TaxTMI 
TaxTMI 
2015 (11) TMI 91
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....nal dated 17/08/2004. In the order dated 30/09/2003 the Commissioner has upheld the demand on merits but dropped the demand for the extended period of limitation i.e., beyond one year, in this case from February, 1997 to March, 2001 and confirmed the demand for the normal period of limitation which is April, 2001 to May, 2002. Penalty under Section 11AC was also dropped. Revenue is in appeal against dropping of demand for extended period of limitation as also penalty. The respondent-assessee had deposited certain amounts during investigation for the normal period of limitation. However, after the filing of the appeal by the Revenue, the respondent-assessee has filed cross-objection No. E/CO-663/2004 contending that the confirmation of demand for the normal period is not correct on various grounds mentioned in the cross-objection. 3. Appeal No. E/3308/2005 is filed against the second order-in-original dated 17/08/2004 whereby the Commissioner has dropped the proceedings initiated under Rule 7(1)(b) of the CENVAT Credit Rules, 2002 to deny the CENVAT credit taken by the manufacturing unit I of the respondent-assessee. The Commissioner has dropped the demand on the ground that, as he....
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....y is paid based upon the computed value. The value is computed in terms of Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975 and Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. There is no dispute between the Revenue and the respondent-assessee about the applicability of the said Rules. However, the dispute is relating to the details in the computation of value as per Rule 6(b)(ii) of old Rules or Rule 8 of the new Rules. 4.3. Case was initiated based upon information collected by Central Excise Intelligence that the respondent-assessee were declaring the said values or the cost of production or manufacture on lower side. Respondent-assessee was filing price declaration under erstwhile Rule 173C of the Central Excise Rules, 1944 on the basis of Chartered Accountants certificate. Revenues case is that the cost of production or manufacture declared by the respondent-assessee was suppressed as all the expenses that were required to be added as per CBEC Circular No. 258/92/96 dated 30/10/1996 were in reality not added. After detailed investigation show cause notices were issued for arriving at the correct assessable value as ....
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.... facts and willful mis-statement. 5. The case was heard extensively on 27th May, 28th May, 1st June and 2nd June, 2015. 6. Learned Commissioner (AR), in respect of appeal No. E/3209/2004 submitted that the Commissioner in the impugned order has agreed with all the charges leveled in the show cause notice in para 111 to 124 and 126 of the impugned order. However, in para 125 he has dropped the extended period on the grounds that: (a) Department never questioned the CA Certificates earlier, hence, assessee had a bona fide belief that the value declared by them is correct; (b) demand is made based on assessees own records which were never hidden from the Department; (c) issue of determining assessable value of captively consumed goods was not free of doubt and Circular dated 30/10/1996 30.10.96 was not clear. Hence, it could be an issue of interpretation. (d) Plant I would be eligible for MODVAT/CENVAT credit and the situation is revenue neutral, hence, intention to evade duty cannot be alleged. 7. It was further submitted that the findings and absolution given by the Commissioner at para 125 of the impugned order are contradictory to his findings at para 111 to 124 & 126 ....
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....e assessee has claimed that the Commissioner has erred in adding expenses other than the cost of manufacture, raw material and profit, did not follow the earlier CESTAT orders and now assessee wants the matter should be remanded for re-determination of the amount in show cause notices. The learned Commissioner (AR) relied upon the following case-laws to support his various contentions: (i) Bombay Tyre International Ltd. 1983(14) ELT 1896 (SC) (ii) Otis elevator Co. 2012 (280) ELT 531(T) (iii) Greaves Ltd. 2006(205) ELT 407(T) (iv) Mahindra & Mahindra 2005(179) ELT 21 (SC-LB) (v) Dharampal Satyapal 2005 (183) ELT 241 (SC) (vi) Piya Pharmaceutical Works 1985 (19) ELT 272 (T) (vii) Coal Tar Chemicals Mfg Co. 1987 (32) ELT 602 (T) (viii) Coal Tar Chemicals Mfg Co. 2003 (158) ELT 402 (SC) (ix) Madurai Soft Drinks Pvt Ltd. 1994 (74) ELT 647 (T) (x) Madurai Soft Drinks Pvt Ltd. 1994(73)ELT A179(SC) (xi) Tata Iron & Steel Co. Ltd. 2014(300) ELT 571 (T) (xii) Nirlon Ltd. 2004(177) ELT 836 (T)(para 14 to 23) (xiii) Phaarmasia Ltd. 2004(173) ELT 481(T) (xiv) Phaarmasia Ltd. 2015 (319) ELT 360(SC) 9. It was also submitted that mere availability of MODVAT/ CENVA....
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....of production/manufacture includes such cost of borrowings. 11. Learned Commissioner (AR) further submitted that as per Rs. Cost Accounting Records (Shaving Systems) Rules.1996, GSR 202(E) dt.6.5.1996, depreciation, interest, research and development expenses, other overheads etc. are all to be considered as Costs. The Rules prescribe exactly as per the Circular of 1996. The Schedule II, Proforma C of the said Rules for Rs. Statement Showing the Cost of self-manufactured Components/Process materials (used in Shaving Systems/Parts thereof), clearly shows that all items of cost as prescribed in Circular dated 30/10/1996, including interest, depreciation etc. are includible. 12. It was also submitted that decisions of the honble Supreme Court in the case of Cadbury India 2006 (200) ELT 353 (SC) which considered the decision of this Tribunal in the case of ITC 2005 (190) ELT 119 (T) does not bind either the department or the Tribunal on applicability of CAS4 for any period prior to the Circular of 2003. It was also submitted that the department had appealed against the Tribunals decision in the case of ITC (supra) and the honble Supreme Court in its decision reported in 2006(204....
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....06 (HP); (vi) Rule 7 & 9 of CCR, 2002 control Rule 3 Sheela Dyeing and Printing Mills Pvt. Ltd. 2008 (232)ELT 408 (Guj); (vii) The Honble Supreme Court has in UOI Vs Ind Swift Laboratories Ltd. 2011 (265) ELT 3 (SC) specifically held with respect to the CENVAT Rules that Rule 3 & 4 are subject to Rule 14 and that there can be no dilution or reading down or ignoring of any word or condition expressly provided in any of the CENVAT Rules. 14. It was also submitted that the decision in CCE Vs. Jairaj Ispat Ltd 2009 (245) ELT 118 (AP) is not binding for the same reasons. Further, the honble Supreme Court in the case of Union of India vs. Marmugao Steel Ltd. 2008 (229) ELT 481 (SC) has held that Rule 57A is subject to the procedure in Rule 57G. Further this Tribunal in the case of Tamil Nadu Petro Products Ltd. 2009 (241) ELT 529 (T) held that the rigours of Rule 57E of Central Excise Rules, 1944 have to be met to avail credit. 15. The learned sr. counsel, on behalf of the respondent-assessee, submitted that the Supreme Court's decision in the case of Bombay Tyre International is not relevant for interpretation of Rule 6(b)(ii). In support of his contention, learned sr. counsel....
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.... E.L.T. 318 (Tri. - Mumbai) (c) Nirma Ltd. vs. Commissioner of Central Excise, reported in 2006 (200) E.L.T. 213 (Tri.-Mumbai), (d) Commissioner of Central Excise vs. Bombay Dyeing and Manufacturing Company Limited 2009 (246) E.L.T. 390 (Tri. - Mumbai) (e) Aaram Plastics (P) Ltd. vs. Commissioner of Central Excise 2014 (307) E.L.T. 904 (Tri.-Del). (f) Swaraj Foundry Division vs. Commissioner of Central Excise 2012 (284) E.L.T. 689 (Tri.Del) 16. Further, the honble Supreme Courts decision in the case of Cadbury India Ltd. 2001 (200) ELT 353 (SC), (para 12 to 14) was quoted. It was further submitted that the contention of the learned Commissioner (AR) that the judgment in the case of Cadbury India is not binding precedent in view of the decision of the bench of three learned judges in the case of ITC Ltd. 2006 (204) ELT 363 (SC) is not correct in view of the subsequent judgment of the bench of three learned judges in the case of Raymond Ltd. expressly approving its judgment in the case of Cadbury India (supra). It was further submitted that the principles laid down in Circular dated 13/02/2003 applies to pending matters relating to the past period. It was submitted that th....
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....the same were available from the profit and loss account of the respondent-assessee and the profit and loss account were submitted to the department and therefore, there cannot be any suppression. It was further submitted that the Assistant Director (Cost) has based his report upon the balance sheet and profit and loss account which were available with the department and hence no suppression of facts can be invoked. The decision in the case of Hindalco Industries Ltd. vs. Commissioner of Central Excise 2003 (106) ELT 346 (Tri.Del) (Para 6) was quoted. Further, similarly, in para 6.5 of this Tribunals observation in the case of P.R. Rolling Mills Pvt. Ltd. 2010 (249) ELT 232 (Tri.-Bang.) was also quoted. It was submitted that Civil Appeal filed by the department against the said decision was dismissed as reported in 2010 (260) ELT A84 (SC). 20. It was also submitted that Director General, Central Excise Anti Evasion had issued a show cause notice No. DGAE/BZU/202/ 12(4)24/97/2507 dated 25/05/1998 to Plant II seeking to recover the duty on SS Strips for the period December 1994 to January 1997. Annexure III to the show cause notice adopted the Overheads and Gross profit as per the ....
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....Excise vs. Indeos ABS Limited-2010 (254) E.L.T. 628 (Guj.). (b) Mafatlal Industries Ltd. vs. Commissioner of Central Excise, Daman [2009 (241) ELT 153 (T-Ahmd)] (c) Castrol India Ltd. vs. Commissioner of Central Excise & Customs, Vapi 2014 (311) ELT 71 (Tri.-Ahmd.) (d) Siddeshwar Textile Mills Pvt. Ltd. vs. Commissioner of Central Excise, Pune-III 2009 (248) ELT 290 (Tri.-Mumbai) (e) Hydraulics Pvt. Ltd. vs. Commissioner of Central Excise, Chennai 2008 (228) ELT 598 (Tri.-Chennai) (f) P.R. Rolling Mills Pvt. Ltd. vs. Commissioner of Central Excise, Tirupathi reported in 2010 (249) E.L.T. 232 (Tri.-Bang). [upheld by Honble Apex Court as reported in 2010 (260) E.L.T. A84 (S.C.)]. (g) The Commissioner of Central Excise, Ahmedabad-II vs. Reclamation Welding Ltd. 2014 (308) ELT 542 (Tri.-Ahmd.) 25. It was submitted extended period is not invokable in the facts and circumstances of the case. It was further submitted that suppression cannot be alleged for the subsequent periods. 26. It was also submitted that the department cannot deny credit of the duty paid by Plant II to Plant I and the department cannot allege suppression in 9 periodical show cause notices issued to th....
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....ent case. 28. The decision of the honble High Court of Karnataka in the case of Karnataka Soaps & Detergents Ltd. vs. Commissioner of Central Excise reported in 2010 (258) ELT 62 (Kar.) was quoted. Para 37 and 40 of the judgment were quoted. It was further submitted that the ratio of the above judgment is followed by the honble Andhra Pradesh High Court in the case of Jairaj Ispat Limited 2009 (245) ELT 118 (AP). It was submitted that the ratio of the above judgment has already been followed by this Tribunal in the case of Essar Oil Ltd. 2014 (303) ELT 255 (Tri.-Ahm.) and United Phosphorous Ltd. 2014 (313) ELT 418 (Tri.Ahm.). It was submitted that, in any case suppression cannot be alleged in the subsequent 9 show cause notice issued for the period April 2001 to May 2002. 29. We have considered the submissions made by both the sides. In order to appreciate the issue involved, we reproduce below the relevant section, rules and the Board's circular: Section 4:- Valuation of excisable goods for purposes of charging of duty of excise. - (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value shall, subject to t....
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....st ascertainable equivalent thereof, determined in such manner as may be prescribed. This would imply that the determination has to be done in the prescribed manner and the prescribed manner is to be in accordance with the earlier portion nearest ascertainable equivalent thereof. If in the prescribed manner, there is any doubt about what to include or what not to include, one will have to interpret after taking into account the former portion i.e. nearest ascertainable equivalent thereof. As per Rule 6(b)(i), if the goods are not sold by the assessee but are used or consumed by him or on his behalf in the production or manufacture of other articles, one has to take the value (i.e. normal sale value) of comparable goods produced or manufactured by the assessee or by any other assessee. Thus, the law anticipates that, even in the situation where the goods are not being sold and are being captively consumed and if comparable goods (which may not be exactly same) are being sold by the assessee then one will have to take that value for the purpose of assessment. In fact, the law further provides that even if the assessee is not selling such goods but some other assessee is selling co....
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....observed that the method of calculation provided under Rule 6(b) (ii) of the Central Excise (Valuation) Rules, 1975 is to ascertain the nearest equivalent of the normal price. Therefore, while determining the cost of production of captively consumed goods during the current year, all elements which are otherwise includible in Section 4(1)(a) price have to be included in the cost of production. It is hereby clarified that for calculation of value of the goods captively consumed under rule 6(b)(ii) the following steps are to be followed:- (i) The cost of production of the goods has to be determined so as to include inter alia, the cost of material, labour cost and overheads including administrative cost, advertising expenses, depreciation, interest etc. (ii) Profit before tax has to be taken from audited balance sheet of the previous year and the profit margin has to be calculated as a percentage of cost of production in the previous year as per the formula prescribed by the Cost Accounts Branch of Department of Expenditure (copy enclosed. (iii) The profit margin of the previous year as arrived at step (ii) as a percentage of cost of production has to be loaded to the cost of....
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....ny excisable goods with reference to their value, then, on each removal of the goods, such value shall - (a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value; (b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed." 35. It to be notedthat new Section 4(1)(b) does not have the words the nearest ascertainable equivalent thereof as was the case in old Section 4(1)(b). It is important to note that in earlier regime, if normal value of an item is Rs. 100/- and for some reason a manufacturer decides to sell it for Rs. 98/- to a particular customer, manufacturer was required to pay duty on Rs. 100/- alone and not Rs. 98/-. In transaction value regime, in such a situation, manufacturer is required to pay duty on Rs. 98/- only. This is a major departure viz. to take transactional values rather than deemed value. Thus where goods are not sold but consumed otherwise, the issue turns to what value will be transaction value fo....
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....een change in the legal position but still no detailed method for determination of cost of production or manufacture was specified and came to be specified only on 13/02/2003. In our considered view, in such a situation, cases pending for finalization on the date of issue of the circular i.e., 13/02/2003 but pertaining to the period after 01/07/2000 can be dealt in accordance with the new circular. Cases pertaining to earlier period i.e. before 01/07/2000 will have to be dealt in accordance with old Section 4(1)(b), Rule 6(b)(ii) and Circular dated 30/10/1996. 39. Computation of value in the old Section 4 read with Rule 6(b)(ii) and hence Circular of 1996 has been matter of dispute in certain aspects. One of the dispute that has arisen in many case is that the goods for which the value is being ascertained as per Rule 6(b)(ii) are not their finished goods and many of the expenditure which are incurred by the manufacturer are for the final products and not relating to the goods for which value under Rule 6(b)(ii) is being determined e.g. the manufacturer may be spending substantial money on the advertisement of their final product and the department wants to add advertisement cost ....
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....pondent-assesssee were following Rule 6(b)(ii) procedure. They were also following the Boards circular of 1996. They have never questioned the correctness or anything relating to the said Boards Circular. As required in the circular they were submitting price declarations along with a certificate from a Chartered Accountant regarding assessable value of various items which were being transferred from manufacture's unit No. 2 and 3 to manufacturers unit 1 and other two independent job-workers located in Hyderabad. The Chartered Accountant's certificate was assumed to be as per Board's circular of 1996. These declarations as filed by the assessee were being accepted by the department. However, lateron intelligence was gathered that the respondent-assessee is declaring the prices on the lower side by under declaring certain components in the cost of production. Investigation was taken up. Statements of various persons including Factory Managers, Accounts Manager, Manager (Excise) and Shri A.K. Jain, Practicing Chartered Accountant, whose certificate was enclosed with the declaration, were recorded. Help of cost accounts expert in the department viz. Assistant Director (Cost) was tak....
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....t I of the respondent-assessee for the purpose of assessment; (ii) the appellant-Commissioner erred in not following the binding orders of the Tribunal in the cases of Cadbury India Ltd. vs. Commissioner of Central Excise, Pune reported in 2001 (135) ELT 510, Hindustan Tyres Pvt. Ltd. vs. Collector of Central Excise, reported in 1998 (34) ELT 324 and GEC Alsthom India Ltd. vs. Commissioner of Central Excise reported in 1997 (96) ELT 473; (iii) the appellant-Commissioner erred in including the entire overheads of the Company as a whole including the expenses of other factories and unrelated and unconnected to the manufacture of the goods under assessment; (iv) the appellant-Commissioner further failed to appreciate that on perusal of the certificate dated 13th May, 1993, it would reveal that the cost of CRSS of Rs. 180.84 per kg. includes overheads of approximately 5% and gross profit of 17.77% of 1991-92 ought to have been deducted for taking the cost of production as overheads and profit is being separately sought to be added. 43. From the above grounds of cross-objection, we find that one of the objections raised is that the appellant-Commissioner has added expenses other ....
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....Appellant has also submitted about the cost of CRSS of Rs. 180.84% per kg includes overheads approximately 5% and gross profit 17.77% of the year 1991-92. In our view the period in the present case pertains to 1996-97 onwards and the figures of 1991-92 will be of no relevance. The respondent-assessee should have submitted the actual figures of CRSS for various raw materials as those were prevailing at the relevant time and not of the earlier period. Even before us no such details have been provided. We, therefore, reject the contention. 46. In view of the above analysis, in our view, for the period prior to 01/07/2000 the value determined by the Commissioner is correct and we uphold the same. As far as computation of value after 01/07/2000 is concerned the same can be computed as per CAS-4. We also note that respondent-assessee has not produced any such costing details/CAS-4 certificate during adjudication or before this Tribunal. In fact, from May, 2001 onwards, respondent-assessee has accepted 1996 circular, paid differential duty and took credit of same in other plant. However, it is not clear whether entire differential duty was paid or only part of it was paid. If entire duty....
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....ils provided by any assessee are normally accepted until and unless there is intelligence to the contrary. In this case also similar thing has happened. Revenue was accepting the percentage figure as given by the respondent-assessee viz. 3.34%. It was only when intelligence was collected that the matter was taken up for investigation and the help of Assistant Director (Cost) was sought and taken, and only thereafter details came out in the open. Keeping in view these facts including the conduct of the assessee, in our considered view, this is a clear-cut case of suppression of facts with willful intention to evade payment of duty and hence extended period of limitation is correctly invokable and for the same reason penalty under Section 11AC is also impossable. 48. Learned sr. counsel has given lot of emphasis on the decision of the honble Supreme Court in the case of Nirlon (supra). We have gone through the said decision. The facts of that case was entirely different. M/s. Nirlon Limited were manufacturing a product which they were selling and also captivelly consuming. They had filed a price-list indicating the sale-price to others as that also for captive consumption. Later on....
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.... the procedure, safeguard, etc. prescribed under the said Notification and at this stage the respondent-assessee cannot be permitted to ask for the benefit of the said Notification without following rigours of that Notification. If they wanted the benefit of the said Notification they should have followed the same at time of clearance of the goods. Moreover, part of the goods were being sent to the job-worker, who for excise purpose is independent manufacturer, for whom the said Notification will not be applicable. 52. The learned sr. counsel also submitted that DGCEI has also issued a show cause notice in which they have approved the overheads indicated by them. We are not impressed with this argument. As mentioned in that case, the DGCEI on the basis of intelligence was investigating that the cost of material has not been increased by the appellant over a period of years and the investigation was confined to that point. Overheads as declared by the respondent-assessee were deemed to be correct and no investigation was undertaken on this aspect. In the absence of any such investigation, it cannot be said that the Revenue has accepted the overheads after investigation and cannot b....
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....ation of any suppression of any facts, made against the assessee and the credit taken on the supplementary invoices is clearly indicated by the assessee in their monthly returns. Since the credit taken on the said supplementary invoices is held to be not admissible, I observe that this in itself is sufficient punishment to the assessee, notwithstanding the fact that they are also held liable to pay appropriate interest on the said cenvat credit so wrongly taken." Hence, we are of the opinion that questions of law formulated will have to be answered in favour of assessee and against revenue." 54. In view of the said decision of the honble High Court and the fact that the decision quoted by the learned Commissioner (AR) are not exactly on the issue before us, we respectfully following the judgment of the honble High Court of Karnataka, dismiss the second appeal of the Revenue. 55. We also note that both the sides have quoted very large number of judgments in respect of both the appeals. We have gone through the judgments and in view of our analysis relating to the law, we do not find that any of these judgments is contradictory. Facts in all these judgments are different. Many ....