TaxTMI 
TaxTMI 
2019 (8) TMI 382
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.... September 2011. The remaining appeals are for the subsequent periods. The details are as follows: Appeal No. E/1768/2012 & E/1781/2012 E/20234-20235/2014 E/21160/2015 & E/21173/2015 Period involved Oct. 2009 to Sept. 2011 Oct. 2011 to August 2012 Sept. 2012 to Sept. 2013 Demand in Rs. Rs. 5,66,51,110/- + Interest Penalty 5,66,51,110 Rs. 1,17,10,253/- + Interest Penalty- 30,00,000/- Rs. 2,64,09,290/- + interest Penalty- 50,00,000/- Penalty on Mondelez Rs. 2,00,00,000/- Penalty of Rs. 30,00,000/- Penalty of Rs. 50,00,000/- Amounts paid Rs. 2,04,80,588/- - - 2. The issues which fall for consideration in these appeals are: (a) whether Little Star is entitled to the benefit of exemption Notification No. 03/2006 (Sl. No. 19) for the goods "Cadbury Perk with Glucose Energy" manufactured by them on behalf of M/s Mondelez; (b) whether the dealer's margin, RD markup and post manufacturing expenses claimed by the appellant in their price list but included in the assessable value by the original authority need to be included for determining the excise duty payable or otherwise; (c) whether the extended p....
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....ion 4A instead of Section 4 of Central Excise Act, 1944. Thereafter, another show cause was issued to the appellant covering the period October 2009 to September 2011. In this second show cause notice, the department did not contest either classification by the appellant or the fact that they are not covered by Section 4A but are covered by Section 4 for the purpose of valuation. The second show cause notice only sought to deny the exemption notification claimed by the appellant and also sought to value the goods under section 4 of Central Excise Act, 1944 as per the price list denying some exclusions claimed by the appellant. Both the show cause notices were decided by Ld. Adjudicating authority vide O-I-O No. 09/2012-Adjn. (Commr.) CE, dt. 26.03.2012. He dropped the proceedings in pursuance of the first show cause notice. Therefore, the dispute with regard to the classification and valuation under section 4A instead of under Section 4 have reached finality. The adjudicating authority has also held that their products are classifiable under chapter heading 1905 3290 and that their products are not covered under section 4A and therefore are chargeable as per valuation under section....
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....the schedules to Central Excise Tariff Act, 1985, read with any exemption notifications that may apply. (e) Where the excise duty has to be levied based on the value, the value shall be determined as per Section 4 of Central Excise Act and the Central Excise Valuation Rules. (f) Where any duty of excise has not been levied or paid or short levied or short paid or erroneously refunded, the same can be recovered by raising a demand under Section 11A of the Act. Further, if such non-levy, short-levy, non-payment, short-payment or erroneous refund is by reason of fraud or collusion or any wilful misstatement or suppression of facts or contravention of any provision of the Act or Rules made thereunder with intent to evade payment of duty, the demand can be raised within an extended period of limitation of five years from the relevant date. 7. In these appeals, it is not in dispute that the excisable goods have been manufactured and they are leviable to Central Excise duty at the rates set forth in the Central Excise Tariff and that the valuation of these goods is covered by Section 4 read with Central Excise Valuation Rules. The initial contention of the Revenue in ....
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.... the corresponding entry in column (5) of the Table aforesaid. Explanation. - for the purposes of this notification, the rates specified in column 4 of the said Table are ad valorem rates, unless otherwise specified. TABLE S.No. Chapter or heading or sub heading or tariff item of the First Schedule Description of excisable goods Rate Condition No. (1) (2) (3) (4) (5) 19 1905 32 19 or 1905 32 90 Wafer biscuits 4% -- 9. Ld. Counsel submits that the classification of their product is not in dispute and the department has accepted the classification under chapter heading 1905 32 90 and there is no condition for availing the benefit of this exemption notification. The description of the product for which the exemption is available is 'wafer biscuits' whereas they described their product as chocolate coated wafers or coated wafers and therefore the Revenue sought to deny them the benefit of exemption notification. He asserts that all wafers are essentially biscuits and therefore their wafers must be considered as 'wafer biscuits' and they should be entitled to the benefit of exemption notification No. 03/2006. He relies on the c....
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.... light fine bakers' wares baked between patterned metal plates. This category also includes thin waffle products, which may be rolled, waffles consisting of a tasty filling sandwiched between two or more layers of thin waffle pastry, and products made by extruding waffle dough through a special machine (ice cream cornets, for example). Waffles may also be chocolatecovered. Wafers are products similar to waffles." 10. On the question of valuation, he would take us through the impugned Order-in-Original No. 09/2012-Adjn. (Commr.) CE, dt. 26.03.2012 and explain that in their case there is no transaction value because they do not sell the goods but manufacture them on job work basis. Little Star manufactures the goods on job work basis for Mondelez and supplies them directly to the depots of the latter. Mondelez, in turn, sells the goods through their marketing net work. Little Star gets their job work charges. Section 4 of the Central Excise Act reads as follows: "Section 4 in the Central Excise Act, 1944 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....
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....ignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory;] from where such goods are removed; 4[(cc) "time of removal", in respect of the excisable goods removed from the place of removal referred to in sub-clause (iii) of clause (c), shall be deemed to be the time at which such goods are cleared from the factory; (d) "transaction value" means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods." 11. He would submit that since the goods are not sold by them, they are not covered by S....
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....umber of firms across the country, they have a uniform method of pricing the goods which is set out in the price list prepared by them. This price list has been re-produced in the impugned Order-in-Original No. 09/2012-Adjn. (Commr.) CE, dt. 26.03.2012 at para 20.13, which is as follows: 13. The entire demand has been raised based on the figures indicated in this price list itself. As can be seen, the price list indicates the consumer end price and various margins at various levels and indicates the invoice price which is the price at which the depots sell to the distributors including taxes. If the excise duty, Cess and post manufacturing expenses are deducted from this invoice price, we get the assessable value of Rs. 78.04 for a pouch of 55 retail packs which, according to him, is the correct invoice price which is adopted by Mondelez and the same should be adopted for determining the tax liability of Little Star as well. In para 20.15 of the impugned order, Ld. Commissioner sought to include dealer margin, RD Markup and the post manufacturing expenses in the assessable value. As far as the Dealer margin is concerned, Ld. Commissioner held that the dealer is the assesse's own....
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....t is on record that all facts are presented before the department. The returns were filed periodically and honestly by them. The first show cause notice dated 08.11.2010 was issued within the normal period of limitation proposing to classify the products under different tariff heading and valued them as per Section 4A based on retail sale price. This shows that the department was fully aware of what they are doing and they have taken a particular view and issued show cause notice accordingly. Using the same information but proposing a different classification and a different method of valuation, the second show cause notice was issued invoking the extended period of limitation. This shows that there was no element necessary for invoking the extended period of limitation because all facts were known to the department before the first show cause notice was issued. Therefore, the extended period of limitation cannot, in any case, be invoked in the second show cause notice. The demand has to fail to that extent on this ground also. Ld. Counsel also produced before us copies of letters written by the assessee to the Central Excise Officers informing them about the nature of their produc....
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....r is greater.]" 16. Ld. Counsel would submit that none of the elements necessary for invocation of Rule 26 as above have been proved or established in their case, therefore the penalty imposed on Mondelez under Rule 26 needs to be set aside. He would draw the attention of the Bench to para 23.2 of the impugned order which reads as follows: "Regarding penalty proposed on M/s Cadbury India Limited under Rule 26, it is seen that they are the principal manufacturers of the impugned goods. The said rule stipulates that any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rules, shall be liable to a penalty not exceeding the duty on such goods or rupees [two thousand rupees,] whichever is greater.] Obviously, the assessees are only job workers for CIL and act on their instructions or otherwise they would lose their livelihood. Moreover, CIL is a multi-national company having their own legal cell and are expected to possess wide knowledge o....
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....ination of Price of Excisable Goods) Rules, 2000. On the first point of availability of exemption notification, he asserts that a plain reading of the exemption notification shows that it is not available to all goods which may fall under chapter heading 1905 3290 but to only "wafer biscuits". If the intention had been to give the benefit of exemption to any goods which falls under the heading, the description of the goods in the notification would have been "all goods" similar to some other entries in the same exemption notification such as S.No. 26, 26B, 27 etc. This brings the question whether the goods which are cleared by the appellant are "wafers biscuits" or otherwise. ER-1 returns filed by the appellant that the department described the goods as 'chocolate coated wafers' (for some period) or 'coated wafers'. The invoices are also described the product so. The wrappers of the product also indicates them as coated wafer layers. It nowhere specifies that these are 'wafer biscuits'. Therefore, neither has the appellant had at any point of time described the product as 'wafer biscuits' to the department nor has the product has been so described in any of the documents. Everyone ....
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....is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue. (3) The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export case (supra) stands overruled." 19. He would submit that any exemption notification being an exception to the general rule that tax must be paid at the rates in the tariff, must be interpreted strictly. If there is an ambiguity as to whether an exemption notification is applicable or otherwise, the benefit of doubt must go in favour of the Revenue and against the assessee as per the law laid down by the Constitutional Bench of Hon'ble Apex Court in the landmark judgment above. He would urge that in this case, there is absolutely no ambiguity at all that the goods which are being manufactured are coated wafers and they are described as such by the assessee to their consumers and to the department in their returns and in all other documents. Nowhere have been described as wafer biscuits. Therefore, the exemption available to wafer biscuits only cannot be extended to get wafers manufactured by the....
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....ted wafers. It is not for this Tribunal to enlarge the scope of an exemption notification meant for 'wafer biscuits' to cover 'coated wafers' as well. Even if it is held that 'wafers' could possibly be broadly considered as wafer biscuits, the matter is definitely not free from doubt/ambiguity. Under these circumstances, in terms of ratio laid down by the Hon'ble Apex Court in the case of Dilip Kumar and Company & others, we have no option but to hold that the assessee is not entitled to the benefit of exemption notification No. 03/2006. 22. Coming to the question of valuation, it is not in dispute that the assessee is manufacturing the goods on job work basis and are therefore covered by Rule 10A of Central Excise Valuation (Determination of price of Excisable Goods) Rules, 2000. This rule reads as follows: "RULE 10A. Where the excisable goods are produced or manufactured by a job-worker, on behalf of a person (hereinafter referred to as principal manufacturer), then, - i. in a case where the goods are sold by the principal manufacturer for delivery at the time of removal of goods from the factory of job-worker, where the principal manufacturer and the buyer o....
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....e that M/s Mondelez was selling these goods directly to individual retailers across the country. Therefore, there is no room for disallowing dealer's margin as a deduction. 24. As far as the RD Mark up is concerned, the Ld. Commissioner considered this to be an R&D cost and Ld. Counsel for the appellant clarifies that this is a margin given to the re-distributors. There is no evidence on record to show that this actually pertains to R&D expenses. Therefore, inclusion of R&D mark up in the assessable value is not sustainable and it deserves to be set aside. 25. As far as the PME (post manufacturing expenses) is concerned, inclusion of these expenses depends upon the nature of the post manufacturing expenses. In case where these are expenses incurred upto the place of removal, the same have to be included in the assessable value. However, if these represent other expenses such as cheque discounting charges as has been asserted by the Ld. Counsel before us, they cannot be included in the assessable value, as has been held by the Tribunal in their own case (supra). This is a fact which can be verified by the adjudicating authority based on any evidence that may be provided by the....