Case: C.C.E.,Visakhapatnam Vs. M/S.Mehta &amp; Co

2. The present appeal filed by the appellant - Commissioner of Central Excise, Visakhapatnam arises out of an order dated 28.07.2008 passed by the Customs, Excise & Service Tax Appellate Tribunal, South Zonal Bench at Bangalore (hereinafter referred to as `the Tribunal) in appeal No. E/132/20054. M/s. Mehta & Company, Mumbai (the assessee) are engaged in the business of interior decoration. The assessee provides composite services including woodwork, furniture items etc. They entered into contracts with customers for doing these works as per their requirement and also carry out these works at their customers premises5. On gathering specific intelligence that the assesses have undertaken the manufacture of articles of wood, furniture, etc. in the premises of Hotel Grand Bay, Vishakhapatnam and removed the same without payment of duty of excise, the officers of Head Quarters Preventive unit inquired and investigated the matter6. It was found that the assessee along with M/s Chandrasekhar Architects Pvt. Ltd., Mumbai entered into an agreement with M/s. Adyar Gate Hotel Ltd., Chennai (now M/s Welcome Group) on 30.08.1995 for carrying out the renovation of the existing structure in their hotel at Nowroji Road, Maharanipeta, Visakhapatnam. The scope of this agreement was further modified by another agreement dated 18.10.1995. As seen by the final bills dated 31.03.1997, raised by the assessee on Hotel Grand Bay, it was observed that the assessee, inter alia, manufactured and cleared furniture, falling under chapter sub-heading Nos. 9401.00 & 9403.00, 4410.11, 8302.00 and 7610.90 respectively, of the Schedule to the Central Excise Tariff Act, 1985. As per the agreement the assessee quoted prices which included sales tax, excise duty, octroi etc7. It appears that the assessee manufactured goods covered under different chapter headings at the customers site and removed them without payment of proper duty of excise with an intention to evade payment of duty. The contract between the assessee and M/s Adyar Gate Hotel Ltd., clearly mentions that the assessee has quoted rates which include the excise duty and it had been made in the contract that the contractor would not have any claim subsequently after execution of the work for excise duty, sales tax etc. from M/s. Adyar Gate Hotels Limited8. A show cause notice under the Central Excise Act, 1944 [for short the Act] dated 15.05.2000 was issued to the respondent - M/s. Mehta & Company to show cause as to why: -(i) Duty of excise amounting to Rs. 62,94,910/- should not be demanded from them on the goods manufactured and cleared under Rule 9(2) of the Rules read with the proviso to section 11A (1) of the Act;(ii) The amount of Rs. 10,00,000/- already paid under protest towards the duty of excise should not be adjusted towards the payment of duty demanded in (i) above;(iii) Penalty should not be imposed on them under Rule 9(2), Rule 52A and Rule 173Q of the Rules;(iv) Penalty equal to the duty demanded in (i) above should not be imposed on them under Section 11AC of the Act;(v) Interest @ 24% p.a. from the first day of the month succeeding the month in which the duty ought to have been paid, till the date of payment of such duty should not be demanded from them under section 11 AB of the Act; and(vi) The goods involved should not be confiscated under Rule 173Q (1) of the Rules9. M/s. Grand Bay Hotel, Beach Road, Visakhapatnam was also asked to show cause as to why penalty should not be imposed under Rule 209A of the Rules for purchase and possession of the excisable goods on which duty of excise had not been paid10. The respondent - M/s. Mehta & Co. and M/s. Grand Bay Hotel submitted their respective replies. The Commissioner of Central Excise vide order dated 31.12.2002 confirmed the demand of Rs. 43,59,710/- out of the proposed demand of Rs. 62,94,910/- under Rule 9(2) along with penalty of equal amount i.e. Rs. 43,59,710/- and directed the redemption of the confiscated goods after the payment of a fine of Rs. 1,00,000/- plus the duty and penalty adjudged11. Aggrieved thereby, the respondent filed an appeal before the CESTAT, Bangalore, which allowed the appeal and remanded the matter to the concerned adjudicating authority to examine the matter afresh and to pass an appropriate order in accordance with law by providing an effective hearing to the parties. Thereupon, the Commissioner, Central Excise & Customs, Visakhapatnam vide order dated 22.10.2003 confirmed the demand of Rs. 14,94,656/- with penalty of Rs. 7,47,328/- with interest as per Section 11 AB of the Central Excise Act, 1944 (for short the Act) and also imposed a penalty of Rs. 5,00,000/- under Rule 173Q. Aggrieved thereby the respondent filed an appeal before the Tribunal and vide order dt. 28.7.2008 the Tribunal allowed the appeal and set aside the order of the Commissioner, Central Excise & Customs, Visakhapatnam under the impugned judgment and order as against which the present appeal was filed.

Court's reasoning:
So far as the issue with regard to limitation is concerned, since that goes to the root of the demand made, it is appropriate to deal with the same before we go into the second issue17. There is no dispute with regard to the fact that issuance of a notice for invoking the provisions of Section 11A of the Act is a condition precedent for a demand to be made under Section 11A of the Act. However, in the present case, a show cause notice was issued to the respondent herein making it a specific case that the respondent manufactured excisable goods as mentioned in the notice and covered under different chapter headings at the site of the customer and removed the same without payment of duty of excise with an intention to evade payment of duty when the contract clause between the respondent and M/s. Adyar Gate Hotel Ltd. clearly mentioned that the contractors quoted rate shall also include the excise duty. It was also mentioned that such conscious action on the part of the contractor has clearly established the intention to evade payment of duty of excise and consequently proviso to Section 11A of the Act could be invoked in the present case23. Although, the respondent has pleaded that it was done out of ignorance, but in our considered opinion there appears to be an intention to evade excise duty and contravention of the provisions of the Act. Therefore, proviso of Section 11A (i) of the Act would get attracted to the facts and circumstances of the present case25. So far as the second issue is concerned, we fail to appreciate as to how the Tribunal could come to a finding, as recorded in the impugned judgment and order in view of the proposition of law already settled by this Court in the decision of Craft Interiors (supra)27. A perusal of the records would also indicate that the Commissioner in his order has listed out various items which were held as furniture and while doing so, he has scrutinized the records to determine the immovability or movability of the items. A bare perusal of the said order would also indicate that he has given deductions for the items held as immovable. He has prepared Annexures 1,2, 3 and 4 and the items mentioned in Annexures 1 and 2 have been held as `furniture after proper examination of the records whereas he has held items in Annexures 3 and 4 as immovable and has allowed deduction28. So far as the items such as chairs, tables etc. listed in Annexure 5 is concerned, the same admitted to be furniture by the assessee himself. The Commissioner having considered the aforesaid issue carefully and after proper scrutiny, the Tribunal was not justified in rejecting the said findings by mere conclusion and without trying to meet the findings recorded by the Commissioner.