TaxTMI 
TaxTMI 
2013 (11) TMI 694
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....n addition to the declared price of the goods. During 1997-1998 the buyer paid Rs. 6,50,500/- in similar manner. The case of Revenue is that these amounts should have formed part of the assessable value of goods sold by the appellant to the buyer. 4. A Show Cause Notice issued in this regard has been confirmed demanding excise duty of Rs. 2,20,835/- along with interest. Further a penalty equal to the said amount is imposed on under section 11AC of the Act, a penalty of Rs. 25,000/- has been imposed under Rule 173Q of Central Excise Rules 1944 on the main appellant and a penalty of Rs. 25000/- has been imposed on the Sh. Basant Dhoot the partner of the firm under Rule 209A of the Central excise Rules, 1944. Aggrieved by the order the appellants filed an appeal with the Commissioner (Appeal) the Commissioner (Appeal) set aside the penalty of Rs. 25,000/- on the main appellant and reduced the penalty on the partner to Rs. 10,000/-. Aggrieved by the order of Commissioner (Appeal) the Appellants have filed this appeal before the Commissioner (Appeal). 5. The contention of the Appellants is that they had an arrangement with the buyer whereby the buyer agreed to provide interest fre....
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..... Rs. 40 per kg Next 20,000 kgs of Retreading material @ Rs. Rs. 42 per kg Next 10,000 kgs of Retreading material @ Rs. Rs. 46 per kg Next 25,000 kgs of Retreading material @ Rs. Rs. 50 per kg Next 55,000 kgs of Retreading material @ Rs. Rs. 55 per kg Next 45,000 kgs of Retreading material @ Rs. Rs. 60 per kg That aforesaid special prices have been specifically agreed to and they would prevail for the supplies to the buyer irrespective of prevailing market prices. It has also been agreed that after supply of 2,00,000 kgs of material on the prices mentioned here in above, the buyer and manufacturer shall enter into fresh agreement for the supply price. That after supply of initial 2,00,000 kgs of material if the supply prices agreed to are more than Rs. 60 per kg, the manufacture shall provide credit period of one month to the buyer for making payment for the supplies made by the manufacturer. 6. The appellants argue that what they have done is to subsidize the interest cost of the appellant in setting up the factory. This was done only to ensure a regular supply of the finished goods for their business of re-treading and this did not affect the price of the ....
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.... of the decisions are on facts of the nature involved in this case. The case of ISPL Industries, the issue was whether notional interest on advances received by manufacturer is to be taken into account for determining assessable value of goods. In this case there is no advance paid at all. What is sought to be added is not notional interest but actual payments received from buyers over and above the price on which duty was paid. In the case of Indian Oxygen Ltd. in the case of Geep Industrial Syndicate Ltd. the case was Revenue wanted to charge duty on the price at the depot during the period when factory was considered as the place of removal which was not legally sustainable. That is not the situation in this case. In the case of Savitha Chemicals Revenue wanted to charge duty on bulk oil removed from the factory based on the price of oil packed and sold from depots. The case of Philips India was about the discount given to dealers who were doing advertising activity to promote the sale of the products. The other decisions quoted are much less similar to the facts of the present case. So noting relevant to the issue at hand turns out from decisions quoted. 12. Section 4 of Cen....
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....ng related persons), who sell such goods in retail; (b) where the normal price of such goods is not ascertainable for the reason that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof determined in such manner as may be prescribed. 13. The impugned sales in this case satisfies all ingredients of the main definition of normal price except that the price declared is not the sole consideration and some other consideration in also received from the buyers in the name of 'compensation'. 14. Another contention raised is that since the appellants had declared the compensation in their balance sheets the information was not suppressed and hence extended period cannot be invoked. There is also an argument that on irregularity detected in audit notice cannot issued invoking extended period of time. The question whether declaration in balance sheet is sufficient to come out of the charge of suppression was examined by the Honorable Apex Court in the case of Usha Rectifier Corpn. (I) LTD. Vs. CCE-2011 (263) E.L.T. 655 (S.C.). In para 2 and 12 of the judgment the Hon'ble High Court. Apex Court observed as under: &n....
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....in the partner played specific role in the clandestine removal. In the facts of this case, the partner's actions and t6he firm's actions which form the basis of the case is the same and we are of the view that it is not necessary to impose a separate penalty on the partner. So penalty imposed on the partner is set aside and the appeal filed by Shri. Basant Dhoot, partner of M/s. Black Stone Polymers is set aside allowing the appeal filed. 19. Thus the appeal filed by M/s. Black Stone Polymers is rejected and the appeal filed by Shri Basant Dhoot is allowed. Per : Ms. Archana Wadhwa 20. After going through the order proposed by my ld. Brother, I proceed to record a separate finding. As detailed fact already stands enumerated in the order recorded by Member (Technical), the same are not being repeated except wherever the need is felt. 21. The sole question required to be decided is as to whether the compensation given by the buyers of the tread rubber to the appellants which is basically a non-interest free loan to the appellant, is required to be added in the assessable value of the tread rubber supplied by the appellant to their buyers. From the impugned orders passed b....
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..... They have relied upon various decisions of the Tribunal laying down that once factory gate sale price is available the same becomes the normal assessable value in terms of the erstwhile provision of section 4 of Central Excise Act and has to be adopted in all cases. In as much as the appellant have been selling the tread rubber to other buyers at the same price, the normal assessable value in terms of 6the section 4 is available and the same price is required to be adopted in respect of sales to BSRI. They also contested the Revenues proposal to enhance price based upon the assessable value of comparable goods purchased by MRF Ltd. on the ground that their goods are not comparable. In support of their plea that the prices fixed in the agreement were on the basis of cost of production, they drew the attention to the profit & loss account of the financial year 1997-98. Against cost of production of Rs. 78,58 lakhs, the sales proceeds were Rs. 87.23 lakhs. It was their contention before the adjudicating authority that despite heavy depreciation cost involved in the total cost of production, they had earned cash profit without taking into account the compensation receipt. It stands ....
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.... final product or was with a view to ensure continuous supply of tread rubber. 27. While dealing with the said question, I find that the appellants are not selling their entire 100% production to BSRI. The sales are also being effected by them to independent wholesale buyers. Such sales are also being effected by them to independent wholesale buyers. Such sales are at the same value. It stands recorded in the impugned order of original adjudicating authority that the sales to independent buyers during the period 1996-97 was to the tune of 2.33% and during the year 1997-98 was to the tune of 1.45% of the total sales. He has, however, observed that the sales of tread rubber to customers other than BSRI did not appear substantial enough to be taken as representative and comparable price of sale of tread rubber by the party. 28. During the relevant period, the erstwhile provisions of section 4 which stands reproduced in the other proposed by my ld. Brother, were to the effect that normal price would be the price at which the goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and price of removal and where the buyer is no....
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.... rubber sold to other independent wholesale buyers, was different in quality than the one sold to BSRI, nor the adjudicating authority has himself referred to any evidence to that effect. In fact, I find that under the heading, 'discussion & Findings', the Addl. Commissioner is rejecting the appellants stand on the ground that clearances to other buyers was very nominal but even if it is accepted that the price charged by the appellant from BSRI and other buyers was the same, even than the price charged form BSRI cannot be accepted the same as it was not the sole consideration for the sale of the excise goods and there was additional consideration flowing from the BSRI as per the agreement. From the above, it can be seen that the adjudicating authority is proceeding on an accepted fact as if the compensation received from BSRI was additional consideration for the goods sold to them rather than to decide the question as to whether the said compensation was additional consideration or not? 31. It stands held in number of decisions that once factory gate sale is available in terms of erstwhile provisions of section 4 of the Central Excise Act, the same has to be adopted as the ass....
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....of the factory for manufacture of tread rubber for ensuring continued supply of tread rubber to them, which fact is also beneficial to the buyer. This is normal business deal. 33. Similarly in the case of VST Industries Ltd. reported in 1998 (2) SCC 24, the court negated the case of Revenue for reloading the assessable value by adding notional interest on the amount of interest free advance deposited as security by some of the dealers on the ground that a uniform price was being charged by the manufacturer from all its dealers and there would be no occasion to content that price charged uniformly flow both sets of buyers would still not be a normal price. In the present case, I find that the demand is being confirmed by adding notional interest without first recording a finding that such interest has lowered the value. 34. I have also taken into consideration the appellants specific plea that if the amount of compensation received in two different financial years is added into the assessable value, the same would lead to frivolous results. To substantiate their plea that the amount of compensation received by them has no connection or link with the price of tread rubber, they....
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....ur of appellant, I also find that the demand is hit by bar of limitation. Admittedly, the fact of receipt of compensation was reflected by the appellant in their account books and was part of the profit & loss account. If that be so, can it be said that the appellant suppressed or mis-stated any fact with intent to evade payment of duty. It has to be kept in mind that for invoking the extended period of limitation, the facts and circumstances mentioned in proviso to section 11A must be available. Admittedly all ingredients of the said provision have inbuilt malafide intent. As regards misstatement or suppression, the said phrases had been subject matter of various decisions of the Hon'ble Supreme Court wherein it stands held that such suppression or misstatement has to be with an intent to evade payment of duty. As such malafide intent is one of the basic requirements to invoke extended period. How such intent has to be arrived at, is the question to be decided in the facts and circumstances of each and every case? When an assessee is disclosing the facts of receipt of compensation in their books of accounts as also in their balance sheet, can it be said that he suppressed or misst....
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....eet 90% requirement of M/s. Blackstone Rubber Industries Pvt. Ltd. for the period 1996-97 to 1997-98 in terms of an agreement dated 16.1.1995. The recital of agreement at page 27 of appeal folder demonstrate that the appellant manufacturer and above buyer had mutual interest to serve specific purpose as embodied in the agreement. 40. The buyer having faced difficulty of procuring quality raw material for use in processing of re-treading and repair of tyre during past 10 years invited the manufacturer appellant to set up a plant at the above mentioned place to serve purpose of each other. Agreement does not rule out mutuality of interest between both the parties by a long term arrangement agreed by them. 41. According to agreement buyer was to give advance to the manufacturer appellant in 3 instalments aggregating to 25 lakhs. In absence of such advance the buyer was to compensate to the manufacturer appellant to the extent of 90% of interest cost incurred by the later in terms of Para 3 & 4 of their agreement. This condition clearly projects that the understanding of parties was to protect each-others interest. But unfortunately show cause-notice did not bring out categorical....