TaxTMI 
TaxTMI 
TaxTMI 
2020 (7) TMI 514
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....supplier of goods]. The Appellant received foil scraps/ aluminium ingot from the supplier of goods for conversion into rolled products. This conversion job was to be undertaken by the Appellant partly through the Taloja Unit of the Appellant and partly through the Belur Unit of the Appellant. The Appellant contends that the Taloja Unit and the Belur Unit paid Central Excise duty in respect of the processes done by them by calculating the assessable value on the basis of the cost of production as contemplated under rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules 2000 [2000 Valuation Rules]. 3. The dispute that has arisen for consideration in this Appeal is whether in the case of inter unit transfer of goods from the Taloja Unit for captive consumption to the Belur Unit, the entire value (i.e. 115% or 110% as the case may be) of the cost of production or the actual cost of production (i.e. 100% of cost excluding the notional loading of 15% or 10%) of the goods, manufactured by the Taloja Unit, would be the cost of the raw material for the Belur Unit of the Appellant for the purpose of determining the assessable value under rule 8 of the 2000 ....
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.... Raviraj Foils Ltd. (Case-II). It is as follows: ANNEXURE-A Case-I Contract between M/s.AMCO India Pvt. Ltd. & M/s. Indian Aluminium Company Ltd. (i) Value of H.R. Coil received from INDAL, Taloja= Rs. 103.70 (ii) Conversion cost of such H.R.Coil to Foil Stock at Belur Unit=Rs. 15.39 (the total conversion cost of Foil scraps/Aluminium Ingots to H.R.Coils at Taloja and its subsequent conversion to Aluminium Foil Stocks/ Aluminium H.R. Closures etc. at its factory at Belur being Rs. 24 kg.) (iii) Thus, full intrinsic cost of the raw material received at Belur Unit viz. that of H.R. Coils plus the conversion cost at the end of Belur amounts to Rs.(103.70+15.39)=Rs. 119.09 per kg. (iv) The assessable value of Aluminium Foil stock declared at Belur=Rs. 110.75 per kg. (v) Therefore, the under valuation is Rs.(119.09-110.75)=Rs. 8.34 per kg. (vi) Total quantity of goods cleared to M/s. AMCO Pvt. Ltd. from 01.04.2001 to 31.12.2003 on such conversion account= 4,02,539 kg. (vii) Thus, total under valuation= Rs.(4,02,539x8.34) =Rs. 33,57,175.00 (viii) Therefore, short levy of duty amounts to Rs. 33,57,175.00 x16% =Rs. 5,37,148.00 Case-II Contract between M/s. Raviraj....
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....o the company as a whole. Had both the divisions been in one factory, there would not have been any scope for the Department to add the profit margin @10% of the cost of production of each divisions. By applying the same logic, as the two units of the company are located at two different places, there seems to be no legal justification to consider the invoice value, which was calculated @ 110% of the cost of production at Taloja Unit to arrive at the assessable value of the end of Belur Unit where final processing was undertaken. It is needless to state that M/s. Hindalco Industrial Ltd. (earlier M/s. Indian Aluminium Co. Ltd) prepared and still also prepare one annual account and balance sheet for all these divisions together. The Taloja Unit while discharging their duty liability prior to transfer of the partly-processed materials to its sister unit at Belur rightly followed the provisions of rule 8 of the Valuation Rules, by paying duty @110% of the cost of production. 9. The correct position with regard to case I and case II of Annexure A to the show cause notice, was pointed out by the Appellant as follows: "9. Having regard to the above, the Noticee respectfully submits th....
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.... with interest and penalty. The Commissioner (Appeals) also did not accept the contentions of the Appellant. The relevant portion of the order passed by the Commissioner (Appeals) is reproduced below: "11. The issue to be decided here is whether Central Excise Duty is to be charged on the value arrived at on the basis of full intrinsic cost of raw materials received in the Appellant's Belur Unit plus the conversion cost, packing cost and profit made, appropriated at Belur Unit, or, the duty is to be charged on the cost of materials at the hands of the Appellant at 100% of the cost of production at the Appellant's Taloja Unit, even though the Appellant paid Central Excise duty on the assessable value calculated at 110% of the cost of production as per Rule 8 of the said Valuation Rules. 12. I find that similar issue is extensively dealt with in the decision of Hon'ble Tribunal in Eicher Motors Ltd. versus Commissioner of Central Excise, Indore [2008 (228) ELT 43 (Tri.- LB)] xxx xxx xxx 18. In view of the above, the principle settled in the case of Eicher Motors Ltd. (Supra) by the Hon'ble Tribunal (Larger Bench) is squarely applicable to the present case. The contention of the....
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....ur Unit. Since the conversion charges at the hand of Taloja Unit included profit and the further notional loading (i.e. 15%/10%) made by the Taloja Unit for remitting central excise duty, need not be considered at the Belur Unit to avoid an absurd result; (v) The extended period of limitation could not have been invoked in the facts and circumstances of the case; (vi) There is no justifiable reason for imposing penalty under Section 11AC of the Excise Act; and (vii) There being no liability of any short paid or not paid duty in the instant case, there cannot be demand of any interest from the Appellant in terms of Section 11AB of the Act. 13. Shri K.Choudhary learned Authorized Representative of the Department, however, supported the order passed by the Commissioner (Appeals) and submitted that there is no error in the impugned order as it is based on a decision rendered by a Larger Bench of the Tribunal in Eicher Motors Ltd. 14. The submissions advanced by the learned counsel for the Appellant and the learned Authorised Representative of the Department have been considered. 15. Section 4 of the Excise Act deals with valuation of excisable goods for purposes of charging of....
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.... issue has been dealt with at length by a larger Bench of the Tribunal in I.T.C Ltd. The larger Bench answered the reference on February 12, 2016 in the following manner: "20. In the light of our foregoing analysis, discussion and reasons, we answer the reference as under: (a) In the case of inter-unit transfer of goods for captive consumption, the actual cost of production (100% of the cost of production), of the raw material procured from the Bhadrachalam unit of the Appellant (excluding the notional loading under Rule 8- 15%/10%) is the cost of raw material in the hands of the Chennai unit, for determining the cost of production of packaging material manufactured by the Chennai unit. The percentage of loading on such cost of production, mandated by provisions of Rule 8 for remittance of excise duty by the Bhadrachalam unit cannot [not] however be considered as comprised in the cost of the raw material consumed for manufacture of packaging material and thus constituting the cost of production at the Chennai unit; (b) In view of the conclusions recorded in (a) above, we hold that the decision of the Chennai Division Bench of CESTAT in the Final Order dated 11-5-2010 in Reven....
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....f Rule 8, Bhadrachalam unit was remitting excise duty at the time of clearance of such raw material, at 115%/110% of the cost of production and since 5-8-2003 at 110% of such cost for remittance of excise duty. The Bhadrachalam unit was remitting excise duty accordingly and undisputedly. 9. The issue is whether the cost of production of the goods the packaging material that is manufactured by the Chennai unit of the Appellant should be computed at 115%/110% of the cost of production/manufacture of the raw material procured from its Bhadrachalam Unit or at the actual cost of such raw material since there was only a stock transfer and not a sale of these goods by the Bhadrachalam Unit to the Chennai unit. 9.1 The answer to the issue turns upon interpretation of Rule 8, in particular on the expression "cost of production of manufacture of such goods", in the said Rule." (emphasis supplied) 23. The Tribunal ultimately concluded as follows: "18. Since Rule 8 mandates loading of specified percentage (15% or 10% as the case may be) on the cost of production of goods cleared to another unit for captive consumption in the later unit for computing excise duty payable by the fi....