Holding

The Supreme Court will not consider a ground not pleaded in the appeal; consequently, the civil appeal is dismissed without examining the factual issue of cum‑duty valuation.

Summary

The assessee, Action Construction Equipment Ltd., manufactured mobile cranes but used a dummy unit, ACE Industries, to claim exemption and evade excise duty. The adjudicating authority fixed an assessable value of Rs 26,63,400 and duty of Rs 4,10,144; the appellate authority, relying on the Supreme Court’s Maruti Udyog Ltd. judgment, treated the sale price as cum‑duty price and reduced the assessable value to Rs 22,09,827 and duty to Rs 3,53,573. The Department appealed to CESTAT on the sole ground that the Maruti judgment was pending reconsideration via a review petition, and CESTAT dismissed the appeal. The Department then filed a civil appeal before the Supreme Court, again raising only the pending‑review ground. The Court observed that the issue of non‑applicability of the Maruti judgment was not pleaded in any appeal memo and therefore declined to examine the factual merits, dismissing the appeal.

Issues considered

Whether the Supreme Court should entertain the Department’s contention that the Maruti Udyog Ltd. judgment was not applicable to the present facts, given that the only ground raised was the pendency of a review petition.
Whether the assessable value of mobile cranes should be computed on a cum‑duty price basis in the absence of a valid statutory amendment.

Legislation cited

Central Excise Act, 1944s. 14, s. 35L(b), s. 4(4)(d)
Central Excise Rules, 1944s. 173Q
Finance Act, 2003s. 136

Subjects

assessable valuecum‑duty pricecentral excisemobile cranesdummy unitexemptionreview petitionvaluationSection 4(4)(d)Supreme Court

Judgment

A COMMISSIONER OF CENTRAL EXCISE, DELHI
v.
MIS. ACTION CONSTRUCTION EQUIPMENT (P) LTD.

JULY 19,2006

B [ARIJJT PASA YAT AND S.H. KAPADIA, JJ.]

Central Excise Act, 1944-Section 4(4)(d)-Assessab/e value of mobile
cranes-Issue regarding-Question not reflected in appeal memos filed by
C Department before the Tribunal and in the present appeal raised for the first
time when the matter came up for admission before Supreme Court-Supreme
Court declines to examine the question-Constitution of India, 1950-Article
136-New plea.

The present appeals concerns compt1tation of assessable value of mobile
D cranes under Section 4(4)(d) of the Central Excise Act, 1944 as it stood at
the relevant time, prior to the year 2000.

Holding that the assessee-Respondent had deliberately floated a non-
functional dummy unit to evade excise duty on the mobile cranes being
manufactured by it, the Adjudicating Authority fixed the assessable value at
E Rs.26,63,400/- involving a corresponding l!xcise duty liability ofRs.4,10,144/
-. The Appellate Authority, however, following a judgment of this Court in
Maruti Udyog Limited held that the price charged by the assessee should be
treated as cum-duty price, and accordingly reduced the assessable value to
Rs.22,09,827 /-. Correspondingly the liability of the assessee with regard to
F excise duty stood reduced to Rs.3,53,573/-. Consequently the assessee sought
refund.

Against the order of the Appellate authority, the Department went in
appeal before the Tribunal only on the ground that the decision in Maruti
Udyog Ltd was pending reconsideration by Supreme Court vide a Review
G Petition and, therefore, the appellate authority should not have followed that
judgment. But the appeal was dismissed. Hence the present appeal.

The said Review Petition has since been dismissed. When the matter
came for admission, it was urged on behalf of the Department that the
judgment in Maruti Udyog Ltd. was not applicable to the facts of the present
II 672
COMMR. OF CENTRAL EXCISE, DELHI "· ACTION CONSTRUCTION EQUIPMENT (P) LTD. 673
case. A
Declining to examine the question and thereafter dismissing the appeals,
the Court

HELD: Jn the circumstances of the case, this Court does not wish to go
into the factual issue particularly, when no such plea was taken by the B
Department in the appeal before the Tribunal and before this Court in the
present appeal. The only ground taken in both the appeals was that the
judgment of this Court in Maruti Udyog Ltd. was pending re-consideration
vide a Review Petition. The question as to non-applicability of the judgment of
this Court in Maruti Udyog Ltd. to the present case is not reflected in the C
appeal memos before the Tribunal and in the present appeal and, therefore,
this Court refrains from examining the factual conspectus of the case.
(678-C-F)

Commissioner ofCentral Excise, Delhi v. Maruti Udyog Ltd., (2002) 144
ELT 3, referred to.
D
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 6394 of2004.

From the Final Order No. 611/04-NB(A) dated 16.6.2004 of the Customs,
Excise & Service Tax Appellate Tribunal, New Delhi in Appeal No. E/3857/03-
NB(A). E
WITH

Civil Appeal Nos. 2380/2005,2967-2969/2005, 2970/2005, 3481/2004, 3724/
2005, 385/2004, 4909/2004, 6348-6350/2004, 6523/2004 and 7662/2004.

A.K. Ganguli, T.V. Ratnam, K. Swami, B.K. Prasad and P. Parmeswaran
F
for the Appellant.

Joseph Vellapally, Piyush Kumar, Anitha Shenoy, Ajay K. Jain Seema
Jain, M.P. Vinod, V. Lakshmikumaran, Alok Yadav and Rajesh Kumar for the
Respondent. G
C.D. Singh, Dhrupad Kashyap and Minakshi Sarma for the State of
Jharkhand.

The Judgment of the Court was delivered by
H
674 SUPREME COURT REPORTS [2006) SUPP. 3 S.C.R.

A KAPADIA, J. CIVIL APPEAL NO. 6394 OF 2004:

This civil appeal is filed under Section 35L(b) of Central Excise Act, 1944
against the order dated 16.6.2004 passed by the Customs, Excise & Service
Tax Appellate Tribunal (for short "the CESTAT"), New Delhi in Appeal No.
E/3857/03-NB(A) dismissing the appeal filed by the appellant herein.
B
The question involved in this civil appeal concerns computation of
assessable value of mobile cranes under Section 4(4)(d) of the Central Excise
Act, 1944 (for short "the 1944 Act") as it stood at the relevant time, prior to
the year 2000.

C The facts arising in this appeal are as follows:

The assessee (respondent) floated a non-functional dummy unit in the
name of ACE Industries to evade excise duty on the mobile cranes being
manufactured by it. The cranes were first assembled in the premises of the
assessee and then dismantled into semi-knocked down condition for re-
D assembly. The same were cleared without payment of duty by wrongly availing
the benefit of exemption available to small scale units in the name of ACE
Industries. The assessee had manufactured three cranes valued at Rs. 26,63,400
involving excise duty of Rs. 4,10,144/-. By a show cause notice dated 3.11.1999,
the Additional Commissioner of Central Excise, Faridabad called upon the
E assessee to show cause why the mobile cranes should not be confiscated
under Rule I 73Q of the Central Excise Rules, 1944. He also demanded excise
duty of Rs.4,10,144/- and penalty. The assessee replied to the show cause
notice. The assessee denied that ACE Industries was a dummy unit as alleged
by the department. Thereafter, a team of officers from the department visit::d
the premises of ACE Industries. On verification of the records, the department
F found that ACE Industries was a division of the assessee and that division
was dealing in spare parts of the mobile cranes. The department further found
that no manufacturing activity took place at the premises of ACE Industries.
On 11.6.1999 the proprietor of ACE Industries was examined. His statement
under Section 14 of the 1944 Act was recorded in which he confessed that
G no manufacturing activity was being undertaken at the premises occupied by
ACE Industries, and that the entire set up was a devise to evade duty and,
at the same time, to avail of the benefit of exemption notification no. 8/99
dated 28.2.1999. He further confessed that the mobile cranes in question were
actually manufactured by the assessee and not by ACE Industries.

H In the circumstances, the adjudicating authority came to the conclusion
COMMR. OF CENTRAL EXCISE, DELHI "· ACTION CONSTRUCTION EQUIPMENT (P) LTD.[KAPADIA, J.] 67 5

that the assessee had deliberately floated a non-functional unit to evade A
excise duty. Accordingly, the adjudicating authority ordered confiscation and
appropriation of an amount of Rs. 3 lakhs from the bank guarantee given by
the assessee towards redemption fine in lieu of confiscation.

Being aggrieved by the impugned order of the adjudicating authority,
the assessee moved an appeal before the Commissioner (Appeals). By the B
impugned decision the appellate authority held that, ACE Industries was a
non-functional unit created by the assessee to evadP- excise duty and claimed
exemption as a small scale unit; that the said cranes were manufactured by
the assessee but they were cleared in the name of ACE Industries and,
therefore, there was a clear violation and evasion of duty under Rule l 73Q C
of the Central Excise Rules. The appellate authority further recorded that the
assessee had paid the duty pursuant to the order of the adjudicating authority.
On account of the said evasion, the department assessed and imposed the
duty of Rs. 4,10,144/-. The appellate authority, however, took the view that
the normal price which is the basis of the assessable value is cum-duty price.
On that basis the appellate authority reduced the assessable value from D
Rs.26,63,440/- fixed by the adjudicating authority to Rs.22,09,827/- and
correspondingly the liability of the assessee stood reduced from Rs.4, I0, 144/
- to Rs.3,53,573/-. Accordingly, the assessee seeks refund.

Aggrieved by the decisions of the appellate authority, the department E
went in appeal to the Tribunal i.e. CESTAT. We have perused the memo of.
appeal. The only ground taken in the memo of appeal is that the judgment
of this court in the case of Commissioner of Central Excise, Delhi v. Maruti
Udyog Limited, reported in (2002) (144) ELT 3 was pending reconsideration
by this court vide Review Petition (C) No. 75 of 2003 and, therefore, the
appellate authority should not have followed the judgment of this court in F
Maruti Udyog Limited (supra). In this connection, the department placed
reliance on the Circular issued by the Central Board of Excise and Customs
bearing No. 749/65/2003-CX dated 26.9.2003.

By the impugned decision rendered by the Tribunal on 16.6.2004, the
appeal preferred by the department was, however, dismissed in view of the G
judgment of this Court in the case of Maruti Udyog Ltd. (supra).

Being aggrieved by the impugned decision, the department has come
to this Court by way of statutory appeal under Section 35L(b) of the 1944 Act.
At this stage, it is important to note that the Civil Appeal filed by the
H
676 SUPREME COURT REPORTS [2006] SUPP. 3 S.C.R.

A department before this Court is dated 27 .8.2004. In the civil appeal, the
department has once again submitted that in view of the Circular no. 749/65/
2003-CX. dated 26.9.2003 of the Central Board of Excise & Customs, New
Delhi the appellate authority had erred in fixing the assessable value on the
basis of cum-duty price particularly when the matter was pending
B reconsideration in this Court vide Review Petition (C) No.75/2003. At this
stage, we may point out that the above review petition has since been
dismissed and the Circular dated 26.9.2003 has been withdrawn by the Central
Board vide Circular dated 27.12.04, quoted hereinbelow.

When the matter came for admission it was urged on behalf of the
C department that the judgment of this Court in Maruti Udyog Ltd (supra) was
not applicable to the facts of the present case as the amount of tax was in
fact not charged by the assessee from its purchasers as in the case of Maruti
Udyog Ltd (supra).

We are not prepared to examine this question. As stated above, vide
D order dated 22.9.2003, the appellate authority has held that the price charged
by the assessee should be treated as cum-duty price and accordingly reduced
the assessable value from Rs.26,63,440/- fixed by the adjudicating authority
to Rs. 22,09,827/-. Against the order of the appellate authority the department
filed an appeal only on the ground that the decision of this Court in Maruti
E Udyog Ltd. (supra) was pending_ re-consideration vide Review Petition (C) No.
75/2003. In this connection, the department placed reliance on the Board
circular No. 749/65/2003-C:X dated 26.9.2003, which is quoted hereinbelow:

"Circular No. 749/6512003-CX., dated 26-9-2003
F. No. 387/67/99-JC
F Government of India
Ministry of Finance (Department of Revenue)
Central Board of Excise & Customs, New Delhi

Subject: Valuation of goods for Central Excise

G Purposes - Cum duty price.
Kind attention is invited to the judgment dated 26-02-2002 of the
Hon 'hie Supreme Court in the case of CCE, Madurai v. T. V.S. Srichakra
Ltd, (2002) 142 E.L.T. A279 (S.C.) and the judgment dated 27-02-2002
in the case ofCCE, Delhi v. Maruti Udyog ltd, (2002) 141 E.L.T. 3
H
COMMR. OF CENTRAL EXCISE, DELHI "· ACTION CONSTRUCTION EQUIPMENT (P) LTD.[KAPADIA, J.] 677

(SC). Vide the said judgment, appeals filed by the Department were A
dismissed by the Hon'ble Supreme Court, upholding that the sale
price realised by the assessee is to be regarded as inclusive of excise
duty and therefore, in arriving at the excisable value of the goods, the
element of duty which is payable is to be excluded.

In this regard, it is to be informed that against the above said B
judgments of the Hon 'ble Supreme Court, Review Petitions have been
filed by the Department and the Hon'ble Supreme Court has ordered
for issue of notice. It is therefore, requested that the cases pending
for adjudication and remanded on this issue may be kept pending in
the Call Book till the decision of the Hon 'ble Supreme Court on the C
Review Petition filed by the Department. Accordingly, if any, adverse
decision of any appellate authority on this issue comes in the
meanwhile, the same will need to be appealed against.

Though vide section 136 of the Finance Act, 2003, Section 4 of
the Central Excise Act has been amended by insertion of an Explanation D
to Section 4(1) to the effect that the price-cum-duty shall be deemed
to include the duty payable on the goods, Board has taken a view that
the amended provision will apply only prospectively and the old
cases will have to be pursued as per the provisions of law prevailing
at the relevant time.
E
It is requested that the contents of this Circular may be brought
to the notice of all the Commissioners under your charge for necessary
action at their end."

It is important to note that the Review Petition preferred by the
department against the judgment of this Court in Maruti Udyog Ltd. (supra) F
stood dismissed on 9.12.2004 and accordingly, the Central Board of Excise &
Customs withdrew its circular dated 26.9.2003 quoted hereinabove and issued
a circular no. 803/36/2004-CX dated 27 .12.2004. For the sake of convenience,
we also quote hereinbelow the said circular dated 27.12.2004:

"Circular No.803/36/2004-CX., dated 27-12-2004 G
F.No.387/67/99-JC
Government of India
Ministry of Finance (Department of Revenue)
Central Board of Excise & Customs, New Delhi
H
678 SUPREME COURT REPORTS [2006] SUPP. 3 S.C.R.

A Subject : Valuation of goods for Central Excise purpose - Cum -
duty price - Regarding

Kind attention is invited to Board's Circular No. 74916512003-CX.,
dated 26-9-2003 [2003 (157) E.L.T. T27] issued from above file.

The Hon'ble Supreme Court vide its Order dated 9-12-2004 has
B dismissed the Review Petition (C) No. 75 of2003 in Civil Appeal No.
3783 of 2000 and other related matters filed by the Department. Copy
of the judgment is enclosed [See: 2004 ( 179) E.L. T. AI 02].

In view of above the above Circular dated 26-9-2003 is hereby
c withdrawn.

It is requested that this may be brought to notice of all concerned
for taking action accordingly."

II' the above circumstances, we do not wish to go into the factual issue
particularly, when no such plea was taken by the department in the appeal
D before the Tribunal and before this Court in the present Civil Appeal. We
have gone through the grounds mentioned in the memo of appeal filed by the
department before the Tribunal and we have also gone through the grounds
mentioned in the civil appeal filed by the department before this Court. As
stated above, the only ground taken in both the above appeals by the
E department was that the judgment of this Court in Maruti Udyog Ltd. (supra)
was pending re-consideration vide Review Petition (C) No. 75/2003. The
question as to non-applicability of the judgment of this Court in Maruti
Udyog Ltd. (supra) to the present case is not reflected in the appeal memos
before the Tribunal and in the civil appeal and, therefore, we refrain from
examining the factual conspectus of the case.
F
Jn the circumstances, on the facts of this case, there is no merit in this
civil appeal and the same is dismissed.

CIVIL APPEAL NOS. 2380/2005, 2967-2969/2005, 297012005, 348112004,
372412005, 385/2004, 4909/2004, 6348-635012004, 6523/2004 AND 766212004:
G
Jn view of the decision in Civil Appeal No. 6394/2004 above, these
appeals stand dismissed.

There will be no order as to costs in all the appeals.

H B.B.B. Appeals dismissed.