http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 5  

CASE NO.: Appeal (civil)  4055 of 2002

PETITIONER: Commissioner of Central Excise, Jaipur

RESPONDENT: Dugar Tetenal India Limited

DATE OF JUDGMENT: 07/03/2008

BENCH: ASHOK BHAN & DALVEER BHANDARI

JUDGMENT: J U D G M E N T

CIVIL APPEAL NO. 4055 of 2002 With Civil Appeal No. 5608 of 2002

BHAN, J.

1.      These two appeals are directed against the order of  Customs Excise and Gold (Control) Appellate   Tribunal, Delhi in appeal No. E/303/2001-C (Final Order  No. 14/02-C) dated 25.1.2002.  Civil Appeal No. 4055 of  2002 has been filed by the Revenue whereas Civil Appeal No.  5608 of 2002 has been filed by the assessee.  

2.      The Assessee is engaged in the manufacture of  photographic chemicals.  During the period from March,  1988 to February, 1992 assessee cleared its products under  the brand name "Tetenal" without payment of duty, claiming  the benefit of exemption under Notification No. 175/86-CE  dated 1.3.86.  From the result of investigation conducted by  the officers of Central Excise, it was found that the  brand  name "Tetenal" belonged to M/s Tetenal Vertribs GmBH,  Germany and that the assessee was not eligible for the  benefit of exemption Notification as they had cleared their  product affixed with the brand name of another person.  It  further appeared to the department that the assessee had  mis-stated and suppressed facts with intent to evade  payment of duty on the goods.  The department, therefore,  by show cause notice dated 24.6.1992 called upon the  assessee to pay central excise duty of Rs.32,25,465/- on the  goods cleared during the aforesaid period and also to show  cause why penalty should not be imposed on them.   

3.      The Collector vide his order dated 5.11.1992 dropped  the proceedings.  The Revenue filed an appeal before the  Tribunal.  The Tribunal by its order dated 21.3.2000 held  that the assessee was not entitled to the benefit of the  Notification and consequently remanded the matter to the  adjudicating authority for fresh decision on the question  whether the demand of duty was within the time prescribed  under the Act.   

4.      In pursuance to the order passed by the Customs  Excise and Gold (Control) Appellate Tribunal, the  Commissioner by its order dated 6.11.2000 rejected the plea  taken by the assessee that the extended period of limitation  could not be invoked.  The Commissioner confirmed the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 5  

demand of duty of Rs.32,25,465/- against the assessee by  invoking the extended period of limitation prescribed under  the proviso to Section 11A(1) of the Central Excise Act, 1944  (for short "the Act") and also imposed a penalty of Rs. 3  lakhs under Rule 173Q of the Central Excise Rules, 1944  (for short "the Rules").   

5.      The assessee being aggrieved filed an appeal against  the aforesaid order before the Tribunal.  Apart from raising  the issue of applicability of the Notification and limitation,  the assessee further contended that the selling price of the  goods was the cum-duty price and they were entitled to  deduct the duty element from the sale price for the purpose  of determination of assessable value of the goods in terms of  Section 4(4) (d) (ii) of the Act.  Tribunal by its impugned  order held that the demand of duty is not barred by time.   That the extended period of limitation was invokable in the  present case. Against this portion of the order the assessee  has filed the appeal.  The Tribunal however set aside the  quantum of duty and directed the adjudicating authority to  re-determine the assessable value of the goods after  examining the assessee’s claim under section 4(4) (d) (ii) of  the Act on its merits and in the light of the Tribunal’s order  in the case of Shri Chakra Tyres Ltd. V. CCE, Madras,  1999 (32) RLT-1.  Against this portion of the order, the  Revenue is in appeal.  Tribunal had set aside the order  imposing penalty but the same has not been challenged by  the Revenue.  

Civil Appeal No. 5608 of 2002

6.      Mr. V. Lakshmikumaran, learned counsel appearing  for the assessee strenuously contended that the assessee  was under a bonafide belief that they were entitled to the  benefit of exemption under the Notification in respect of the  products manufactured by the assessee and cleared under  the brand name "Tetenal" during the material period and,  therefore, they had no intent to evade payment of duty.   It  was also contended that the brand name "Tetenal" on the  finished goods was duly declared by the assessee in its  classification list which were accepted by the Revenue.  That  they were eligible to the exemption treating the brand name  "Tetenal" as their own product.  That the classification list  was being submitted right from 1988 and approved by the  department and that it was not a case of mis-statement or  suppression of the fact but interpretation of Notification No.  175/86-CE.  The period of dispute was from February, 1988  to March, 1992 and the show cause notice was issued on  26.6.1992, hence the demand prior to 24.12.1992 was  clearly barred by time.  

7.      As against this, Mr. I. Venkatanarayana, learned  senior counsel appearing for the Revenue submitted that  the assessee was fully aware of the fact that during the  material period, the brand name "Tetenal" did not belong to  them but belonged to their German collaborator.  The  assessee suppressed this material fact before the  department with intent to evade payment of duty on the  branded goods by wrongly availing the benefit of Notification  No. 176/86-CE.  It was contended that there was no  material on record to support the plea of bonafide belief.  It  was further submitted that the assessee deliberately  withheld from the department the material information that  the brand name was that of their foreign collaborator and

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 5  

the same was done with the intention to avail the benefit of  exemption under the notification to which the assessee was  not entitled.   

8.      Assessee’s main contention is that use of brand name  "Tetenal" on finished goods was duly declared in their  classification list and they were under a bonafide belief that  they were entitled to SSI benefit treating the brand name  "Tetenal" as their own property.  That the belief of the  assessee was reinforced by the fact that classification lists  which were being submitted from 1988 onwards had been  duly approved.  It is not disputed that the appellants had  given the following declaration on various classification list  filed by it from time to time:-         "We shall affix our brand name on  finished goods which will be only our  brand name viz. "Tetenal"

9.      This declaration gives an impression as if the brand  name "Tetenal" was owned by them.  On investigation the  claim of the assessee was found to be false.  The excise  officers unearthed that the said brand name was in fact  owned by one M/s. Tetenal Vertriebs GmBH, Germany,  their foreign collaborator and that they were paying royalty  @ 4% of ex-factory price minus the cost of imported inputs  as per written agreement between them.  Thus it is  established beyond reasonable doubt that the assessee had  wrongly been giving declaration in various classification lists  that the brand name "Tetenal" was owned by them.   

10.     Proviso to Section 11A(1) of the Act reads:

"Section 11A - Recovery of duties not  levied or not paid or short-levied or short- paid or erroneously refunded  (1) When any duty of excise has not been  levied or paid or has been short-levied or  short-paid or erroneously refunded,  whether or not such non-levy or non- payment, short-levy or short payment or  erroneous refund, as the case may be,  was on the basis of any approval,  acceptance or assessment relating to the  rate of duty on or valuation of excisable  goods under any other provisions of this  Act or the rules made thereunder, a  Central Excise Officer may, within one  year from the relevant date, serve notice  on the person chargeable with the duty  which has not been levied or paid or  which has been short-levied or short-paid  or to whom the refund has erroneously  been made, requiring him to show cause  why he should not pay the amount  specified in the notice :  Provided that where any duty of excise  has not been levied or paid or has been  short-levied or short-paid or erroneously  refunded by reason of fraud, collusion or  any wilful mis-statement or suppression  of facts, or contravention of any of the  provisions of this Act or of the rules made  thereunder with intent to evade payment  of duty, by such person or his agent, the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 5  

provisions of this sub-section shall have  effect, as if, for the words "one year", the  words "five years" were substituted"  

11.     The declaration of the assessee in the classification list  that the brand name "Tetenal" was owned by them was a  willful mis-statement/suppression of facts with the intent to  evade payment of duty with ulterior motive to avail benefit  under Notification No. 175/86-CE dated 1.3.86.  The  assessee was fully aware of the fact that the same was not  owned by it and that the same belonged to their foreign  collaborator.  Shri Vijay Prakash Katta, Director of the unit  in his statement dated 11.3.1992 admitted that the brand  name "Tetenal" was owned by the foreign collaborator and  not by the assessee.  Thus the conditions postulated in  proviso to Section 11A(1) for invoking extended period of  limitation are fully satisfied.   

12.     Para 7 of the Notification No. 175/86-CE stipulates  that the benefit of exemption will not be available to the  goods on which the brand name of another manufacturer is  affixed and the said manufacturer is not entitled to the  small scale exemption, so that the benefit of small scale  exemption should not be misused by manufacturers  manufacturing goods for different persons.  Admittedly the  German collaborator was not entitled to avail the SSI  exemption.  We presume that the assessee while filing the  classification list would be aware of Clause 7 of the  Notification.  In spite of clause 7 in the Notification, the  assessee made a mis-statement in the classification list for  claiming benefit of the exemption Notification No. 175/86- CE.  For the reasons stated above, we do not find any merit  in the appeal filed by the assessee.

13.     The assessee in addition to the submission that the  extended period of limitation could not be invoked had  contended that the selling price of the goods was the      cum-duty price and they were entitled to deduct the duty  element from the sale price for the purpose of determination  of assessable value of the goods in terms of Section 4(4) (d)  (ii) of the Act.  The Tribunal accepted this plea of the  assessee relying upon the decision of the Tribunal in the  case of Shri Chakra Tyres Ltd (supra). The view taken in   Shri Chakra Tyres Ltd (supra) was affirmed by this Court  in Commissioner of Central Excise, Delhi V. Maruti  Udyog Limited, 2002 (3) SCC 547.  Learned counsel for the  Revenue has relied upon the judgment of this Court in  Asstt. Collector of Central Excise V. Bata India Limited ,  1996 (4) SCC 563.  This judgment was duly considered in  Maruti Udyog Limited (supra).  After considering the case  in Bata India Limited (supra) this Court observed in para 5  as under:- "5.     A reading of the aforesaid Section  clearly indicates that the wholesale price  which is charged is deemed to be the  value for the purpose of levy of excise  duty, but the element of excise duty,  sales tax, or other taxes which is  included in the wholesale price is to be  excluded in arriving at the excisable value.  This Section has been so construed by  this Court in Asstt. Collector of Central  Excise and Ors v. Bata India Ltd., 1996  (4) SCC 563, and it is thus clear that

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 5  

when cum-duty price is charged, then in  arriving at the excisable value of the  goods the element of duty which is  payable has to be excluded. The Tribunal  has, therefore, rightly proceeded on the  basis that the amount realised by the  respondent from the sale of scrap has to  be regarded as a normal wholesale price  and in determining the value on which  excise duty is payable the element of  excise duty which must be regarded as  having been incorporated in the sale price,  must be excluded. There is nothing to  show that once the demand was raised by  the Department, the respondent sought  to recover the same from the purchaser of  scrap. The facts indicate that after the  sale transaction was completed, the  purchaser was under no obligation to pay  any extra amount to the seller, namely,  the respondent. In such a transaction, it  is the seller who takes on the obligation  of paying all taxes on the goods sold and  in such a case the said taxes on the  goods sold are to be deducted under  Section 4(4) (d) (ii) and this is precisely  what has been directed by the Tribunal.  There is also nothing to show that the  sale price was not cum-duty. "

14.     In our view, the Tribunal has rightly remanded the  case to re-determine the duty payable keeping in mind the  provisions of Section 4(4) (d) (ii).

15.     For the reasons stated above, we do not find any merit  in either of the appeals and accordingly dismiss the same  leaving the parties to bear their own costs.