, vide the order in original, confirmed the duty amount of Rs. 3,31,115/- payable for the period 1996-97 under the erstwhile Rule 9(2) of CER 1944 read with sub section (1) of CEA 1944, imposed equal penalty under Section 11AC of CEA 1944 and appropriate interest under Section 11AB of CEA, 1944 was also demanded. Aggrieved by that order, the assessee filed an appeal.

The Commissioner (Appeals), vide his order dated 25.06.2007 made in No: 66/2007 (M-IV) confirmed the demand order along with interest made by the adjudicating authority. Challenging the said order, the assessee approached the Tribunal. By its order dated 23.07.2008 made in Appeal No: E/657/2007, the Tribunal allowed the assessee''s appeal and hence, the Revenue is before this Court in this Civil Miscellaneous Appeal.

When this matter is taken up for hearing, it is brought to the notice of this Court by the learned counsel appearing for the parties that similar question has been considered by the Gujarat High Court in the case of Commr. of C. Ex. and Cus. Vs. Indeos ABS Limited, (2010) 254 ELT 628 and the issue raised was answered in favour of the assessee. It is not in dispute that, in an identical matter where a similar issue was raised, the Supreme Court, in the case of Nirlon Ltd. Vs. Commissioner of Central Excise(2015) 8 AD (SC) 105 : (2015) 320 ELT 22 : (2015) 51 GST 177 : (2015) 32 GSTR 319 : (2015) 6 SCALE 13 : (2015) 5 SCJ 339 - CX, affirmed the view taken by the concerned High Court. The relevant paragraphs of the order reads thus,

" 7. We have ourselves indicated that the two types of goods were different in nature. The question is about the intention, namely, whether it was done with bona fide belief or there was some mala fide intentions in doing so. It is here we agree with the contention of the learned senior counsel for the appellant, in the circumstances which are explained by him and recorded above. It is stated at the cost of repetition that when the entire exercise was revenue neutral, the appellant could not have achieved any purpose to evade the duty.

Therefore, it was not permissible for the respondent to invoke the proviso to Section 11A(1) of the Act and apply the extended period of limitation. In view thereof, we confirm the demand insofar as it pertains to show cause notice dated 25.2.2000. However, as far as show cause notice dated 03.03.2001 is concerned, the demand from February, 1996 till February 2000 would be beyond limitation and that part of the demand is hereby set aside. Once we have found that there was no mala fide intention on the part of the appellant, we set aside the penalty as well. "

In view of the said statement made by the learned counsel on either side that the ratio laid down by the Supreme Court in Nirlon Ltd. case cited supra, is applicable to the case on hand, the substantial question of law is answered in favour of the assessee/respondent and against the Revenue/appellant.

Accordingly, the civil miscellaneous appeal fails and the same is dismissed. However, in the circumstances of the case, there shall be no order as to costs.