AURANGABAD ELECTRICALS (P) LTD.versusTHE COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS, AURANGABAD

               [2010] 13 (ADDL.) S.C.R. 957


         AURANGABAD ELECTRICALS (P) LTD.                        A
                             v.
   THE COMMISSIONER OF CENTRAL EXCISE AND
            CUSTOMS, AURANGABAD
          (Civil Appeal No. 2694 of 2006)
                                                                B
                   NOVEMBER 12, 2010
            [D.K. JAIN AND H.L. DATTU, JJ.]

      Central Excise Act, 1944 - ss.11A and 11AC - Central
Excise Rules, 1944 - r. 9(2) and 209A - Show cause notice C
issued to assessee on the allegation that inputs used in
manufacture of assessee's final product were under-valued
which led to evasion of duty - Adjudicating commissioner
passed order demanding differential duty and penalty -
Appellate Tribunal affirmed the order but reduced the penalty D
- Contention of appellant that both, the Commissioner and
the Tribunal non-suited it mainly on the ground that it did not
supply the details of the final product and the landed cost of
the inputs supplied ·during investigation or in their reply to the
show cause notice - On appeal, held: Though the appellant E
did not produce any material/data as to the actual expenses
incurred, however, it did produce a price valuation certificate
issued by its Chartered Accountant - The certificate was
purportedly filed by it before the Appellate Tribunal after the
appeals were heard and reserved for judgment - However, F
technicalities should not defeat rendering of complete justice
to a litigant - Matter remanded to Appellate Tribunal to verify
and consider whether the said certificate which had been
placed on record by the appellant, would assist it in support
of its defence - Administration of justice.
                                                                G
    The appellant-assesee was engaged in the
manufacture of motor vehicle parts, namely 'magneto
assembly'. For manufacture of the final products, viz.
magneto assembly, the appellant-assessee purchased
                        957                                     H
   958    SUPREME COURT REPORTS [2010] 13 (ADDL.) S.C.R.


A some of the inputs from M/s. Bajaj Auto Ltd., which was
  also the principal consumer of its final products. Show-
  cause notice was issued to the appellant-assessee on
  the allegation that it was receiving inputs from Mis. Bajaj
  at under-valued landed cost by not including the element
B of landed cost of inputs incurred on account of sales tax,
  octroi, freight, insurance, loading, unloading and
  handling charges and that the appellant was further
  undervaluing the clearances effected by it to M/s. Bajaj
  so that the production cost by both of them was kept at
C a minimum and central excise duty was discharged at a
  lower value. The appellant-assessee replied to the show-
  cause notice whereafter the adjudicating Commissioner
  passed order demanding differential duty- of Rs.84 lakhs
  under Section 11A(2) of the Central Excise Act, 1944 read
o with Rule 9(2) of the Central Excise Rules, 1944 and
  penalty of Rs.69 lakhs under Section 11 AC of the Act. The
  Appellate Tribunal while confirming the orders of the
  adjudicating Commissioner reduced the penalties
  imposed on the appellant from Rs.69 lakhs to Rs.10
E lakhs.
       In the instant appeal, the appellant contended that
  both the adjudicating commissioner and the tribunal non-
  suited it mainly on the ground that the appellant and M/
  s. Bajaj did not supply the details of the final product and
F the landed cost of the inputs supplied during
  investigation or in their reply to the show cause notice.

         Allowing the appeal, the Court

       HELD:1.1. Though the appellant did not produce any
G material/data as to actual expenses incurred on account
  of freight, loading, unloading charges, profit margin etc.,
  the appellant-assessee submitted that it could have
  supported its defence pleaded in its objections to the
  show cause notice by producing relevant documents
H including the certificate issued by its Chartered
AURANGABAD ELECTRICALS (P) LTD. v. COMMNR. OF 959
       CENTRAL EXCISE AND CUSTOMS

Accountant but due to unavoidable and unforeseen              A
circumstances, could not produce the same. The said
certificate issued by the Chartered Accountant, which is
in respect of valuation of normal price of Magneto
Assemblies manufactured and sold by the appe1lant to M/
s Bajaj in wholesale, points out freight charges incurred     B
by the appellant for getting material from Bajaj to the
appellant, as well as loading and unloading charges,
consumables overheads and profit. If such payment was
made, then the whole premises on which the. show cause
notice issued pales into insignificance. The appellant had    C
produced the Certificate along with the other papers filed
before the Tribunal, may be after the appeals were heard
and reserved for judgment. In the normal course, this
court would not have accepted either the submission of
the appellant-assessee or would have taken note of the        o
certificate. However, keeping in view the well settled
principles laid down by this court that technicalities
should not defeat rendering of complete justice to a
litigant, it is considered appropriate to remand the matter
to the tri!>unal to verify and consider whether the           E
certificate which is already placed on record by the
appellant, would assist them in support of their defence.
[Para 11] [964-A-H; 965-A]

    1.2. The order passed by the tribunal is set aside and
the matter is remanded back to the tribunal to look into      F
the certificate issued by the appellant's Chartered
Accountant and to determine if the appellant had actually
incurred the freight charges, loading and unloading
charges, consumable overheads profit etc. and whether
in the light of this, any of the orders made by the           G
adjudicating authority would stand. [Para 12] [965-B-C]

    CCE, Pune v. Dai /chi Karkaria Ltd. 1999 (84) ECR 4
(SC), referred to.
                                                              H
    960    SUPREME COURT REPORTS [2010] 13 (ADDL.) S.C.R.


A                        Case Law Reference:
          1999 (84) ECR 4 (SC)      referred to         Para 8

        CIVIL APPELLATE JURISDICTION : Civil Appeal No.
    2694 of 2006.
B
        From the Judgment & Order dated 20.12.2005 of the
    Customs, Excise & Service Tax Appellate Tribunal, West Zonal
    Bench at Mumbai, Court No. Ill in Appeal No. E/1836 of 2002.

                                 WITH
c
          C.A. Nos. 2420, 2693 & 2691 of 2006

        Joseph Vellapally, Pratap Venugopal, Surekha Raman,
    Puroshottam Kumar Jha, Namrata (for K.J. John & Co.) for the
    Appellant.
D
       V. Shekhar, B. Sunita Rao, Amey Nargolkar, Zangpo
    Sherpa, B. Krishna Prasad, B.V. Balaram Das for the
    Respondent.

E         The Judgment of the Court was delivered by

      H.L. DATTU, J. 1. In this batch of civil appeals, the
  appellants have challenged the common order passed by the
  Customs, Excise and Service Tax Appellate Tribunal, West
  Zonal Bench at Mumbai in Appeal No.A/2287-2290/WZB/MUM/
F 2005/C-lll/EB dated 20.12.2005.

        2. By consent of the learned counsel, we have taken Civil
    Appeal No.2694 of 2006 as the lead case.

      3. M/s. Aurangabad Electricals Ltd. (for short 'M/s.
G Aurangabad EL') are appellants in this civil appeal. They are
  engaged in the manufacture of Motor Vehicle Parts namely
  'Magneto Assembly' in their factory at Aurangabad. For
  manufacture of their final product, viz. Magneto Assembly, they
  purchase some of the inputs, namely, 'Pick-up Coil', com bush,
H
AURANGABAD ELECTRICALS (P) LTD. v. COMMNR. OF 961
  CENTRAL EXCISE AND CUSTOMS [H.L. DATTU, J.]

charging coil etc. from M/s. Bajaj Auto Ltd. (for short 'M/s. Bajaj')   A
on which appropriate duty is paid by Mis. Bajaj. The appellants
had submitted price declarations applicable to Magneto
Assembly, which were accepted by the department.

     4. The main issue involved in these appeals is the                 B
valuation of Magneto Assemblies cleared by the appellants -
Mis. Aurangabad EL to Mis. Bajaj and consequent short
payment of duty thereon on account of not taking into account
the total landed cost of the inputs supplied by Mis. Bajaj.

     5. The Commissioner, Central Excise and Customs,                   C
Aurangabad (for short 'the Commissioner'), issued a show
cause notice dated 27.04.2001, inter-alia alleging that the
appellants have undervalued the Magneto Assemblies supplied
to M/s. Bajaj during the period from April 1996 to December
2000. Accordingly, the appellant, M/s. Bajaj, Mr. Anil Mali, CEO        D
of Mis. Aurangabad EL and Mr. Ranjit Gupta, Vice-President
(Materials) of M/s. Bajaj were called upon to show cause as to
why the differential duty specified in the notice should not be
demanded and recovered urider Section 11 A of the Central
Excise Act, 1944 (for short 'the Act') and why interest and             E
penalty should not be imposed under Sections 11AB and 11AC
of the Act. The show cause notice was also issued to Mr. Anil
Mali, Chief Executive Officer of the appellant, M/s. Bajaj and
Mr. Ranjit Gupta of Mis Bajaj wrre asked to show cause as to
why penalty should not be imposed under Rule 209 A of the               F
Central Excise Rules, 1944 (for short 'the Rules').

     6. The appellants had replied the show cause notice, inter-
alia, contending that they have not undervalued their final
products namely, Magneto Assembly, since the same are
cleared in wholesale trade in accordance with proviso (i) to            G
Section 4(1 )(a) of the Act. They had also contended that they
had cleared the Magneto Assemblies in accordance with
approved price declarations and finalization of RT 12 return
assessment. Therefore, show cause notice and the demands
raised were barred by limitation under Section 11A(1) of the            H
    962   SUPREME COURT REPORTS (2010) 13 (ADDL.) S.C.R.


A Act. The co-noticee, more or less on the same lines as the
  appellants, had objected to the show cause notice and had
  further submitted that the department has not produced any
  proof that the co-noticee was anyway connected with the
  alleged under-valuation of inputs which were cleared by M/s.
B Bajaj on payment of appropriate duty and it was also contended
  that the entire notice was based on assumption and
  presumption and, therefore, it could not be established that the
  co-noticee was concerned with the exercisable goods which
  he knew or had reason to believe were liable for confiscation.
c It was further contended that since there was no undervaluation
  of excisable goods, no penalty could be imposed by invoking
  Rule 209A of the Rules.

         7. After adjudication, the Adjudicating Commissioner
    passed an Order-in-Original No.04/CEX/2002 dated
D   25.01.2002, inter-alia holding that the inputs supplied to
    appellants by M/s. Bajaj were under-valued, and consequently,
    Magneto Assemblies supplied to Mis. Bajaj have been under-
    valued leading to evasion of duty. It was also held that M/s. Bajaj
    was incurring expenditure on account of freight/insurance,
E   loading/unloading and handling charges etc. which, along with
    profit margins, had not been included in the landed cost of the
    inputs supplied to appellants. Further, Mis. Bajaj were supplying
    drawings/designs/specifications free of cost to appellants and
    upto 20% of the production cost of goods manufactured which
F   were sold back to M/s. Bajaj, was being incurred by M/s. Bajaj.
    The Adjudicating Commissioner, accordingly, confirmed the
    differential duty demand of Rs. 84,27,889/- under Section
    11A(2) of the Act read with Rule 9(2) of the Rules, and penalty
    of Rs. 69,72,104/- under Section 11AC of the Act. The
G   Adj1.1dicating Commissioner also imposed a penalty of Rs.
    5,00,000/- on Mis. Bajaj, as well as personal penalty of Rs.
    50,000/- on Mr.Ranjit Gupta, Vice-President of Mis. Bajaj and
    Rs. 25,000/- on Mr. A.R. Mali, Chief Executive.Officer of M/s.
    Aurangabad EL, under Rule 209A of the Rules. The
H   Adjudicating Commissioner also directed the Deputy
AURANGABAD ELECTRICALS (P) LTD. v. COMMNR. OF 963
  CENTRAL EXCISE AND CUSTOMS [H.L. DATTU, J.]

Commissioner, Central Excise, Aurangabad II division to               A
quantify the interest payable under Section 11AB of the Act and
issue appropriate demand notice.

     8. The appellants and other co-noticees, being aggrieved
by the aforesaid order, preferred appeals before the Customs,
                                                                      B
Excise and Gold (Control) Appellate Tribunal (for short 'the
Tribunal') under Section 358 of the Act. The Tribunal, by its
order dated 20.12.2005 has remanded the matter to the
Adjudicating Commissioner for re-computation of excise duty
to be levied in the light of the decision of this Court in the case   C
of CCE, Pune v. Dai /chi Karkaria Ltd., 1999 (84} ECR 4 (SC}.
In so far as the penalties imposed on the appellants, the
Tribunal being of the view that the same is excessive, has
reduced the penalty from Rs. 69, 72, 104/- to · 10 lakhs, and in
so far as the penalties imposed on Mis. Bajaj and the other two
appellants, the Tribunal has confirmed the same.                      D

      9. We have heard Mr. Joseph Vellapally, learned senior
counsel for the appellants and Mr. V. Shekhar, learned senior
counsel for the Revenue. We do not propose to notice the
submissions made by the learned senior counsel in view of the         E
final order that we intend to pass in these appeals.

     10. The main allegation against the appellants in the show
cause notice issued was that the appellants are the
manufacturers of Magneto Assemblies and are receiving inputs
from M/s. Bajaj, which is the primary consumer of their goods         F
at under-valued landed cost by not including the element of
landed cost of inputs incurred on account of Sales Tax, Octroi,
Freight, Insurance, loading, unloading and handling charges.
The appellants are further undervaluing the clearances effected
by them to M/s. Bajaj since the appellants are already receiving      G
the price compensation in terms of inputs at reduced landed
cost and thereby they are aiding each other for mutual business
interest so that the production cost by both of them kept at
minimum and central excise duty is discharged at a lower value.
                                                                      H
    964    SUPREME COURT REPORTS [2010] 13 (ADDL.) S.C.R.


A         11. The learned senior counsel for the assessee would
    submit that the adjudicating commissioner and the Tribunal has
    non-suited the appellants mainly on the ground that the
    appellants and Mis. Bajaj have neither supplied the details of
    final product and the landed cost of the material supplied during
B   investigation nor in their reply to the show cause notice. It is
    also observed that the appellants did not produce any material/
    data as to actual expenses incurred on account of freight,
    loading, unloading charges, profit margin etc. The learned
    senior counsel would submit that the appellants could have
c   supported their defence pleaded in their objections filed to the
    show cause notice by producing relevant documents including
    the certificate issued by its chartered accountant but due to
    unavoidable and unforeseen circumstances, they could not
    produce the same. It is submitted that this lapse should not be
    put against the appellants and non-suit them only on this ground.
0
    In support of his submission, he would draw our attention to the
    Certificate issued by the Chartered Accountant in respect of
    valuation of normal price of Magneto Assemblies manufactured
    and sold by M/s. Aurangabad EL to M/s Bajaj in wholesale,
    which was in support of costing. The said Certificate issued by
E   Mukund Mankar and Co., Chartered Accountant, points out
    freight charges incurred by M/s. Aurangabad EL for getting
    material from Bajaj to M/s. Aurangabad EL, as well as loading
    and unloading charges, consumables overheads and profit. If
    such payment was made, then the whole premises on which
F   show cause notice issued pales into insignificance. The
    appellant had produced the Certificate along with the other
    papers filed before the Tribunal, may be after the appeals were
    heard and reserved for judgment. In the normal course, we
    would not have accepted either the submission of the learned
G   senior counsel or we would have taken note of the Certificate.
    Keeping in view the well settled principles laid down by this
    Court that technicalities should not defeat rendering of complete
    justice to a litigant, we think it appropriate to remand the matter
    to the Tribunal to verify and consider whether the Certificate
H
AURANGABAD ELECTRICALS (P) LTD. v. COMMNR. OF 965
  CENTRAL EXCISE AND CUSTOMS [H.L. DATTU, J.]

which is already placed on record by the appellant, would assist     A
them in support of their defence.

     12. In view of the above, we allow these appeals and set
aside the order passed by the Tribunal and remand the matter
back to the Tribunal to look into the certificate issued by Mukund
                                                                     8
Mankar and Co., Chartered Accountant and to determine if M/
s. Aurangabad EL had actually incurred the freight charges,
loading and unloading charges, consumable overheads profit
etc. and whether in the light of this, any of the orders made by
the Adjudicating Authority would stahd. Since we are remanding       C
the matter for fresh disposal, we also permit both the parties
to urge such contentions which are available to them, including
the submissions made before us. In the facts and circumstances
of the case, parties are directed to bear their own costs.

B.B.B.                                          Appeal allowed.      D