TaxTMI 
TaxTMI 
2018 (1) TMI 679
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....s. There was a search in the factory on 06/01/2005. The officers conducted the physical stock verification of finished goods as well as of the raw materials in the presence of Shri Rajeev Malaviya, Authorized Signatory and along with two independent witnesses. The stock verification of finished goods was prepared on the spot. The stock of raw materials and that of finished goods were found to be tallying with the recorded balance as per computer sheets/records maintained by the appellant. Further, during checking/scrutiny of the records, it was observed that the appellant had cleared "Waste & Scrap Ni Slurry" without payment of duty and without issuing proper Central Excise invoice. On being asked for the reason for non-payment of duty on such waste & scrap cleared through 12 computer generated letter-head papers, and not under the cover of invoices, Shri Rajeev Malaviya, in his statement dated 06-07/01/2005 stated that such goods have been cleared without payment of duty by mistake, he accepted such mistake and voluntarily debited the amount of duty Rs. 1,04,174/- through PLA entry No.1 dated 06/01/2005, and further amount of Rs. 13,000/- + Rs. 91,174/- from RG-23A Part-II vide en....
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....said suppliers, on behalf of the appellant, reduced the cost of Catalyst to Rs. 800/- per liter and also agreed that 7325 Liters of Catalyst will be supplied at Nil cost, but claimed service charges against above supplies, being Rs. 55,00,000/- lump sum and it has been confirmed under suppliers reference letter ER/292 dated 01/07/2003. Against Excise duty, it is mentioned that Excise duty would be charged extra against the Excise invoice, but for the service charges, no excise duty would to be paid. The value of 7325 Liters of Catalyst said to be supplied at Nil rate, worked out at the agreed rate of Rs. 800/-, will come to Rs. 58,60,000/-, i.e. a little more than the service charges of Rs. 55,00,000/- claimed by the appellant from the buyer. Therefore it appeared that appellant knew very well what the real value of the goods shown as sold at 'Nil' value was. 4. Further, it was observed that in the case of M/s Mangalore Refinery & Petrochemicals Ltd., Mangalore, in their proposal dated 19/10/2002 and in dispatch instruction note dated 18/02/2002, the appellant, on their pass have mentioned value for free supplies at Rs. NIL but the for purpose of Central Excise duty, mentioned t....
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....t as per relevant invoice (in Rs.) Total price of goods as per relevant invoice Assessable value worked out on prorate basis variety wise (in Rs.) Relevant invoice No. on the basis of which assessable worked out Duty evaded (in Rs.) 1 14 31.08.02 PRC 46-4(S) 2100 818.80 0 17,19,480/- 14 dt. 31.08.02 275117 2 15 31.08.02 PRC 46-4(S) 2275 818.80 0 18,62,770/- 14 dt. 31.08.02 298043 3 16 31.08.02 PRC 46-4(S) 275 818.80 0 18,62,770/- 14 dt. 31.08.02 298043 4 17 12.09.02 PRC 46-4(S) 2350 818.80 0 19,24,180/- 14 dt. 31.08.02 307869 5 23 14.10.02 RC 57-4Q 4375 400 0 17,50,000/- 26 dt. 14.10.02 280000 6 24 14.10.02 RC 57-4Q 4375 400 0 17,50,000/- 26 dt. 14.10.02 280000 7 25 14.10.02 RC 57-4Q 4250 400 0 17,00,000/- 26 dt. 14.10.02 272000 8 35 25.09.03 RC 46-3Q 1050 800 0 8,40,000/- 35 dt. 25.09.03 134400 9 36 25.09.03 RC 46-3Q 2950 800 0 23,60,000/- 35 dt. 25.09.03 377600 10 37 25.09.03 RC 46-6Q 332....
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....-operative Ltd. ('IFFCO' for short) & (v) M/s Mangalore Refineries & Petrochemicals Ltd., Mangalore ('MRPL' for short). All the 5 buyers are Petrochemicals Industries having big market for their products and they alone are able to decide and dictate the terms of purchase of Catalyst manufactured by the appellant. The appellant had entered into contracts for supply of Catalysts for specified quantity and description as given in the respective contract and the supply of specified quantity was to be made along with the specified quantity of free supplies indicated the respective contract for different other items of Catalyst. In other words, the supply of one variety of Catalyst for a price agreed upon stipulates supply of other variety of Catalyst of different quantity without charging for the same or at nil rate, hence, called free supply, but the price paid by the buyer is attributable to the price of both the goods that is cleared at a price and cleared at nil rate. The quantity cleared at nil rate is in the nature of quantity discount and nothing effectively is supplied free. The duty of Excise on the transactions value as per the price agreed at the applicable rates in force had....
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.... of duty. Further, the production of Catalysts of specified items contacted for cannot be manufactured without the production of Catalysts alleged to have been supplied free, because the two are inseparable and form part of the same production process. The commercial and technical compulsions in running the business necessitate the production of Catalyst for which price is determined explicitly and those for which the free supply is made to ensure that the plant is allowed to run, as there is no store or storing capacity for the items which are considered as free supplies made. Just as sugar cannot be produced without molasses and the sale of sugar can be combined with the sale of molasses, the production of Catalysts specified in the contract cannot be carried out without the production of other Catalysts (joint product or by product) supplied as free material as both arise in the course of production simultaneously, and both are to be sold/cleared virtually to the same parties who are the few buyers of the product and only have usage of the same in the factories producing chemicals, fertilizers, petrochemicals, etc. in the Petrochemical Industries. The appellant's counsel further....
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....m the appellant and the terms and conditions remained the same except for variation in price on account of market factors, cost escalations, etc. Except for the present dispute, there is no dispute with regard to similar transactions both in the past and thereafter in the future. Therefore, there is no ostensible reason why the present demand raised by the Revenue, only on presumptions should not be set aside, there being no finding/evidence of any suppression of facts, fraud, collusion etc. with intent to evade duty on the part of the appellant. 13. The ld. A. R. appearing for the Revenue has relied on the impugned order. He further contended that the free supplies made in the present case cannot be termed as trade discount, or as quantity discount as there is no uniformity in the discount. Further he contended that in the appellant's case, there was no fixity nor rationality about free supplies as it was found to vary from 30% to 150%. It was also submitted that the trade discount can be allowed a deduction/reduction for valuation purposes and the trade discount would mean discount usually expressed as a percentage of deduction/reduction given to the buyer. It was also con....