TaxTMI 
TaxTMI 
2017 (6) TMI 323
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....re being disposed of through this common order. 2. All the appeals were heard together in which Shri V Lakshmi Kumaran and Shri Rahul Tangri learned advocates represented all the appellants as well as Shri H C Saini, learned AR, appeared for Revenue. 3. The brief facts are as under: (a) M/s. Suzuki Processors, Bhilwara were engaged in processing of grey fabrics. They used to pay central excise duty on the processed man-made fabrics of their own on the basis of the sale price of such fabrics in accordance with the provisions of section 4(1)(a) of the Central Excise Act, 1944. In respect of the fabrics processed on job work basis, duty was being paid on the basis of cost of grey fabrics plus the job charges in accordance with principles laid down by the Supreme Court in the case of Ujagar Prints Vs. Union of India (1989 (39) ELT 493 (SC)]; (b) Suzuki entered into two separate agreements with a private limited company named M/s. PGO Processors Pvt. Ltd. Bhilwara (hereinafter referred to as "PGO" also) for a period of three years w.e.f. 3.6.97. One agreement was for utilizing plant and machinery for processing of man-made fabrics and the other was for rent of the land and buildin....
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....e processing charges under Rule 7 of the Valuation Rules, 1975 read with the principles laid down by the Supreme Court in the case of Ujagar Prints [1989 (39) ELT 493 (SC)] (d) M/s. PGO Processors Pvt. Ltd., Bhilwara vide their letter No. PGO.97-98 dated 24.02.98 informed that from 24.02.98 they would pay Central Excise Duty on Fabrics Processed for M/s. Suzuki Processors on the sale value as declared by M/s. Suzuki Processors. Therefore, they filed price declarations on the basis of sale value as declared by M/s. Suzuki Processors from 26.2.98 onwards under Rule 173 C of Central Excise Rules, 1944 in respect of Man Made Fabrics so processed for M/s. Suzuki Processors. From 26.2.1998 they were paying duty on selling price of M/s. Suzuki Processors. (e) Therefore, for a period prior to 24.02.1998 i.e. for the period from 03.06.1997 to 23.02.1998, a show cause notice C. No. V(55) 15/OFF/96/98/322 dated 15.1.1999 was issued to M/s. Suzuki Processors (A unit of Suzuki Textiles Ltd.) proposing inter alia demand of Rs. 2,25,37,010/- on the ground that M/s. Suzuki had floated a dummy unit in the name and style of M/s. PGO Processors (P) Ltd. Bhilwara with an intent to evade Central Ex....
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....e Notification No. 36/98-CE dated 10.12.98 till the disposal of the petition. (i) The Hon'ble High Court disposed of the petition by its order dated 22.4.1999 by directing the department to allow clearances of goods by PGO on provisional basis on payment of maximum duty as per Sub-clause (ii) of the Clause 1 of Notification No. 36/98-CE till the request of applicability of the notification to M/s. PGO Processors (P) Ltd., Bhilwara was determined by the Commissioner of Central Excise, Jaipur II after giving adequate and proper opportunity of hearing in accordance with law. (j) The show cause notice C.No. V(55)15/OFF/96/98/322 dated 15.1.99 has been adjudicated vide Order in Original No. 18/2012 C-Ex/ JPR II Commissioner dated 30.3.2012 wherein it is inter alia held that M/s. Suzuki Processors, Bhilwara were manufacturer within the contemplation of Section 2(f) of Central Excise Act, 1944, and accordingly, they were liable to pay duty in respect of fabrics processed on their account in the Process-house on the basis of sale price for such fabrics in terms of Section 4(1) (a) of Central Excise Act, 1944 and that M/s. PGO Processors (P) Ltd., Bhilwara did not hold the position ....
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.... clearances effected by M/s. PGO Processors. It is the case of the department that as the commercial arrangement subsisting between the parties is nothing but a façade, the clearances in question have been under-valued under the Ujagar Prints Principle (until 15.12.1998) and on the annual production capacity under the compound levy scheme thereafter [ Notification No. 36/98-CE dated 10.12.1998 superseded by Notification No. 19/2000-CE dated 01.03.2000]. It is alleged that such clearances ought to have been correctly valued on the sale price of M/s. Suzuki Textiles Ltd. Accordingly, the differential duty on such clearances is sought to be recovered by the department. 8. Learned senior advocate, Shri V Lakshmi Kumaran arguing the case for the appellants, submitted that the differential duty demands are not sustainable on the main ground which is common to all the appeals. That the commercial arrangement subsisting between M/s. Suzuki Textiles and M/s. PGO Processors is not a sham and borne out of genuine commercial considerations. To support this argument, he further submitted as follows: (i) Both M/s. Suzuki Textiles and M/s. PGO Processors are registered with the Registra....
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....ments were entered into between M/s. Suzuki and M/s. PGO Processors. This is nothing but a sham agreement to evade payment of Central excise duty. M/s. Suzuki who were paying duty at the rate at which the processed goods were sold, started paying duty at the end of M/s. PGO at a very much diminished value. He further submitted that M/s. IDBI, who had given loan to M/s. Suzuki did not give permission for such lease arrangements. He finally submitted that differential duty has been rightly demanded from M/s. Suzuki. 11. Heard both sides and perused the records. 12. The case of the department revolves around the question whether the commercial arrangement subsisting between the parties is to be considered as a façade engineered with the intention to evade central excise duty. After leasing out the processing unit duly stands paid on the processed fabric on the basis of cost of goods plus processing charges as has been held by the Apex Court in Ujagar Prints case. It is the claim of the appellant that leasing out of land, building, plant and machinery have been carried out between two completely separate legal entities. Further, such leasing is for commercial consideration and....