Emcon Technologies India Pvt. Ltd. v. Central Excise

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 15-2-2012CORAMTHE HONOURABLE MR.JUSTICE M.JAICHANDRENW.P.No.3409 of 2008 andM.P.No.1 of 2008Emcon Technologies India Pvt. Ltd.(formerly known as ARVIN Exhaust India Pvt. Ltd)No.17 & 18, Sengundrum Industrial Area,Melrosapuram, S.P.Koil Post 603 204,Kancheepuram District,Rep. By its Manager-Finance,Mr.D.Jayaraj.. Petitioner. Versus1. The Additional Commissioner of Central ExciseChennai Commissionerate III,121, Nungambakkam High Road,Chennai-600034.2. The Asst. Commissioner of Central Excise,Chennai II Division,Chennai Commissionerate IIR-40, A-1, Hundred Feet Road,Mogappair East,Chennai-600 037... Respondents.PRAYER: Petition filed under Article 226 of the Constitution ofIndia, praying for a Writ of Certiorari calling for the records onthe file of the 1st respondent in Order in Original No.21/2007, dated30th November, 2007 and to quash the said order. For Petitioner:Mr.Joseph PrabhakarFor Respondents:Mr.A.C.Manibharathi (R1 & R2)ORDERThis writ petition has been filed praying that this Court may bepleased to issue a Writ of Certiorari, to call for and quash theorder of the first respondent, in Order-in-Original No.21/2007, dated30.11.2007. https://hcservices.ecourts.gov.in/hcservices/

2. It is stated that the petitioner company is engaged in themanufacture of automobile parts and components, falling under Chapter8708.00 of the Central Excise Tariff Act, 1985. The petitionercompany is having central excise Registration Certificate and it hasbeen supplying manufactured automobile parts and components, toM/s.Mahindra Ford Limited (Ford India Limited). While so, thepetitioner company had developed `Dies and Tools’ to manufacture theautomobile parts and components, as required by its clients,involving very high costs and investment. Therefore, the petitionercompany had entered into an agreement, with M/s.Mahindra Ford Limitedand had availed a tooling advance, to be adjusted against the supplyof automobile parts and components. 3. The petitioner company, in its balance sheet, capitalized thesaid tooling advance and had claimed depreciation on it. Based on theestimated life of the tools, they were to be used for production ofupto two lakh units. Accordingly, the amortization cost per unit hadbeen calculated, by taking into account two lakh pieces. Due tocertain technical reasons, M/s. Mahindra Ford Limited had to stop themanufacturing of motor vehicles (Escort model) and hence, they haddirected the petitioner company to stop the manufacture of particularautomobile parts and components. 4. In such circumstances, as the petitioner company had investedheavy amounts of money in developing the `Dies and Tools',M/s.Mahindra Ford Limited had accepted to compensate the tooling costto the petitioner company, due to the cancellation of its orders.Accordingly, entries were made in the books and the differencebetween the unadjusted advance written off by M/s.Mahindra FordLimited and the written down value of the tooling was written off bythe petitioner company, during the year 2000-2001, amounting toRs.47,41,578/-. 5. Out of the said amount of Rs.47,41,578/-, Rs.15,69,578/- hadbeen credited to the petitioner’s Nasik unit and Rs.31,72,000/- hadbeen credited to the Chennai Unit of the petitioner company, underthe head `Miscellaneous Income’. While so, the Joint Commissioner ofCentral Excise, Chennai-II Commissionerate, had issued a Show CauseNotice No.79/2005, dated 25.10.2005, calling upon the petitionercompany to show cause, as to why the excise duty of Rs.5,07,520/-, at16% on the tooling advance of Rs.31,72,000/-, written off, is notleviable on the additional consideration paid, by M/s.Mahindra FordLimited, in respect of the Chennai Unit, under proviso to Section 11A(1) of the Central Excise Act, 1944, with appropriate interest, underSection 11AB and penalty under Section 11AC and Rule 25 of theCentral Excise Rules, 2002. https://hcservices.ecourts.gov.in/hcservices/

6. The petitioner company had submitted a detailed reply, dated16.11.2005, stating that there was no intention to evade payment ofduty, as alleged by the Joint Commissioner of Central Excise,Chennai-II Commissionerate, and that the show cause notice issued, inrespect of the year 2001-2002, is barred by limitation. 7. It had also been stated that the Joint Commissioner of CentralExcise, Nasik, Maharashtra, had dropped the proceedings, relating tothe same issue. However, without accepting the submissions made onbehalf of the petitioner company, the Joint Commissioner of CentralExcise had confirmed the excise duty demand of Rs.5,07,520/- at 16%on the tooling advance of Rs.31,72,000/- written off, to recover theappropriate interest on the duty confirmed and had also imposed apenalty of Rs.5,07,520/-, under Section 11AC of the Central ExciseAct, 1944, and also a penalty of Rs.5,07,520, under Rule 25 of theCentral Excise Rules, 2002, raising a total demand of Rs.15,22,560/-on the petitioner company. 7. Aggrieved by the said order the petitioner company had filed astatutory appeal before the Commissioner of Central Excise (Appeals).The appeal had been numbered as A.No.77/2006 [M-II]. The Commissionerof Central Excise (Appeals), by his order, dated 31.1.2007, made inOrder-in-Appeal No.26/2007, had remanded the matter back to the lowerauthority for deciding the same, afresh, by observing the principlesof natural justice, with a direction to follow the judgement of theCustoms, Excise and Service Tax Appellate Tribunal, in Commissionerof Central Excise, Madras Vs. Shardlow India Limited 1999[110] ELT772 [T]. Further, the petitioner has been directed to produce all therequisite information and the documents, before the lower authority,as and when required by him, to decide the matter, as per law.Accordingly, the matter had been adjudicated by the secondrespondent, who had passed an order, dated 30.11.2007, in Order-in-Original No.21/2007. 8. The learned counsel appearing on behalf of the petitioner hadcontended, inter alia, that the first respondent had passed theimpugned order, without considering the ratio of the decision, inCommissioner of Central Excise, Madras Vs. Shardlow India Limited1999[110] ELT 772 [T], and without following the directions issued bythe appellate authority, while remanding the matter. https://hcservices.ecourts.gov.in/hcservices/

9. He had also stated that the first respondent had passed theimpugned order without considering the principles laid down by thevarious decisions of the Tribunal and the Commissioner of CentralExcise (Appeals) Chennai, as well as the principles laid down by theSupreme Court. It had also been stated that the respondent Departmentcannot take a different stand, in respect of the same issue, beforetwo different authorities. While the Joint Commissioner of CentralExcise, Nasik, State of Maharashtra, had dropped the proceedingsagainst the petitioner company, in respect of a similar issue, thefirst respondent cannot take a different stand in a similar matter,involving similar issues. 10. Relying on the averments made in the counter affidavit filedon behalf of the respondents, the learned counsel appearing on behalfof the respondent has stated that the order passed by the firstrespondent is in accordance with the relevant provisions of law andtherefore, it cannot be said that it is arbitrary and invalid. It hasbeen further stated that the impugned Order-in-Original, dated30.11.2007, had been passed by the first respondent, scrupulously,following the directions of Commissioner of Central Excise (Appeals)Chennai, issued in Order-in-Appeal No.26/2007 (M-II), dated31.1.2007. 11. It had also been stated that the order passed by the JointCommissioner of Central Excise, Nasik, State of Maharashtra, cannotbe said to be binding on the adjudicating authority in another partof the country, as the issues which were before the first respondentinvolved certain issues relating to the interpretation of the rulesand the regulations of the Central Excise Act, 1944. The respondentshad correctly interpreted the relevant provisions of law and hadinitiated action to recover the excise duty payable by thepetitioner, with a view to prevent loss of revenue to the State. Ithad also been stated that the first respondent had considered all theissues raised by the petitioner company, while passing the impugnedOrder-in-Original, dated 30.11.2007.12. It had also been stated that the petitioner company ought tohave availed the alternative remedy provided under the statute. Theimpugned order, dated 30.11.2007, clearly states that an appealagainst the said order may be filed, before the Commissioner(Appeals) Chennai, in the form prescribed, under Rule 3 of theCentral Excise (Appeals) Rules, 2001, within sixty days from the dateon which the order is communicated. While so, the petitioner haspreferred the present writ petition before this Court, invoking itsextraordinary jurisdiction, under Article 226 of the Constitution ofIndia. https://hcservices.ecourts.gov.in/hcservices/

13. In view of the submissions made on behalf of the petitioner,as well as the respondents, and on a perusal of the recordsavailable, this Court is of the considered view that the petitionercompany ought to have availed the appellate remedy, by filing anappeal before the Commissioner (Appeals), Chennai. However, thepetitioner has chosen to prefer the present writ petition before thisCourt, under Article 226 of the Constitution of India, withoutshowing proper cause or reason to do so. 14. Even though, various grounds have been raised by thepetitioner company, this Court does not find it appropriate toconsider the same on merits, in view of the availability of anefficacious alternative remedy. As such, the writ petition filed bythe petitioner company is liable to be dismissed. Hence, it isdismissed. 15. However, it is made clear that it would be open to thepetitioner company to file an appeal before the Commissioner(Appeals) Chennai, by raising all the grounds available to it, as perlaw, within a period of thirty days from the date of receipt of acopy of this order. On such appeal being filed, the Commissioner(Appeals) Chennai, shall consider the same and pass appropriateorders thereon, as expeditiously as possible. No costs. Sd/-Asst. Registrar/true copy/Sub Asst. Registrar.csh https://hcservices.ecourts.gov.in/hcservices/ To1. The Additional Commissioner of Central ExciseChennai Commissionerate III,121, Nungambakkam High Road,Chennai-600034.2. The Asst. Commissioner of Central Excise,Chennai II Division,Chennai Commissionerate IIR-40, A-1, Hundred Feet Road,Mogappair East,Chennai-600 037.1 cc To Mr.Joseph Prabakar, Advocate Sr 103611 cc To Mr.A.C.Mani Bharathi, Advocate Sr 10292W.P.No.3409 of 2008rk[co]gp/30.3