Supreme Court of India
COMMISSIONER OF CENTRAL EXCISE, NEW DELHIversusINDIA THERMIT CORPORATION LTD. & ORS.
- Citation
- 2008 INSC 571
- Decided
- 1 May 2008
- Disposal
- Dismissed
- Bench
- ASHOK BHAN
Holding
The revenue cannot reopen the same valuation issue for the same period after earlier adjudication orders have become final; consequently, second proceedings are barred and the alleged undervaluation is rejected where the transaction is at arm’s length.
Summary
The Commissioner of Central Excise issued a show‑cause notice on 18 January 1999 demanding differential excise duty and penalties from India Thermit Corporation Ltd. (ITCL) and its subsidiary Asiatic Thermics Ltd. (ATL) for alleged mis‑classification, suppression of facts and undervaluation of thermit portions and dry moulds. Earlier show‑cause notices had been issued between November 1995 and June 1996, and orders‑in‑original were passed between January 1996 and January 1997, which the department did not challenge and thus became final. The respondents contended that the 1999 notice was barred by limitation and that the earlier adjudications precluded a fresh demand for the same period, and that the transactions between ITCL and ATL were at arm’s length, negating any undervaluation. The Tribunal held that the department could not re‑agitate the same issue for the remaining period and dismissed the revenue’s appeals; it also held that the subsidiary‑holding company transactions were at comparable prices and therefore not undervalued. The Supreme Court affirmed the Tribunal’s reasoning, dismissing the appeals and ordering each party to bear its own costs.
Issues considered
- Whether a fresh show‑cause notice and demand for differential duty can be issued for the same period after earlier adjudication orders have become final.
- Whether the limitation period under Section 11A of the Central Excise Act bars the 1999 notice.
- Whether transactions between a subsidiary and its holding company constitute undervaluation when conducted at arm’s length.
- Whether the revenue may re‑agitate the same valuation issue for the remaining period after part of it has been adjudicated.
Legislation cited
- Central Excise Act, 1944s. 11A, s. 35-L, s. 4
- Central Excise Rules, 1944s. Rule 1730, s. Rule 209-A, s. Rule 226, s. Rule 9(2)
Subjects
central excisevaluationlimitation perioddouble jeopardyrelated personsarm's length transactiondifferential dutymis‑classificationpenaltySection 11ASection 35-L
Judgment
[2008] 7 S.C.R. 512
A COMMISSIONER OF CENTRAL EXCISE, NEW DELHI
v.
INDIA THERMIT CORPORATION LTD. & ORS.
(Civil Appeal Nos.8350-8354 of 2002)
MAY 1, 2008
B
[ASHOK BHAN AND. DALVEER BHANDARI, JJ.)
Central Excise Act, 1944 - s.11A - Demand -
Suppression of facts - Extended period of limitation -
c Invocation of - Orders-in-original passed between 22. 1. 1996
and 31.1.1997 in respect of SCNs issued between 27.11.1995
to 3.6.1996 - In all these orders, there was common issue of
valuation of goods - These orders were not challenged by
department and hence became final - SCN dated 18. 1. 1999
issued more than 3 years after the first SCN dated 27. 11. 1995
0 was issued covering the same issues - Challenge to - Held:
Since earlier adjudications were accepted on the same issue
for part of the period, revenue cannot be permitted to re-agitate
the same issue for part of the remaining period - There cannot
be second proceedings raising the demand for the same
E period.
s. 4 - Related person - Undervaluation of goods - Supply
of goods by subsidiary company to holding company -
Demand of differential duty on the ground that subsidiary
company undervalued the goods resulting in non-payment of
F duty - Held: Since transaction to holding company was at the
same price as to other purchaser, there was arms length
transaction and hence no undervaluation of goods.
Respondent no.1 had been engaged in the
G manufacture of Thermit Portion. The 20% of its
production was sold outrightly to Indian Railways and
80% was consumed for the rail jointing work of Indian
Railways undertaken on contract basis.
On 18.1.1999, Department issued notice demanding
H 511
COMMNR. OF CENTRAL EXCISE, N. DELHI v. INDIA 513
THERMIT CORPN. LTD. & ORS.
differential excise duty and imposing penalty on the A
ground that respondent no.1-ITCL had willfully and
deliberately indulged in mis-classification of various
excisable goods through mis-declaration of their nature,
description, suppression of facts and undervaluation of
excisable goods cleared to self for rail jointing at different B
J. sites of India with an intent to evade payment of excise
duty. Appellate Authority confirmed the demand.
Respondent no.3-ATL had been engaged in the
manufacture of dry moulds and thermit welding
equipments. c
On 18.1.1999, notice was issued on·ATL demanding·
differential duty for the period 1993-94 to 11.9.1996 and
imposing penalty on the ground that ATL was the
"subsidiary company" of ITCL and was solely dependent
D
upon ITCL for supply orders and all the goods
' ,.._ manufactured by ATL were sold to ITCL for further
marketing by them and that ATL under-valued the goods
resulting in non-payment of duty of Rs.14 lacs by ATL.
Respondents contested the issue on merits as well as on
limitation on the ground that earlier also a show cause E
notice dated 17.1.1996 was issued involving the period
from July 1995 to December, 1995 on the same issue. The
Appellate Authority confirmed the demand.
Tribunal by its common impugned order, allowed the F
'>"
appeals filed by the respondents both on merits as also
on limitation. In the case of ITCL, on the issue of valuation,
it held that the highest of the price for bulk sale to railways
is comparable price and department cannot take price for
the small quantities sold to railways for assessing the
G
products used captively. On the issue of limitation, it held
that several show cause notices were issued between
" {
27.11.1995 to 3.6.1996 demanding differential duty on
valuation of 'Thermit Portions' cleared for self use
covering the period from May, 1995 to November, 1995.
H
514 SUPREME COURT REPORTS [2008] 7 S.C R
A In these show cause notices, orders-in-original W?H
passed between 22.1.1996 and 31.1.1997. The DepartmPn;
filed these appeals.
Dismissing the appeals, the Court
8 HELD: 1. In all these orders, there was a com.,.,~
issue of valuation of thermit portions cleared for self U$"
The~e orders became final and were not challenged b-1!
the df'partment. The present show cause notice da•Pr!
18.1.1999 had been issued more than three years aftr:·
c the first show cause notice dated 27.11.1995 was issued
covering the same issues to twelve clearances of therm it
portions and valuation of dry moulds. The Tribuna!
correctly held that the impugned order overlapped tl-i•
earlier adjudication orders in respect of period fron1
7.3.1995 to 31.3.1995. Since, the department has accepte ;•
0
the earlier adjudications on the same issue for part of thP.
period, revenue cannot be permitted to re-agitate the same
point for a part of the remaining period. There cannot bP.
second proceedings raising the demand for the samP
E period. [Paras 13 and 14] [518-G, H; 519-A, B, C]
2. In the case of ATL, on merits, the Tribunal held that
even if ATL and ITCL are related persons, there is no
material evidence that the transaction between them was
not at arm's length. The dry moulds manufactured by ATL
F were supplied to ITCL in naked condition since no packing
material was used. ATL had entered into a contract witt'
railways and the price charged to railways after dedu.::fon
the cost of packing was the same as charged to net..
The· transaction to ITCL was at or about the same pric 0 •
G as to the railways. Thus, there was no undervaluatior
The view taken by the Tribunal is accepted that even if
ATL and ITCL are taken to be related persons which :.,
not as such held by this Court, it has not influenced thl'
price. [Paras 16, 17] [519-D, E, F]
H CIVIL APPELLATE JURISDICTION : Civil Appeal
COMMNR. OF CENTRAL EXCISE, N. DELHI v. INDIA 515
THERMIT CORPN. LTD. & ORS. [ASHOK BHAN, J.]
_...
Nos.8350-8354 of 2002. A
Appeal from the final Order Nos. 155-159/2002 dated
29.4.2002 of the Custom Excise and Gold (Control) Appellate
'. Tribunal New Delhi in Appeal Nos. E/1482-1485/2000-8. E/
' 1895-1896/2000-8. E/1869/2000-B.
'
B
M. Chandrasekharan, ASG, Rupesh Kumar, Alka Sharma
.).
(for B.V. Balaram Das) for the Appellant.
V. Lakshmi Kumaran, Alok Yadav and M.P. Devanath for
the Respondents.
The Order of the Court was delivered t'y
c
ASHOK BHAN, J. 1. Revenue has filed these appeals
under Section 35-L of the Central Excise Act, 1944 (for short
'the Act') against the final order Nos.155-159 of 2002 dated
29.4.2002 passed by Customs, Excise and Gold (Control) D
Appellate Tribunal, New Delhi (for short 'the Tribunal') in Appeal
" Nos.E/1484-1485/2000-8, E/1895-1896/2000-8, E/1869/
2000-B whereby the Tribunal allowed the appeals filed by the
respondents herein and set aside the order-in-original passed
' by the Commissioner, Central Excise(Adj.}, New Delhi.
!' E
Facts in the case of Mis. India Thermit Corporation
Ltd.:
2. M/s India Thermit Corporation Ltd., respondent No.1
herein, (for short 'ITCL')is engaged in the manufacture of 'Therm it
F
.# Portion' and 'Thermit Welding Equipments'. Respondent was
classifying these products under Chapter Heading 3810.00 and
under various sub-headings of Chapter 84 respectively. The
main product of the respondent is 'Therrnit Portion· used in
jointing of rails of Indian Railways. 'Thermit Portion'
manufactured by the respondents are cleared by two methods: G
(a) Outright sales to Indian Railways which is around 20%
of the production along with consumables such as thimbles,
ignition matches, asbestos powder. etc.
(b) respondents undertake rail jointirig work of the Indian H
~
'
516 SUPREME COURT REPORTS [2008] 7 S.C.R.
A Railways on contract basis and consume the balance 80%
of Thermit Portion in the jointing work.
3. ITCL was issued a show cause notice dated 18.1.1999
demanding differential excise duty of Rs.62,60,022.42 under
proviso to sub-section (1) of Section 11A of the Act on the ground '
.
B that it has willfully and deliberately indulged in mis-classification
of various excisable goods through mis-declaration of their .,.,
nature, description, suppression of facts and under-valuation of
excisable goods cleared to self for rail jointing at different sites
of India in an attempt to beguile the department with an intent to
c evade payment of excise duty. Mr. Alok Nagory, Managing
Director of ITCL was also required to show cause as to why
penalty should not be imposed upon him under Rule 209-A of
the Central Excise Rules, 1944 (for short 'the Rules').
4. A detailed reply dated 10.11.1999 was filed by the
D respondents along with copies of the documents in support of
their contentions.
5. The Commissioner of Central Excise(Adjudication),
authority in original, by his order dated 31.1.2000 confirmed
the demand for differential duty of Rs.62,60,022/- on ITCL and
E
imposed penalty of equivalent amount under Rule 9(2), 226 and
1730 of the Rules along with Section 11 AC of the Act. Penalty
of Rs.1,00,000/- (rupees one lac) was also imposed on Shri
Alok Nagory, Managing Director of ITCL under Rule 209A of
the Rules.
F ~
6. Feeling aggrieved against the order-in-original passed
by the Commissioner, ITCL and its Managing Director filed
appeals before the Tribunal.
Facts in the case of Mis.Asiatic Thermics Ltd.
G
7. M/s Asiatic Thermics Ltd., respondent No.3 herein, (for
short 'ATL') is engaged in the manufacture of dry moulds and
thermit welding equipments and classifying its products under
Chapter Heading 8479.00.
H 8. A show cause notice dated 18.1.1999 was issued to -.
.
COMMNR. OF CENTRAL EXCISE, N. DELHI v. INDIA 517
THERMIT CORPN. LTD. & ORS. [ASHOK BHAN, J.]
.. _.
ATL for demanding differential duty of Rs.33,80,585 during the A
period 1993-94 to 11.9.1996 on the ground that ITCL is the
"holding company" and ATL is the "subsidiary company". ATL is
solely dependent upon ITCL for supply orders and all the goods
manufactured by ATL has to be sold to ITCL forfurther marketing
by them. ATL under-valued the goods resulting in non-payment B
.... of differential duty of Rs.14,61,392/- by ATL. Apart that, ATL mis-
declaration of the nature and composition and suppression of
the usage of goods, mis-classified its products and wilfully
evaded excise duty to the tune of Rs.19, 19, 193/- totalling to
Rs.33,80,585. Shri R.S.Maheshwari, Director of ATL and Shri c
Alok Nagory, Managing Director of ITCL were also asked to
show cause as to why penal action be not taken against them
under Rule 209A of the Rules.
9. Detailed reply was given to the show cause notice as
also the written submissions at the time of personal hearing. D
Respondents contested the issue on merits as well as on
limitation on the ground that earlier also a show cause notice
dated 17.1.1996 was issued involving the period from July 1995
to December, 1995 on the same issue.
10. The Commissioner of Central Excise(Adjudication), E
authority in original, by his order dated 28.2.2000 confirmed
the demand for differential duty of Rs.33,80,585/- on ATL and ·
imposed penalty of equivalent amount under Rule 9(2), 226 and
1730 of the Rules along with Section 11AC of the Act. Penalty
of Rs.1,00,000/- (rupees one lac) was also imposed on Shri F
~
R.S.Maheshwari and Shri Alok Nagory, Managing Director of
ITCL under Rule 209A of the Rules.
11. Feeling aggrieved against the order-in-original passed
by the Commissioner, ATL, Director of ATL and Shri Alok Nagory,
G
Managing Director of ITCL filed appeals before the Tribunal.
,. 12. Tribunal by its common impugned order, being the first
appellate authority, considered the matter elaborately and by
recording detailed reasons allowed the appeals filed by the
"Y,·
respondents both on merits as also on limitation. In the case of H
518 SUPREME COURT REPORTS [2008] 7 S.C.R.
A ITCL, on the issue of valuation, it held that the highest of the
price for bulk sale to railways is comparable price and
department cannot take price for the small quantities sold to
railways for assessing the products used captively. On the issue
of limitation, it held that several show cause notices were issued
B between 27.11.1995 to 3.6.1996 demanding differential duty
on valuation of 'Thermit Portions' cleared for self use covering
the period from May, 1995 to November, 1995. Although, these
show cause notices are not on record, counsel for the
respondents has given the details of the show cause notices
C which are given below:
a) C.No.R-lll/ITCNal/95/1595 dated 27.11.95- May and
June'95
b) C.No.V(3)6-Demand/96/533 dated 30.1.96 - July'95
D c) C.No.V(3)15-Demand/96/1229 dated 4.3.96 -
August'95
d) C.No.V(03)27-Demand/96/1740 dated 29.3.96 -
Sep.'95
e) C.No.V(3)39-Demand/96/2112 dated 23.4.96 -Oct.'95
E
f) C.No.V(3)49-Demand/96/2716 dated 3.6.96 - Nov.'95
In the aforesaid six show cause notices, orders-in-original
were passed between 22.1.1996 and 31.1.1997, which are as
under:
F
a) 0-1-0 No.14/Demand/Ack-1/96 dated 22.1.1996
b) 0-1-0 No.15/Demand/Ack-1/96 dated 26.1.1996
c) 0-1-0 No.06/Demand/Ack-1/97 dated 31.1.1997
d) 0-1-0 No.08/Demand/Ack-1/97 dated 31.1.1997
G e) 0-1-0 No.09/Demand/Ack-1/97 dated31.1.1997
f) 0-1-0 No.10/Demand/Ack-1/97 dated 31.1.1997
g) 0-1-0 No.11/Demand/Ack-1/97 dated 31.1.1997
13. In all these orders, there was a common issue of
H valuation of therm it portions cleared for self use. These orders
COMMNR. OF CENTRAL EXCISE, N. DELHI v. INDIA 519
THERMIT CORPN. LTD. & ORS. [ASHOK BHAN, J.]
have become fine> I and not been challenged by the department. A
The present show cause notice dated 18.1.1999 has been
issued more than three years after the first show cause notice
dated 27 .11.1995 was issued covering the same issues to
twelve clearances of thermit portions and valuation of dry moulds.
It was further held by the Tribunal that the impugned order B
overlaps the earlier adjudication orders in respect of period from
7.3.1995 to 31.3.1995. We agree with the findings recorded by
the Tribunal.
14. Since, the department has accepted the earlier
adjudications on the same issue for part of the period, revenue C
cannot be permitted to re-agitate the same point for a part of
the remaining period. There cannot be second proceedings
raising the demand for the same period.
15. For the reasons stated above, appeals filed by the
revenue are dismissed. Parties shall bear their own costs. D
~' ... 16. In the case of ATL, on merits, the Tribunal held that
even if ATL and ITCL are related persons, there is no material
evidence that the transaction between them was not at arm's
length. The dry moulds manufactured by ATL were supplied to
ITCL in naked condition since no packing material was used. E
ATL has entered into a contract with railways and the price
charged to railways after deducting the cost of packing was the
same as charged to ITCL. In other words, the transaction to
ITCL was at or about the same price as to the railways. Thus,
there is no undervaluation. F
17. We agree with the view taken by the Tribunal that even
if ATL & ITCL are taken to be related persons [we are not holding
so], it has not influenced the price. There is no under-valuation.
ATL has been selling the product to ITCL and Indian Railways at
or about the same price. G
18. For the reasons stated above, appeals filed by the
revenue are dismissed leaving the parties to bear their own
costs.
D.G. Appeals dismissed. H
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