TaxTMI 
TaxTMI 
2009 (7) TMI 293
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....ture of certain chemicals. With effect from 1-3-94, Excise Duty was levied on Denatured Ethyl Alcohol used for industrial consumption. During the period prior to 1-7-2000, as per the provisions of Section 4 of the Central Excise Act, 1944 read with Rule 6(b) of the Central Excise (Valuation) Rules, 1975 (hereinafter referred to as CEVR), when the excisable goods are not sold by an assessee but are used or consumed by him or on his behalf in the production or manufacture of other articles, the value was to be based on the value of the comparable goods produced or manufactured by the assessee or any other assessee [Rule 6(b)(i)] and if such value could not be determined, on the cost of production or manufacture including profits, if any, which the assessee would have normally earned on the sale of such goods [Rule 6(b)(ii)]. In this case, the appellant in respect of the clearances of Denatured Ethyl Alcohol to their sister unit at Barabanki were discharging duty liability on the basis of cost of production under Rule 6(b)(ii). Since the balance sheet for a particular year was being finalized in the month of September for the purpose of determining assessable value based on cost of pr....
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....0 (Aug. 99 to Dec. 99) 14.25 per litre It is on this basis that the assessable value of the clearances of Denatured Ethyl Alcohol made by the appellant to their sister unit at Barabanki during the period from 1994-95 to December 1999 was revised and three show cause notices, whose details are given below, were issued to the appellant for payment of allegedly short paid duty alongwith interest and also for imposition of penalty on them under Section 11AC of the Central Excise Act:- Show Cause Notice Period Duty demanded 26-3-99 April, 94 - Feb., 99 Rs. 14,59,49,158/- 31-8-99 March, 99 - July, 99 Rs. 25,12,528/- 18-1-2000 August, 99-Dec., 99 Rs. 4,99,417/- Out of the above show cause notices, the first show cause notice was issued by invoking extended period under proviso to Section 11A(1) of the Central Excise Act. 1.3 The above three show cause notices were adjudicated by the Commissioner, Central Excise and Customs, Allahabad vide Order-in-Original No. MP (demand - 34/99-2000) dated 31-10-2000 by which - (a) total duty demand of Rs. 14,89,61,104/-....
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....ods are not sold or for any other reason, the nearest ascertainable equivalent thereof is to be determined in such manner as may be prescribed, that therefore even when clause (i) of sub-rule (b) of Rule 6 is applied, endeavour, must be to determine the nearest ascertainable equivalent, that in this case it is clear such an exercise has not been done and that the Department's action of adopting the highest price of the comparable goods of other assesses on a particular day in each year is not sustainable in law. 1.5 The Tribunal did not go into the question of limitation, though that had been raised in the appeal, as the appeal was decided in the Appellant's favour on the merit itself. 1.6 The Department filed an appeal under Section 35L(b) of Central Excise Act, 1944 against the above-mentioned order of the Tribunal, before the Hon'ble Supreme Court which was admitted as Civil Appeal No. 4975/02. 1.7 Hon'ble Supreme Court vide judgment dated 12-11-07 while observing that there is no dispute relating to the period from April, 1999 to December, 1999, has remanded the dispute for the period from April, 1994 to March, 1999 to the Tribunal for de novo consideration, observing ....
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....eriod the highest or the average can be taken. That has to be done on the basis of the judicial discretion of the assessing officer which can also be decided by the appellate authority by finding out whether there is any rationale in the fixation done. In that view of the matter, the approach of the CEGAT is not legally tenable. We set aside the order of CEGAT and remit to CESTAT, which has come in place of CEGAT, for fresh consideration. 11. The appeal is allowed to the aforesaid extent. There will be no order as to costs." 1.8 Accordingly the appeal No. E/467/01 filed by the appellant has been taken up for de novo decision. 2. Heard both the sides. 2.1 Shri V. Laxmikumaran, Advocate, the learned Counsel for the appellant made the following submissions:- (i) As per the provisions of Section 4 as it stood during the period of dispute, the assessable value shall be deemed to be the normal price which is the price at which such goods are ordinarily sold by the assessee to a buyer in course of wholesale trade for delivery at the time and place of removal, where the buyer is not related person and price is the sole consideration of sale. As per clause (b) of Sectio....
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.... Section 4(1)(a) which is the price at which the goods are normally sold in course of wholesale trade to independent buyers for delivery at the time and place of removal where the price is the sole consideration for sale. Therefore, when determining the nearest ascertainable equivalent of normal price on the basis of other assessee's price, their price nearest to the date of removal has to be adopted and not the highest price during the year on some particular date. Therefore, the taking highest price during a year of other assessee and applying it for the clearances of the appellant during the entire year is totally wrong. (iii) Application of Rules 6(b)(i) and (ii) of CEVR should not result in values violently different. Hon'ble Supreme Court in the case of CCE, Jaipur v. Rajasthan Spg. & Wvg. Mills Ltd. reported in 2007 (218) E.L.T. 641 (S.C.) has held that application of Rule 6(b)(i) and 6(b)(ii) should not result in widely different assessable values and that the different methods for determining value must converge to common valuation. (iv) When for determining the assessable value under Rule 6(b)(i), the other manufacturer's price is adopted, in accordance with the pro....
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....al Excise Range, the Department was aware of this fact and the appellant cannot be accused of suppressing any information. Therefore, making the allegation of suppression or mis-suppression of facts, against the appellant and invoking longer limitation period on that basis under proviso to Section 11A(1) of the Central Excise Act, 1944 is totally wrong. For the same reason penalty under Section 11AC and interest under Section 11AB are not attracted. 2.2 Shri Virender Choudhry, the learned Departmental Representative made the following submissions:- (i) The contention of the appellant that the SDS manufactured by them was not comparable with the SDS manufactured by other three units in the vicinity, as while the appellant were manufacturing SDS out of the molasses purchased at controlled price, the others were manufacturing SDS out of molasses procured at much higher price in free sale, is not factually correct. The show cause notice and the Order-in-Original make it very clear that the SDS of the appellant is comparable with the SDS of the other units in terms of the price of the raw material. M/s. Saraiya Distillery and M/s. K.M. Sugar Mills whose prices are sought to ....
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....on 4(1)(a)(i) is available, recourse must be taken to Rule 6y(b)(ii). (ii) If the appeal is decided in the assessee's favour, all the points are deemed to have been decided in the assessee's favour and in this case, the limitation issue cannot be deemed to have been decided against the appellant. Therefore, limitation issue has to be taken into account even if it was not discussed in the Tribunal's order and it does not figure in the Hon'ble Supreme Court's order. (iii) While the appellant till November, 1997 were producing SDS only out of molasses procured at controlled price, other units were using free sale molasses also. The appellant's contention before the Commissioner was that M/s. Saraiva Distillery were buying molasses at controlled as well as at free sale prices, but the Commissioner has distorted the appellant's contention. (iv) In any case, the higher price of the other manufacturers of the whole year cannot be adopted. (v) If in case of Saraiya Distillery their assessable value of Rs. 12 per litre is correct, it does not appeal to any reason as to why this value during the same period is not correct for the appellant. 3. We have carefully considered the ....
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....97 Rs. 5.50 per ltr April 97 to Nov. 97 Rs. 8.30 per ltr December 97 to March 98 Rs. 12.41 per ltr April 98 to March 99 Rs. 13.52 per ltr April 1999 to Dec. 99 Rs. 17.43 per ltr (v) In the vicinity of the appellant's distillery unit at Captainganj, there were three other distillery units M/s. K.M. Sugar Mills (distillery division - Faizabad), M/s. Kisan Sahkari Chini Mills (distillery division - Ghosi) and M/s. Saraiya Distillery, Sardar Nagar (distillery division - Gorakhpur). These units were also manufacturing SDS from molasses and were having sales at the factory gate. All these three units were located within the jurisdiction of the same Central Excise Range under whose jurisdiction the distillery unit of the appellant's company fell. (vi) Till October, 1997, the Department did not raise any objection in respect of the assessable value based on cost of production adopted by the appellant and the price declarations filed by them from time to time were approved and RT-12 returns filed by them were finalized. There was no provisional assessment during the period of dispute. It is only during November, 1997 that audit unit for the first time raised....
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....Thus, normal price should have the five ingredients - (a) It should be the price at which the goods are the ordinarily sold i.e. the representative price. (b) It should be the price in course of wholesale trade. (c) It should be the price for delivery at the time and place of removal. (d) The transaction should be such that the price is the sole consideration for sale. (e) The transaction should be at arm's length. 4.2 As per proviso (i) of Section 4(1)(a), an assessee can have different prices for different classes of buyers provided they are not related persons and under this proviso, even the contract price for supply of a specified quantity of goods to a buyer over a particular period can be treated as "normal price" for that buyer. As per proviso (ii) to Section 4(1)(a) in case of goods with price control, the price fixed by the Government shall be deemed to be the normal price. As per clause (iii) of the Section 4(1)(a) where all the sales are through related persons, the price at which such related persons sell the goods to independent buyers will be the normal price. As per clause (b) of Section 4(1) where the normal price of such goods is not ascertainabl....
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....r to be reasonable taking into consideration all the relevant factors including the difference, if any, in the material characteristics of the goods to be assessed and the comparable goods, have to be made. Tribunal in the case of CCE, Chandigarh v. AEE Civil Workshop-cum-store, PSEB, Mohali reported in 2000 (124) E.L.T. 895 (Tribunal) = 2000 (37) RLT 716 (CEGAT) has held that while determining the assessable value of goods being cleared for captive consumption under Rule 6(b)(i) on the basis of the value of the comparable goods of some other assessee, adjustments have to be made for difference in the labour cost. Another point which has to be kept in mind while determining the value under Rule 6(b)(i) on the basis of the price of the comparable goods is that what is being determined under Rule 6(b)(i) is the "nearest ascertainable equivalent of the normal price" and, therefore, the value so determined must satisfy ingredients of the normal price as closely as possible and, therefore, the price of the comparable goods to be adopted should be the price at the time of removal or as close as possible to the time of removal of the goods to be assessed to duty. 4.2.2 The normal price....
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....discussed in para 4.2.1 above, for determining the nearest ascertainable equivalent of normal price in respect of the goods being stock transferred by the appellant to their Barabanki, first the sub-clause (i) of Rule 6(b) has to be applied and it should be seen is as to whether the price of comparable goods being sold by the above-mentioned three manufacturers in the vicinity of the appellant can be adopted. However, in this regard the appellant have three fold grievance to the method adopted by the Department - (1) While applying Rule 6(b)(i), the prices of the comparable goods under Section 4(1)(a) i.e. the general price at the place of removal available to any unconnected buyer, must be adopted and not the contract prices, to special class of buyers. In this case the prices of the other manufacturers sought to be adopted are the contract prices to some special class of buyers, which have been adopted without examining the terms of the contract. (2) While adopting the other assessee's price, the Department has first ascertained the highest price of each of the manufacturers during a particular year and thereafter highest of the three highest prices has been adopted and app....
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....n for sale. The term "wholesale trade" has been defined in Section 4(4)(e) as sales to dealers, industrial consumers, Government, local authorities and other buyers who purchase their requirement otherwise than in retail. First proviso to Section 4(1)(a) permits a manufacturer to have different normal price for different classes of buyers - dealers, industrial consumers, Government local authorities etc. provided each of these prices has the ingredients of normal price as mentioned in Clause (a) to Section 4(1). The question now arises as to which of the normal prices is to be adopted while applying Rule 6(b)(i) when the value of the captively consumed goods is to be determined on the basis of the value of comparable goods manufactured by other manufacturers - whether specially negotiated price to a particular class of buyers can be adopted or only the general wholesale price under Section 4(1)(a) to dealers through whom the goods are sold to general public is to be adopted. We are of the view that while applying Rule 6(b)(i), it is the general factory gate price under Section 4(1)(a), the price at which the goods are available to any wholesale dealer, rather than the price to some....
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....ition to molasses procured at control price, also the molasses procured at free sale price, which was much higher. Since the data about the extent to which the other manufacturers - M/s. Saraiya Distillery, M/s. Kisan Sahkari Chini Mills and M/s. K.M. Sugar Mills have used free sale molasses, is not available, it would be extremely difficult to make adjustment for difference in the cost of the inputs. In view of these circumstances, we are of the view that in this case, it is not feasible to determine assessable value of the goods under Rule 6(b)(i) and the value has to be determined under Rule 6(b)(ii) only, based on the cost of production of the goods plus profit which the assessee would normally earned the sale of such goods. As per the judgment of the Tribunal in the case of Raymonds Ltd. (supra) and Hon'ble Supreme Court judgment in the case of CCE, Aurangabad v. Raymonds Ltd. (supra), the profit to be included is notional profit which the assessee would earn in the normal course and not the actual prices and that even if the assessee have incurred loss notional profit has to be added. In this case, however, we find that though throughout the period of dispute the appellant cl....