TaxTMI 
TaxTMI 
2015 (11) TMI 91
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....peal No. E/3308/2005 is against order-in-original 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 ....
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.... the sale-price of the goods are not available and duty 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....
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....gainst the said order, for the reason that there is suppression of 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 Commis....
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....jection filed by the respondent-assessee is concerned, it was submitted that in the cross-objection the 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....
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..../ production are actual cost incurred. It was also submitted that Guidance Notes to CAS 4 clearly states that interest paid for borrowed funds is not considered as includable in CAS4 because the prescribed norm of 115% or 110% of cost 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 applicabi....
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.... Rule 57A Qamar Steel Tubes (P) Ltd. 2010 (252) ELT 349(All); (v) Rule 52A and 57GG control Rule 57A CCE Vs Spectra Electronics 2009(235) ELT 795 (HP); CCE Vs. Chandra Laxmi Tempered Glass Co. 2009 (234) ELT 245 (HP); CCE Vs. Karamchand Appliances 2009 (238) ELT 706 (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 ....
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.... submitted that following judicial decisions have laid down meaning of cost of production for Rule 6(b)(ii): (a) Mafatlal Industries Limited vs. Commissioner of Central Excise 2001 (134) E.L.T. 725 (Tri. - Mumbai) (b) Ashima Denim Limited vs. Commissioner of Central Excise -2005 (191) 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....
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.... from duty under Notification 67/1995. As far as limitation is concerned it was submitted that all the facts to arrive at the value as determined in the show cause notice or in the impugned order were already available with the department hence there cannot be any suppression of facts. 19. It was further submitted that if all the overheads were to be considered 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 ....
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....SC-CX. It was also submitted that the case of Dharampal Satyapal (supra) has no application in the facts of the present case. The judgment of this Tribunal in the case of Gopal Zarda Udyog vs. Commissioner of Central Excise 2001 (128) ELT 409 was quoted to support the contention. 24. The learned sr. counsel rely upon the following case laws: (a) Commissioner of Central 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 Weldi....
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....) was introduced. Even after this amendment, if there was no sale the credit was allowed. Thus, the bar contained in Rule 57AE did not apply to inter-unit transfer. It was submitted that CENVAT Credit Rules, 2001 were introduced w.e.f. 01/07/2001 and CENVAT Credit Rules, 2002 came into force w.e.f. 01/03/2002. In both the rules, the prohibition is applicable only if the goods are sold and not inter unit transfer, as in the present 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....
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.... (ii) If the value cannot be determined under sub-clause (i), on the cost of production or manufacture including profits, if any, which the assessee would have normally earned on the sale of such goods;" Clause (ii) is the relevant clause. However, in view of Section 4(1)(b), this sub-rule should not be read in isolation but with clause (i) as also Section 4(1)(b). 31. A combined reading of the Section 4(1)(b) and Rule 6(b) would indicate that the value of the goods as in the present case is required to be computed as nearest 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, o....
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.... before depreciation & taxation) or "Profit before tax" or any other profit has to be taken into consideration for determination of assessable value of the goods captively consumed. Another doubt has also been raised whether the present method of determining profit margin as a percentage with reference to sales turnover and loading the profit margin of the preceding year to the cost of production of the present year to arrive at the assessable value are to be continued. 3. The matter has been further examined in consultation with the Cost Accounts Branch of Department of Expenditure. Board has 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....
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....f includability of various components under the Circular of 1996 vs. CAS-4 and wants case to be remanded for determination as per CAS-4. 34. In 2000, the said Section 4 was replaced by a new Section wherein the concept of transaction value in place of normal value/ price was introduced. Thus under new section, it is the transaction value and not any deeming value or the normal value on which duty is to be charged. The new Section 4(1)(b) which is relevant in the present case is as under: "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 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 ....
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....quivalent thereof is not there in the Section 4 of the Act and the Rule 8 also states that the value will be 115/110% of the cost of production or manufacture of such goods without specifying how the cost of production or manufacture would be determined. All that was stated was cost of production will be as per generally accepted principles of accountancy. Keeping in view the changes in legal position at different points of time, there can be no doubt that for determining the value up to 30/06/2000 one has to follow the circular dated 30/10/1996 and while following the circular, concept of nearest ascertainable equivalent thereof is to be kept in mind. W.e.f. 01/07/2000 though there has been 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....
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....the only way left for the Revenue would be to take the expenditure incurred by the assessee as a whole. Similarly, many a times, a manufacturer may have number of plants and the goods being valued may be produced in one plant but certain costs may be available for all the plants put together and not for individual plants, in such a situation, as mentioned earlier, the only way left with Revenue is to take the overall cost. However, wherever, it can be demonstrated that a particular component of expenditure is not at all relating to the goods being valued under Rule 6(b)(ii), there is no question of adding cost/expenditure corresponding to that component of expenditure. 41. In the present case, the respondent-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 ....
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....the respondent-assessee did not file any appeal against the Commissioners order. We find, in the cross-objection filed by the respondent-assessee, it is stated that with a view to avoid litigation with the department and since the entire amount was available as credit to the respondent-assessee in Plant 1 they debited total amount of Rs. 96,71,259/- from time-to-time during the months of May, 2002 and June, 2002 against supplementary invoices for the goods cleared to Plant 1 during the period May, 2001 to May, 2002. The grounds of filing the cross-objection are that: (i) the appellant Commissioner erred in adding the expenses other than the cost of manufacture, cost of raw material and profit in the value of the goods transferred from Plant II and Plant III to Plant 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 Ex....
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....ether. In a situation like the present one, the details has to come from the respondent-assessee alone and he is required to satisfy the jurisdictional authorities with the details and it is only thereafter that the respondent-assessee can claim the benefit. Since the respondent-assessee is not in a position to provide the details, Revenue had no option but to take the overall figures. We note that respondent-assessee has not provided any such details either during investigation or adjudication by the original authority or before this Tribunal and in these facts and circumstances the contention needs to be rejected. We also note that number of items in the present case are marketable like wax paper, lanolin wax, CRSS, CRSS (P&H), etc. which was not so in the case of Cadbury India Ltd. (supra). 45. 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 we....
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....me of which were specifically listed in the circular and were to be included as per the circular of 1996 and these facts were in the exclusive knowledge of the respondent-assessee. In fact, it also appears that after computing the overheads in percentage in the above manner, they were just giving these figures (i.e. amount or %)to the Chartered Accountant who in turn were issuing the certificate without going into the question which are the items of expenditure within the category of overheads which have been included or excluded. We find that it is an admitted position that in the price declaration submitted to the department they were only indicating in terms of percentage overheads i.e., overheads constitute 3.34% as against the actual computation of 33.7%. For purpose of computation of value, the details 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 so....
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....e notice of the department and subsequent show cause notices were issued with the same or similar set of information and in our view, charge of suppression of facts cannot be invoked in respect of the show cause notices issued subsequent to the show cause notice dated 28/02/2002. No penalty under Section 11AC would be therefore imposable in respect of the demand of duty that will arise in the subsequent show cause notice. 51. The learned sr. counsel for the respondent-assessee has also submitted that they could have availed benefit of Notification 67/1995 and in that situation they were not required to pay any duty. In our view, this contention is required to be rejected for the simple reason the respondent-assessee has not opted for the benefit of Notification 67/1995. The respondent-assessee has not followed 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 goo....
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....e additional duty has been paid under re-assessment or on being detected by the department and such duty paid is available as credit under Rule 3 of CENVAT Credit Rules to the assessee & it cannot be allowed to be whittled down by Rule 7(1)(b). Thus, principles enunciated in Ballarpur Industries would be inapplicable to the facts of the case. The Commissioner while passing the Order-in-Original has accepted that there has been no loss of revenue to the Government. In paragraph 15 of the Order-in-Original dated 25-2-2005 it is held as follows : "However, I find some force in the defence plea that there was no loss of revenue to the department since whatever duty paid by their Mysore unit is admissible as cenvat credit, but for the reason discussed in the earlier paragraph. It is also relevant to note that there is no allegation 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....