TaxTMI 
TaxTMI 
2019 (3) TMI 1362
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....upplied were manufactured by appellants and cleared to customers site on payment of duty, certain bought out items (shop made) were procured from third party vendors and sent directly to site of the customers (DTS items). Appellants were clearing shop made goods on payment of excise duty. However, with respect to DTS items, no excise duty thereon was discharged by the appellants. However commercial invoices were issued by the appellants both for shop made goods and DTS supplies. Appellants had established a system of accounting wherein as and when despatches are effected, the same are accounted for in the packing slips generated in the system covering various excise invoices for the purpose of ascertaining actual quantity cleared, Packing Slip Analysis maintained by appellants was relied upon. Once the supplies to these projects were completed, the appellants applied for finalization of provisional assessment. In both finalization orders, the asst. Commissioner allowed deductions for DTS supplies from assessable value based on values mentioned in the commercial invoices issued by appellants to their customers. In the finalization order of original authority dt. 25.10.2011 in respec....
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....he commercial invoice issued by the appellant on the basis of Estimated Value of Goods Sold ('EVGS') should be taken for the purpose of deduction of DTS supplies than the cost of procuring the items (as mentioned in the vendor's invoice). Further, para 15 (iii) of the memorandum states that during the finalization of provisional assessment, the deduction for DTS supplies will be based on the EAVGS (Estimated Assessable Value of Goods Sold) as mentioned in the commercial invoice of the Appellant. (iii) For the purpose of valuation for DTS supplies, the cost plus method was specifically discussed at para 9 of the O.M. Under this method, DTS supplies will have to be valued at actual costs (as per vendor invoice) plus a reasonable margin for overhead expenses and profits. However, such cost-plus method was rejected by the Commissioner of Central Excise in para 9 of the O.M. itself. (iv) Further, the assessment of DTS goods is beyond the purview of the jurisdictional central excise authorities of the Appellant. The goods are purchased by the Appellant at a particular price and are sold to the customer at a price as per a pre-determined formula (accepted by the customer) without br....
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....assesse is due in any duty, then for the short fall in payment of duty, the assessee is liable to pay interest." The aforesaid decision of the Hon'ble High Court has been followed in following decisions : a. Jonas wood head & Sons v. CCE [2015-TIOL-1848-CESTAT-Mad] b. Hindustan Zinc v. CCE [2015-TIOL-2427-CESTAT-Del] Jyothy Lab v. CCE [Final Order No.40918-40919/2015 dated 27.07.2015] 4. On the other hand, on behalf of Revenue, Ld. A.R Shri K. Veerabhadra Reddy reiterated the impugned orders and also made the following submissions : i) The value charged on BHEL by the vendors for the DTS items is very much relevant. ii) If such bought out items are overvalued in the commercial invoices subsequently issued by BHEL that would in turn lead to undervaluation of the goods manufactured by BHEL and cleared by them. Accordingly, whenever commercial invoice values are higher than the actual cost from vendors, it will lead to uncalled for depression in the valuation of self-manufactured goods. These aspects have been considered by the Commissioner (Appeals) in para 4.8 of the impugned order for Appeal E/470/2012 and in para 4.3 of the impugned order for E/509/2012 and on....
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.... and are called "Commercial Invoices". The reasons for continuing with the present method are given in paras 8 to 10 of the said office order. For finalization after issue of final Commercial Invoices under the contract, the following guidelines have been given in para 15 therein as under : At this stage the excise duty payable will be worked out after taking into consideration the following : (i) Full value of realized from the buyer including cost escalations (ii) Full value of goods cleared from other BHEL units. (iii) Full value of items supplied direct to site. This will also be worked out on the basis of agreed EAVGS per kg. (iv) Assessable value will be worked out for each clearance and duty payable calculated. For this calculation, it will be necessary to arrive at the FAVGS per Kg taking into account all the factors as are known finally. Then additional Excise duty payable, if any, will be demanded. (v) In case of refund, evidence should be produced showing that excise duty paid is not passed on to customer. 6.2 It is pertinent to note that the above office order was very much in force during the periods of dispute in both these appeals. This being so,....
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....ot be appropriate for the purpose of arriving at the actual value of the goods supplied. Hence to this extent, it appears that the guideline 2004 (office memorandum) is not in line with Section 4 of Central Excise Act, 1944 which talks about the transaction value. • With respect to the query of the Tribunal whether any of the ingredients of the cost is overlooked by the appellant to result in under-valuation of the excisable goods cleared from its factory, Revenue has reiterated the stand taken by Revenue by the lower authorities that if bought out items are overvalued in the Commercial Invoice; it will lead to undervaluation of goods cleared from the factory. • On a query No.(iii) whether any costing has been undertaken by Revenue to demonstrate that methodology prescribed by the guidelines suffers from any drawback, Revenue submitted that Deputy Director (Cost) of the office of the Commissioner of Central Excise, Trichy had called for documents for the purpose of arriving at Actual Value / Costing of the goods supplied. However, in the absence of required documents proper costings or determining the actual value could not be undertaken. • Wi....
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....to pick up commercial invoices of DTS goods where the prices charged by BHEL are much higher than what was suffered by them and conveniently ignore the commercial invoice of DTS goods wherein the price may have been lower than what vendors had charged to BHEL. We are also unable to fathom how Revenue while contending that the 2004 guidelines are in contra-distinction to the transaction value of Section 4 of the Act, yet finds it proper to question the commercial price charged by BHEL to their customers without any ground or reason to prove that such values are not transaction values. As seen above, there is no satisfactory response to the query raised by Tribunal in the interim order, as to what are the ingredients of cost added to invoice value of the bought out items which resulted in overvaluation. Possibly, objection to the "high" price of DTS items is on account of the apprehension that vis-à-vis the total contract cost, the cost of excisable goods manufactured by the appellants would then get depressed resulting in lower than required discharge of central excise duty. However, such a suspicion has to be sufficiently proved by the Revenue with incontrovertible evidences....
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....sought for Provisional Assessment as the contracts with their customers contained price variation clause which was accorded as per law in force. The finalization of the provisional Assessment based on the available Transaction Value (Commercial Invoice Value) shall be the best recourse in the situation. The argument for modification of the Impugned Orders based on the available Transaction Value (Commercial Invoice value) merits consideration." It has been brought to our notice by Ld. Counsel that Revenue has preferred appeal against the said order of the Commissioner (Appeals) only to the extent of nine appeals that were rejected as time-barred and not against the remaining appeals that have been decided on merits. The contention of the Ld. counsel is that subsequent decision of Commissioner (Appeals) allowing deduction based on commercial invoices raised by the appellants on their customers for supply of DTS goods items stands accepted by the department and has attained finality. 7.6 In the circumstances, the portion of the impugned orders ordering reconsideration of the matter by the original authority whether the bought out items are overvalued is not sustainable. 8. T....