TaxTMI 
TaxTMI 
2019 (3) TMI 855
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....ecovery from the assessee under proviso to Section 11A of the Central Excise Act, 1944. 3) I order recovery of interest at appropriate rate on the confirmed demand of Rs. 9,14,925/- (Rupees Nine Lakhs Fourteen Thousand Nine Hundred and Twenty Five only) from the assessee under the provisions of Section 11AB of the Central excise Act, 1944. 4) I impose a penalty of Rs. 9,14,925/- (Rupees Nine Lakhs Fourteen Thousand Nine Hundred and Twenty Five only) from the assessee under the provisions of Section 11AC of the Central Excise Act, 1944. 5) I impose a penalty of Rs. 3,00,000/- (Rupees Three Lakhs only) on Shri T U Shenava, Managing Director of M/s ITMPL under Rule 26 of the Central Excise Rules, 2002. 6) I impose a penalty of Rs. 1,00,000/- (Rupees One Lakh only) on Shri T V Shetty, Marketing Manager of M/s ITMPL under Rule 26 of the Central Excise Rules, 2002. 7) I impose a penalty of Rs. 20,000/- (Rupees Twenty Thousand only) on Shri Vasant Nadar, Authorized signatory and Factory Incharge of M/s ITMPL under Rule 26 of the Central Excise Rules, 2002. 8) If M/s Industrial Tubes Manufacturing P Ltd pay the Central Excise duty as confirmed against Sr No (2) above alon....
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....r adjudicated the show cause notices as per his order referred in para 1, supra. 2.6 Aggrieved by order of Commissioner Appellants 1 to 4 have filed this appeal before tribunal. 2.7 Aggrieved by the order of Commissioner to the effect of dropping demand of Rs. 66,42,033/- revenue has also filed the appeal. 3.1 Appellant 1, has in the appeal filed assailed the order of Commissioner, stating that i. They have cleared the finished goods after undertaking the job work on the material supplied by the M/s NTPC or M/s GIPCL. They have valued the goods as per the decision of Apex Court in case of Ujjagar Prints [1989 (39) ELT 493 (SC)]. ii. The value of the material supplied by the said client was taken as declared by the said customers. They added the job charges to the value material declared and arrived at assessable value for determination of the Central Excise duty payable and paid accordingly. iii. They have no control over the value declared by the said clients. iv. The assessable value in case of job work, has to be determined on the basis of the principles laid down by the Apex Court in case of Ujjagar Prints and subsequent decisions, it cannot be on the basis....
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....o. They had acted under bonafide belief that what was being done is in consonance with the law laid down. In such a case no penalty could have been imposed on them in view of the decisions in case of a. Cement Marketing [1980 (6) ELT 295 (SC)] b. Grasim [2005 (183) ELT 123 (SC)] c. Hero Cycles Ltd [2005 (191) ELT 938 (T)] d. G T Auto Industry [2005 (190) ELT 203 (T)] e. Krishna Mohan Beverage [2004 (167) ELT 460 (T)] 3.2 Appellant 2, 3 & 4 have more or less adopted the arguments made by the Appellant 1. They have stated the proceedings for imposition of personal penalties on the individuals are in nature of quasi criminal in nature and the burden to prove the alleged offence against the individual is on revenue. If such a burden is not discharged the guilt of persons concerned cannot be said to have been established. 3.3 In their appeal Appellant 5, revenue has assailed the order of Commissioner stating - i. Price of Rs. 224.40 per kg was not actual price obtained in transaction. It was the bid price quoted in a sale proposal which however did not culminate in sale and translate into sale price. ii. In absence of any other pr....
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....o GIPCL. Inspection charges and cost of transportation charges of scrap were added to the assessable value for calculation of duty liability. vii. Penal recovery in case of short receipt kept on higher side so that the vendors refrain from defaulting. Hence this price does not have any bearing on the assessable value of job work material. viii. Prices in MCX Index are only an indicative price and not actual price obtained in a transaction. ix. The contemporaneous prices from MCX Commodity Index obtained is of Heavy Scrap of Copper, Nickel Plates and Brass Sheet Cuttings and not of ordinary copper, nickel and brass scrap received in the form of used and worn condenser tubes of NTPC and GIPCL. x. Inward transportation charges have been included in the conversion cost in case of NTPC. In case of GIPCL the inward transportation and testing charges included in the assessable value. xi. The contracts with NTPC and GIPCL allowed fixed percentage of burning loss. If the burning loss is less than that allowed in contracts, excess scrap, if any, retained was cleared on payment of duty on transaction value by the appellants. Hence, to include the value of excess scrap, if any, ....
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.... of the correct value of metal/ metal scrap at any period of time. By mis-declaring the price of raw material Appellants have deliberately suppressed the assessable value of the finished goods cleared by them with intention to evade/ short pay the duty, thus extended period of limitation as per proviso to Section 11A(1) has been rightly invoked. For the same reason he submits that penalty under section 11AC on Appellant 1 is justified and also the penalties under Rule 26 on Appellants 2, 3 & 4. 5.1 We have considered the submissions made in the appeals and during the course of arguments. 5.2 Following issues are framed for our consideration in this case. i. What would be principles of valuation of the goods under consideration? ii. What should be the value of raw material in the case? iii. Whether extended period of limitation as proviso to Section 11A(1) of Central Excise Act, 1944 can be invoked in the facts and circumstances of this case? iv. Whether penalty under Section 11AC justifiable in the facts of the present case? v. Whether penalty under Rule 26 of Central Excise Rules, 1944 justifiable on the officers of the Company in the present case? 5.3 What....
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.... In other words goods manufactured on job-work basis after 1.7.2000 will continue to be valued in the same manner as they were being valued before 1.7.2000. In other words, after 1.7.2000, in respect of goods manufactured on job-work basis, valuation would be governed by Rule 11 of the new valuation Rules of 2000 read with rule 6 read with the above two decisions of the Apex Court." Since the facts are not in dispute we are of the view that in the present case the valuation of the finished goods has to be determined in manner as clarified by the Board in terms of the above circular. 5.4 What should be the value of raw material in the case? In case of Ujagar Prints and Others v. Union of India and Others [1988 (38) E.L.T. 535 (S.C.)], Hon'ble Supreme Court has held as follows: "26. Re : Contention (e) This concerns the question of the correctness of the determination of the assessable-value. The processors say that they have filed classification lists under Rule 173B of the Central Excises and Salt Rules, 1944 as they had no other choice and that if the proper principles of determination of the assessable-value do not legally justify the consequence flowing from the c....
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....he Act. The value would naturally include the value of grey fabrics supplied to the independent processors for the processing. However, excise duty, if any, paid on the grey fabrics will be given proforma credit to the independent processors to be utilised for the payment on the processed fabrics in accordance with the Rules 56A or 96 D of the Central Excise Rules, as the case may be." Even the Referring Bench did not doubt the correctness of the inclusion in the assessable-value the cost of the Grey fabric and the processing charges. The Referring Bench held: "We cannot accept the contention of the learned counsel on behalf of the petitioners and the appellants that the value of the grey cloth which is processed by the processor should not be included in the assessable value of the processed fabric...." 29. In the argument, as presented, that the assessable-value would include what is referred to as the "post-manufacturing profits", there is an obvious fallacy. In Atic Industries Ltd. v. H.H. Dave, Asstt. Collector of Central Excise and Others [1975 (3) SCR p. 563] Bhagwati J. speaking for the Court said: 'The value of the goods for the purpose of excise must take into....
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....anufacture or; (b) Where such price was not ascertainable, the price at which an article of the like kind and quality was sold or capable of being sold at the time of removal of the article chargeable with duty. The nature of the excise duty is not to be confused with, or tested with reference to, the measure by which the tax is assessed. The standard adopted as the measure of assessment may throw light on the nature of the levy but is not determinative of it. When a statutory measure for assessment of the tax is contemplated, it "need not contour along the lines which spell out the levy itself.", and "a broader based standard of reference may be adopted for the purposes of determining the measure of the levy." Any statutory standard which maintains a nexus with the essential character of the levy can be regarded as a valid basis for assessing the measure of the tax. 30. In the case of processing-houses, they become liable to pay excise duty not because they are the owners of the goods but because they cause the 'manufacture' of the goods. The dimensions of the Section 4(1) (a) and (b) are fully explored in a number of decisions of this Court. Reference may be made to the cas....
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....n of this Court's judgment dated 4th November, 1988, it is made clear that the assessable value of the processed fabric would be the value of the grey-cloth in the hands of the processor plus the value of the job work done plus manufacturing profit and manufacturing expenses whatever these may be, which will either be included in the price at the factory gate or deemed to be the price at the factory gate for the processed fabric. The factory gate here means the 'deemed' factory gate as if the processed fabric was sold by the processor. In order to explain the position it is made clear by the following illustration: if the value of the grey-cloth in the hands of the processor is Rs. 20/- and the value of the job work done is Rs. 5/- and the manufacturing profit and expenses for the processing be Rs. 75/-, then in such a case the value would be Rs. 30, being the value of the grey-cloth plus the value of the job work done plus manufacturing profit and expenses. That would be the correct assessable-value. 2. If the trader, who entrusts cotton or man-made fabric to the processor for processing on job work basis, would give a declaration to the processor as to what would be the price ....
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.... be taken into consideration in arriving at the assessable value. 10. Repelling this contentions, this Court noticed that according to Section 4 of the Central Excise Act, the value of an article for the purposes of duty shall be deemed to be the wholesale cash price for which an article of the like kind and quality was sold or was capable of being sold at the time of removal of the article from the factory or premises of manufacture. It was then observed that in the case of processing houses they became liable to pay excise duty not because they were the owners of the goods but because they caused the manufacture of the goods. 11. It was held that it could not be contended, keeping in view the provisions of Section 4 and the Central Excise (Valuation) Rules, 1975 that the assessable value of the processed fabric should comprise only of the processing charges disregarding the value of the grey cloth. 12. Justice Mukharji, in a separate but concurring judgment observed that the assessable value of the goods manufactured would include the value of the grey cloth in the hands of the processor plus the value of the job work done plus manufacturing profits and manufacturing exp....
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....itioner/ appellants therein to the effect that assessable value should be the processing charges only. The said decision of the Apex Court do not allow the supplier of raw material or the processor (job worker) to declare imaginary or unsustainable values of the raw material supplied specifically in a case where the supplier of raw material or the person getting the job work done is not entitled to CENVAT Credit of duty paid on finished/ processed goods. Examining from the above premises, we examine the facts of present case. In case of the goods processed on the behalf of a. M/s NTPC, the landed price of the raw material i.e. old condenser tube removed from condenser while retubing has been declared as Rs. 224.40 per kg and the processing charges as Rs. 60 per kg, thus the assessable value as per the principles laid down by the Apex Court in above referred decisions was determined as Rs. 284.40/-. In this case the award letter itself states that processing charges were inclusive of the "collection, transportation & transit insurance of the said goods from NTPC premises to the premises of processor. Appellant 1 had discharged the duty by taking this value as the assessable va....
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....evailing as per MCX Index was much higher. Appellants in the case of goods manufactured by them on their own account paid duty on assessable value arrived at on the basis of the rate published & declared by MCX. • Appellant 1 was retaining the excess raw material supplied by the said customers free of cost and the value of the excess raw material retained by them was an additional consideration flowing to the appellant 1, hence the monetary value of such additional consideration was to be included in the value of finished goods. • The same goods being cleared by the Appellant-1 when manufactured and sold by themselves, were being sold at much higher value as is depicted in the table below: Invoice Name of Party Description of Goods Assessable Value Rs/kg Number Date 42 06.09.2007 M/s NTPC 90/10 Cupro Nickel Tube 284.40 43 07.09.2007 M/s Voltas 675.00 d. Commissioner has while adjudicating the case accepted the value declared by M/s NTPC for the raw material supplied stating as follows in para 46 of his order: "46. It is noticed in case of job work of M/s NTPC, the assessee i.e. M/s ITMPL are not the owners....
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....ared the landed cost of old brass tubes at Rs. 160/- per kg. 48. On being asked by the investigation for the basis for arriving at Rs. 160/- per kg. M/s. GIPCL had replied that the said rate has been arrived at the on the basis of the value of tubes purchased by them M/s. BHEL in 1990-91 and they did not ascertain the cost of raw material at the relevant time. They also stated that they have never sold any such goods at any point of time. In addition to this, the minutes of the meeting held between M/s. GIPCL & M/s. ITMPL wherein it was decided to explore the possibility of billing the testing charges directly to assesses to avoid Central Excise burden. This proves the modus operandi of M/s. ITMPL & M/s. GIPCL to evade Central Excise duty. Thus, the cost of brass scrap as arrived at by the department at Rs. 349.02 per kg is correct. Accordingly, the provisions of Section 11AB of the Central Excise Act, 1944 are attracted to charge interest on the duty demanded as also the penal action is also warranted under Section 11AC of the Central Excise Act, 1944. 49. The assessee vide technical bid dated 20.07.06 had quoted rate of Rs. 386.02 per kg for conversion of scrap of brass tub....
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....e value of the scarp supplied. h. In our view Commissioner should have rejected the declared value of raw material supplied by M/s NTPC and M/s GICPL and determined the value of same by applying the principles consistent with the norm of metal recovery from the waste tubes supplied for reprocessing. In our view matter for redetermination of the value of raw material needs to be reconsidered by the Commissioner and proper value arrived at on the basis of evidences available on records. 5.5 Whether extended period of limitation as proviso to Section 11A(1) of Central Excise Act, 1944 can be invoked in the facts and circumstances of this case? i. In the present case there is misdeclaration of value by the appellant. j. In case of GICPL commissioner has given a finding that the said misdeclaration has been deliberate and was devised modus operandi between the Appellant 1 and M/s GICPL in a meeting held between the two. Further by adopting this modus operandi the assessable value declared by the Appellant-1 is lower than the value quoted by the Appellant 1 themselves in the technical bid. Since Appellant-1 have in association with M/s GICPL devised this modus operandi for ev....
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....50 and 51 of his order recorded his findings in this regard and has held that the officers working in the company are liable to penalty under Rule 26 of the Central Excise Rules, 2002. Tribunal has in case of Goyal Ispat [2017 (6) GSTL 210 (T-Chennai)] held as follows: "15. Appeal No. E/790/2007 has been filed by Shri Ghisulal Kothari, Director of GIL against imposition of penalty of Rs. 10 lakhs on him in the impugned order under Rule 26 of the Central Excise Rules, 2002. The appellant herein has contended that Rule 26 presupposes the existence of ingredients of confiscation under the Central Excise Act or the Rules therein. As there is no allegation in the SCN that goods are held liable for confiscation, the imposition of penalty on him under Rule 26 is illegal and improper. Appellant also contends that he was not directly connected/concerned/involved with the payment of Central Excise duty or Central Excise procedures to be followed in the manufacture of clearances of impugned goods by GIL. To understand the contention of the appellant, it would be worthwhile to reproduce Rule 26 ibid as it existed at the relevant time : RULE 26. Penalty for certain offence. - Any person w....