TaxTMI 
TaxTMI 
2022 (11) TMI 1444
X X X X Extracts X X X X
X X X X Extracts X X X X
....by M/s KBEPL during the period from 1.10.2000 to 31.3.2004, in terms of Section 11A(2) of the Central Excise Act, 1944 and direct the assessee to pay the same forthwith. II. I confirm the demand of Rs. 1,02,67,856/- (Rs. One Crore Two Lakhs Sixty Seven Thousand Eight Hundred Fifty Six Only) and Education Cess of Rs. 1900/- (Rs. One thousand Nine hundred only) not paid by M/s KBEPL on the manufacture and removal of excisable goods from the Satara Unit but shown to have been received from Goa unit during the period from 1.10.2000 to 10.1.2005, in terms of Section 11A(2) of the Central Excise Act, 1944 and direct the assessee to pay the same forthwith. III. I confirm the demand of Rs. 36,09,438/- (Rupees Thirty Six Lakhs Nine Thousand Four Hundred Thirty Eight Only) not paid by M/s KBEPL on the escalation bills raised by them in respect of excisable goods manufactured and removed by them during the period from 15/10/2000 to 31/03/2003, in terms of Section 11A(2) of the Central Excise Act, 1944 and direct the M/s KBEPL to pay the same forthwith. IV. I direct M/s KBEPL to pay interest at the appropriate rate on the aforesaid confirmed demands in terms of Secti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....scalated by value addition of 230% and in case of other purchases by over 50% as is evident from table below: • Noting the discrepancies as above, matter was referred to the Assistant Director (Cost) for the cost audit. It was revealed that the assessable value on which the duty was paid by the appellant 1, was much below the cost of raw material consumed and the value of brought out items was escalated as is evident from the table below: • On the basis of the report of Assistant Director (Cost) and subsequent investigations revenue was of the view that during the period 01.04.2000 to 31.03.2004, the appellant had short paid the duty to extent of Rs 3,73,29,200/- by suppressing the sale price of the goods cleared by them. • Investigations also revealed that in respect of the brought items shown to be purchased from M/s K C Goa, their sister concern, no manufacturing activities were undertaken in Goa, but all the goods were actually manufactured and cleared from the premises of the appellant. This was done to avail the benefit of SSI exemption on the clearances made from GOA unit. These goods were cleared clandestinely in garb of brought out it....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of proviso to sub-section (1) of Section 11A of the Central Excise Act, 1944; • an interest at an appropriate rate should not be demanded & recovered from them on the aforesaid amounts of demand of CFNVAT duty under the provisions of Section 11AB of the Central Excise Act, 1944; and • penalty should not be imposed upon them under the provisions of Section 11AC of the Central Excise Act, 1944. Details of Purchases of brought out items Purchase Price Sale Price Value Addition % value Addition Purchased from Group Company 5,69,42,110 19,10,56,707 13,41,14,597 235.52 Purchased from Other 15,58,62,285 23,84,15,963 8,25,53,678 52.96 Financial Year Manufactured Goods Brought Out Items Raw Material Finished Gods Purchase Sale Escalation %Escalation 2000-01 100518803 53777229 83457654 155931565 72473911 86.83 2001-02 68680284 25860648 77372987 153984994 76612007 99.01 2002-03 62555293 37243767 46749452 102564193 55814741 119.39 2003-04 92112457 92232510 5224300 16991918 1167718 225.24 Total ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Page 175 of Volume I of Paper Book. Respondent failed to appreciate that all sugar manufacturers in the co-operative sector are subject to State control through Federations, who inter alia approve the price break up. • Respondent erred in concluding that there had been a diversion of value from manufactured goods to bought out items without appreciating that in all the Contracts, taxes and duties including excise duty were to the buyers account and were payable by the buyers at actuals, who in turn were entitled to take Cenvat Credit. In view thereof, there was no incentive for the Appellant to undervalue the manufactured items. • Respondent erred in comparing the price variations in the manufactured items with the bought out items, without appreciating that in the case of manufactured items, key inputs (such as steel) are vastly different from those used in bought out items (which are not custom made and are made in large volumes) in which the manufacturer enjoys economies of scale. • Respondent ought to have appreciated that valuation had to be the "Transaction Value" in terms of Section 4 of the Act as invoice price at which the Appellant ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inquiry was made with the jurisdictional central excise officer in Goa with regard to the manufacture of the goods by KCIE, though regular Monthly Returns were being filed with the jurisdictional authorities at Goa. • Respondent ought to have appreciated that the finding of clandestine removal of goods alleged to be manufactured by Appellant (and not by KCIE) had not been discharged inasmuch as no excess procurement or consumption of materials, labour, transport etc. was shown to exist at Appellant's factory in Satara. • KCIE has paid duty of Rs. 95,01,741/- during the period April 2000 to March 2004 to the Goa Commissionerate. Respondent has erred in concluding that there was no requirement to pay such duty and therefore she was not inclined to give any benefit of duty paid at Goa for the actual excisable goods manufactured and it is submitted that excise duty, in any event, cannot be collected twice on the same goods, on the premise that the Appellant's factory at Satara have cleared without payment of duty. • There is an inherent contradiction in the Departments case inasmuch as while the Cost Auditor treats the items obtained from ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat, the price of sale of bought out items as stated by them was approved by the Director of Sugar, a statutory Authority. Hence, it must be accepted. However, it is seen that, there is no requirement in any statute/ law for the approval of prices of such procurement by any Statutory Authority. The Contracts etc. have been executed without any such manifest approval at a composite price. • The Apex Court has in the case of Om Prakash Bhatia Vs.CC 2003 (155) ELT 433 (SC), in similar facts, negated such a claim of an importer. At para 19 of the decision, the Court states that, no prudent businessman would pay more than the prevailing market price of goods. The Review Petition against this decision was dismissed, as reported at Om Prakash Bhatia v. Commissioner - 2003 (158) E.L.T. A177 (S.C.) • Hence, there is no 'sale' of the impugned goods and there is no 'transaction value' of such goods. The provisions of Section 4(1)(a) of the CEA, 1944 shall not apply and the goods have to be valued in accordance with the CEVR, 2000. Rules 3 to 7, 9 & 10 are not applicable to this case, because they apply only in case the goods are sold. • T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eties Act 1959 and Karnataka Cooperative Societies Rules 1960 by Sugar Factories which came together to co operate. It is a syndicate. It is not a statutory body set up by law. It is not a Governmental Organization. In the State of Karnataka, the Director of Sugar administers the above said Act and Rules as functional Registrar of Cooperative Societies as far as Cooperative Sugar Factories are concerned. • Hence, any price of goods supplied, if submitted to such an Organization, is not done in terms of any statutory mandate to any statutory authority. • The Price Break up is not submitted for self manufactured or Bought out machinery and equipment for approval. The Price Break up is to be submitted for the major value equipment and machinery to be supplied, in terms of the Contract if any, only for the purpose of scheduling payments by the Purchaser to the Appellant. • In any case, it is not shown that, such Price Break up was to be submitted for all the 37 Contracts during the impugned period. • Clandestine Removal of goods: • Evidence on records show that the goods claimed to have been bought from KC, Goa by the App....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e devices, however, cannot be part of tax planning. Dubious methods resorting to artifice or subterfuge to avoid payment of taxes on what really is income can today no longer be applauded and legitimised as a splendid work by a wise man but has to be condemned and punished with severest of penalties' • Hence, the extended period of limitation is correctly invoked. 4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments. Tribunal had vide its order No A/353-354/07/WZB/C-I/EB remanded the matter back to the original authority observing as follows: "5. We have considered the submissions. We find that the Commissioner's order is based solely on the cost audit report. There is no attempt to analyse the contract entered into by the appellants and there contention that the price break up of individual items is required to be approved by the statutory officers and cannot be changed. A plea was also raised that the cost of manufacture at the time of placing of bid on an estimated basis is more than the cost of manufacture at that time and it is on account of delay in execution of the order that t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Department is that KBEPL have under-valued excisable goods manufactured by them resulting in short payment of excise duty. I find that the customers of Sa KBEPL, many of whom are sugar factories, have placed composite orders by way of Contracts/Work Orders etc. for supply of various goods viz machineries, assemblies, sub- assemblies of Sugar Plant. I find that during the material period KBEPL have entered into the following 37 Contracts with customers: S No Name of Customer Nature of Document 1 M/s. Jamkhandi Sugars Ltd., Jamkhandi Contract 2 M/s. ICL Sugars Ltd., Chennai LOI 3 M/s. Sahakar Maharshi Shankarrao Mohite Patil SSK Ltd., Akluj Purchase Order 4 M/s. T.K. Warana SSK Ltd., Warananagar Copy not furnished 5 M/s. T.K. Warana SSK Ltd., Warananagar Supply Order 6 M/s. T.K. Warana SSK Ltd., Warananagar Supply Order 7 M/s. T.K. Warana SSK Ltd., Warananagar Supply Order 8 M/s. BHW Kessels International Corporation, New Delhi Supply Order 9 M/s. Kay Pulp and Paper Mills Ltd., Borgaon Contract 10 M/s. Shri Dhanalaxmi SSK Niyamit, Ramdurg Contract 11 M/s. Shetkari Sakhar Karkhana....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Ltd., Goa Purchase Order 41 M/s. Kay Pulp and Paper Mills Ltd., Borgaon Purchase Order I find that in four cases KBEPL have failed to furnish copy of contract/purchase order/LOI, as the case may be. I also find that there are only 6 contracts and rest are Purchase Orders/Supply Orders/LOI/Price Bid etc. I also find that KBEPL while raising CE Invoice under Rule 52A or Rule 11 of the Central Excise Rules for excisable goods manufactured by them have mentioned the Contract/PO reference in many cases but the same is not mentioned on a few invoices. 4. I have gone through the contract in respect of M/s. Shri Dhanlaxmi SSK Niyamit, Ramdurg and find that - a. Contract is entered into on 10th day of June 2000 and the contract is to be executed by 15/07/2001. [Para 1 and 5.1] b. KBEPL have to design, procure, manufacture, supply, transport, deliver to site Sugar Plant and Machinery detailed in Annexure [Para 2.1] c. Contract price is Rs. 2008.00 lakhs as per following break up Rs in Lakhs Group A Milling Plant Group B Boiling Plant 1. Ex-works price of semi-gravity flow sugar plant and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Dhanlaxmi reasonable extension of time will be granted. If the work is delayed due to non-payment of bills by Dhanlaxmi, the increase in price is allowed. I find that KBEPL have not come forthwith reasons for delay in execution of contract. ESCALATION CLAUSE I find that the terms & conditions of Contract imply that escalation is allowed if the contract is delayed due to non- payment by Dhanlaxmi and/or suspension of work as per orders of Dhanlaxmi. I find that Escalation Bills are issued to Dhanlaxmi by KBEPL. This matter is discussed in detail in the later part of my findings. 5. I have gone through the contract in respect of M/s. The Markandeya Co-operative Sugars Ltd., Kakati and find that a. Contract is entered into on 25th day of May 2001 and the Contract is to be executed by 31/07/2002 [Para 1 and Para 5.1]. b. KBEPL have to design, procure, manufacture, supply, transport, deliver to site Sugar Plant and Machinery detailed in Annexure [Para 2.1] c. Contract price is Rs. 3300.00 lakhs as per following break up [Para 3.1] Rs. in Lakhs 1 Ex-works price of semi-gravity flow sugar plant and machinery according to the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....about completion of the project or otherwise and duration of completion. ESCALATION CLAUSE I find that the terms & conditions of Contract imply that Escalation is allowed if the contract is delayed due to non- payment by Markandeya and/or suspension of work as per orders of Markandeya. I find that Escalation Bills are issued to Markandeya by KBEPL.The matter is discussed in detail in the later part of findings. 6. I have gone through the contract in respect of M/s. Jamkhandi Sugars Ltd., Jamkhandi and find that - a. Contract is entered into on 25th day of November 1995 and further supplementary contract entered into on 09th day of October 2000. The Contract is to be executed by 15/12/2000. [Para 1 and 2] b. KBEPL have to design, procure, manufacture, supply of the machinery and equipments as detailed in Annexure [Para 2.1] c. The original Contract price was Rs. 810.00 lakhs but the supplementary contract has specified contract price as Rs. 895.75 lakhs as per following break up [Para 3.1]: [Rs. In lakhs] 1 Ex-works price of semi-gravity flow sugar plant and machinery according to the specifications a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e date of commissioning of plant shall be replaced or satisfactorily rectified by the seller [KBEPL] free of charge [Para 9.b] e. Seller [KBEPL] shall indicate within 45 days of signing of the contract, the equipment-wise breakup prices for major items of equipments [Para 12.a] f. If the Purchaser [Shetkari] orders expressly in writing for the supply and/or execution of work to be suspended for a substantial period of time for no fault of Seller [KBEPL], the Seller shall be entitled for reasonable extension of time. [Para 20.1] DURATION OF CONTRACT I find that the contract is entered into on 14th December 2000 and was to be executed within 12 months from the date of receipt of Rs. 200 lakhs. It is not known from the Contract as to when the said amount was paid to KBEPL. However, I find that the supply was continued to Shetkari till October 2002. I find that KBEPL have not raised any Escalation Bills on Shetkari. 8. I have gone through the contract in respect of M/s. Akkubai Mahila Sahakari Audyogik Utpadak Sanstha Ltd., Asurle- Porle and find that - a. Contract is entered into on 10th day of October 2000 and the Contract is to b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and components of the equipment. I also find that it is not clear from the price break up as to which equipments are to be bought out and which are to be manufactured by KBEPL. I find that the customers have also not mentioned in their Contracts as to which goods are to be bought out and which goods are to be manufactured. I find that KBEPL have clearly arrived at the contracted price only after negotiations and price breakup was required to be submitted later on. Since the price break up did not differentiate between bought out goods and manufactured goods, even after submission of price break up by KBEPL, customers are/were unaware or unconcerned about which goods are bought out and which are manufactured. This is because customers did not have to pay any amount over and above the quoted lump sum contracted price. I, therefore, find that the price breakup was a formality and individual transaction value of each of the item manufactured in the factory of KBEPL was not negotiated. I find that Contracts do not stipulate any approval of price break up from any statutory authority of State Government but KBEPL/customers may have submitted these figures to Karnataka State Federation o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as a whole and there is no correspondence or proof that the prices of individual items have been negotiated. DURATION OF CONTRACT I find that the contract is entered into on 10th October 2000 and was to be executed before March 2000. 10. I have also gone through Purchase Orders, Offer Letters, LOI, Price Bid etc. of M/s. Sahakar Maharshi Shankarrao Mohite Patil SSK Ltd., M/s. Shri T.K. Warana SSK Ltd., M/s. BHW Kessels International Corporation, M/s. The Thandava Co-op Sugars Ltd., M/s. Kirloskar Bros. Ltd., M/s. Nuclear Power Corporation of India Ltd., M/s. Precision Automation & Robotics India Ltd., M/s. Larsen & Toubro Ltd., M/s. The Nandi SSK Niyamit, M/s. Hallmark Technical Services Pvt. Ltd., M/s. Sagar Sugar & Allied Products Ltd., M/s. Ispat Industries Ltd., M/s. Kay Iron Works Pvt. Ltd., M/s. Kay Nitroxygen Pvt. Ltd., M/s Kay Chandra Iron Engg. Works Pvt. Ltd., M/s. Kay Pulp & Paper Mills Ltd. and find that the terms & conditions are broadly as under: a) KBEPL have to design, manufacture, supply and transport the equipment, machinery etc. to the site as well as undertake erection & commissioning of the said machinery. b) Price ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that in three Contracts, there is express provision for escalation in Bills. However, KBEPL have raised Escalation Bills only in case of two contracts, for the contract as a whole with M/s. Shri Dhanlaxmi SSK and M/s. The Markandeya Co-op Sugar Mills Ltd. These customers have also provided that KBEPL is entitled for Escalation Bills only if the detailed price break up of plant & machinery showing monthwise value of materials [ex- works] contract base price supplied and to be supplied against each item as per Proforma 'A' is submitted. It appears that in both of cases Proforma 'A' is supplied by KBEPL. I find that M/s. Akkubai Mahaila Sahakari Audyogik Utpadak Sanstha Ltd. and few other Purchase Orders have expressly provided for FIRM & FIXED price disallowing any kind of escalation in any circumstances. I also find that in some contracts as well as Purchase Orders, there is Escalation Clause but KBEPL have not raised Escalation Bills. I find that in many cases the execution of contract/order was delayed but it cannot be understood from the documents submitted by KBEPL as to why the delay was caused as also reasons for raising and also not raising Escalation Bills." ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e : Rs 12.00 lakhs b) Excise Duties @ 16% : Rs 248.32 lakhs c) Customs Duties : ..... d) Sales tax @ 4% : Rs 72.01 lakhs e) Other taxes : ..... v) Total cost of above items (10.1 (ii) to (iv)) : Rs 377.32 lakhs vi) Total Price Offered (Total from 10.1 (i) to (iv)) :Rs 1872.32 lakhs It is to be clearly understood that the total price offered is inclusive of the cost of the following: a) , b), c) ..... d) All taxes and duties paid by the sellers of their sub contractors on raw materials components and other raw materials for their own manufacture of finished equipments or assemblies 10.3 The total price offered at 10.1 (vi) above is inclusive of the total amount in respect of single point Central/ State Sales Tax, Excise Duty, Special Excise Duty, Custom Duty on Imported components and items and boiler quality/MS Plates, local taxes and any other taxes or duties and octroi at the destination point only imposed by law leviable on the plant and machinery supplied to the purchasers or bought out items supplied directly to site from sub-contractors works. All the above details of taxes, duties and s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....spatch and shall be the actual amount as paid by the SELLER. The SELLER shall furnish to the PURCHASER with their bills excise duty gale pass in support of excise duty and special excise duty paid both for base price and price escalation bills All taxes and duties will be as on the date of final negotiation, any statutory variation in taxes and duties imposed are acceptable by the PURCHASER. The SELLER shall within one month from the date of finalization of Agreement furnish the PURCHASER with an indication of the approx. incidence of Central/State Sales Tax, Excise Duty, Special Excise duties, Customs duty, Local taxes and any other taxes or duties and octroi payable by the PURCHASER under the contract based on the rates prevailing on the date of Agreement. 3.5 PROVIDED always that the PURCHASER or their authorized representative shall be shown all original documents, and accounting records in support of excise duties, customs duties on imported components and items of Boiler Quality Plates / MS plates charged and the original bills of the sub-contractors for satisfying that the single point Sales Tax, Excise duty and special duties as aforesaid has actually been....
X X X X Extracts X X X X
X X X X Extracts X X X X
....NNEXURE and terms of the agreement. SELLER shall provide necessary facilities to the inspecting agencies for proper inspection and testing of the equipment at SELLER or his sub-contractors works. PROVIDED that incase of major change in procedure, the Inspection Agency shall give sufficient advance intimation to the SELLER, The SELLER shall also provide inspection facilities normally available at the plant site for the machinery inspection. 7.3) The SELLER or their sub-contractors shall also satisfy the PURCHASER and/or their Inspection Agency that adequate provisions have been made (i) to carryout instructions of the PURCHASERS/or the Inspection Agency and fully with promptitude to ensure that parts or materials required to be inspected are not used before inspection and (ii) to prevent rejection of materials or parts from being used. 7.4) Where part assemblies or sub-assemblies not approved/passed by the Inspection Agency have been rectified or altered, such parts, assemblies or sub-assemblies shall be segregated for separate inspection and approval before being incorporated in the plant and machinery. 7.5) The PURCHASER or their Inspection Agen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....issioning of the goods at the site of the Customers. The fact that these contracts were on turnkey basis and were not merely for the supply of goods, but were for the various activities such as design, procurement, manufacture and supply of goods, erection and commissioning thereof has been recorded by Commissioner in the impugned order. Further Commissioner has also recorded that these Contracts were for the lump sum price of various goods to be supplied under these contracts/ agreements, but also indicated the quantum of "Insurance, Taxes and Duties of Excise, Customs, Sales Tax and other taxes" and quantum towards "Price of necessary facilities like handling supervision for erection & commissioning, packing/forwarding, freight, handling charges etc." In some of the agreements the lump sum price inclusive of all the charges, duties and taxes have been indicated. 4.7 From the facts and the findings as noted in the impugned order, it is evident that appellant are not in business of supply of the off the shelf goods or consuming the goods captively or supplying the goods through the any of their related person. Admittedly in all the case the appellant have supplied the goods to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he money from the buyer to the assessee. In the absence of these factors it cannot be contended that normal price was not ascertainable. There is no valid reason to doubt the genuineness of the sale price. It can therefore be safely be concluded that the goods were sold at the normal price within the meaning of Section 4(1)(a) of the Act. In our view, the Tribunal is right in accepting the wholesale price as the correct price following the judgment of the Court in Union of India & Ors. v. Bombay Tyres International Ltd. etc. [1983 (14) E.L.T. 1896]. We hold that clause (b) of sub-section (1) of Section (4) of the Act would not be attracted to determine the nearest ascertainable equivalent of the normal in price of the goods for assessment of excise duty in the facts of this case. We do not find any illegality in the order of the Tribunal in setting aside the order of the Collector. The appeal is therefore dismissed. No costs." 4.8 In the paras as below impugned order refers to the cost auditor report and concludes that the goods supplied against the contracts/ Purchase order have been undervalued: "13. I also find that the CENVAT credit utilization of the assessee was e....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as well as manufactured goods. As KBEPL hardly paid any duty through PLA, the matter was taken up for Cost Audit for determination of cost of production vis-à-vis sale value. On study of duty payment by KBEPL, Cost Audit Report has observed that there was a negative value addition in the excisable goods manufactured. The Cost Audit Report also revealed that in case of Bought Out items, price charged was much higher than its purchase cost and in case of manufactured items the price charges was much less than the cost. 15. The Cost Audit Report observed that in case of Manufactured Goods, during the period from 01/04/2000 to 31/03/2004, against the reasonable sale price of Rs. 44,24,21,660/-, the actual clearance value was only Rs. 20,91,14,154/-, resulting in under-valuation to the extent of Rs. 23,33,07,506. The Central Excise duty on this amount @ 16% comes to Rs. 3,73,29,201/-. Further, in case of Bought Out items, against the reasonable sale price of Rs. 24,04,11,155/-, the actual sale price was Rs 47,50,31,019/-, thus there was over-invoicing of Rs. 23,46,19,864 The Cost Audit Report thus concluded that as the orders were composite, KBEPL have shifted the price....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on M/s. Shri Dhanlaxmi SSK Niyamit and M/s. Markandeya Co-op Sugar Mills Ltd. It is found that drawing, designing and engineering charges are included in the total contract amount quoted by the customers but the said charges are not included in the assessable value of excisable goods manufactured by KBEPL as their price break up is done without following any costing/valuation norms. However, the Cost Audit Report has considered all the expenses incurred on manufacturing by KBEPL, and therefore, the assessable value proposed by the Department in this demand include expenses on drawing, designing and engineering. As regards escalation of prices of raw materials contended by KBEPL it is found that though KBEPL have pleaded that there was steep rise in the prices of raw materials for workshop items, there does not appear increase in the prices of bought out items purchased at the same time of removal of excisable goods from the factory. There is no answer as to how the price increase in the market adversely affected only excisable goods manufactured in the factory of KBEPL-Satara and not the bought out goods including those goods purchased from M/s. Kay Iron Works, Satara, the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Guarantee Certificates given by suppliers of KBEPL were verified: Sr.No. Invoiced No. & Date Name of the Supplier 1. 428 dated 09/09/2000 M/s. EPE Process Accumulators Pvt. Gandhinagar, Hyderabad. Filters Ltd., 2. AP/40/2000-01 dtd. 24/11/2000 M/s. A.P. Engineering Howrah Works, 3. AP/44/2000-01 dtd. 12/12/2000 M/s. A.P. Engineering Howrah Works, 4. BB/2000-01/159 dtd. 15/12/2000 M/s. Barmecha Brothers, Kolkata. As regards retention money the same is bound to be received by KBEPL after completion of contract. 18. Though all the contracts have been verified, a sample study in case of 9 contracts/Purchase Orders/Supply Orders/Price Bids etc. was undertaken and prices of bought out goods and excisable goods are worked out each contract-wise and enclosed in Exhibit 'A' to this Order. On going through the said worksheet, it can be seen that even in case of individual contracts there is over-valuation of bought out goods at the expense of an apparent loss on manufactured items. Therefore, there is no strength in the contention of KBEPL that the figures arrived at in Cost Audit Report by considering Balance Sheet ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....manufactured excisable goods as well bought out goods. I would like to quote an example of contract price mentioned in the contract in respect of M/s. The Markandeya Co-op Sugar Mills Ltd., Kakati, Taluka & District Belgaum [Karnataka] as under: Rs in Lakhs 1. Ex-works price of semi-gravity flow sugar plant and machinery according to the specifications and details given in Annexures 3030 2 Price of necessary facilities like handling supervision for erection & commissioning, packing/forwarding, freight, handling charges etc. 30 3 Insurance, Taxes and Duties of Excise, Customs, Sales Tax and other taxes 240 Total Contract Price 3300 There is escalation clause in many of the contracts. I also find that the Cost Audit Report has taken into consideration all the fundamentals of valuation, and that, the same is certified by qualified statutory authority in this regard viz. Assistant Director [Cost]. The Cost Audit Report has revealed that KBEPL have split up the contract amount in such a way that bought out goods are over-valued at the cost of proper assessable value of excisable goods and in turn at the cost of excise duty. In such ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....entral Excise Department for computation of correct assessable value under the provisions of Section 4 of the Central Excise Act, 1944 and Valuation Rules 2000. The Departmental stand is that KEEPL should correctly and legally arrive at the assessable value of the excisable goods manufactured in their factory and pay appropriate excise duty thereon. I find that there is a great amount of contradiction in the submissions of the KBEPL. When the KBEPL say that there was steep rise in the prices of raw materials for workshop items, there does not appear increase in the prices of bought out items purchased at the same time of removal of excisable goods from the factory. There is no answer as to how the price increase in the market adversely affected only excisable goods manufactured in the factory of KBEPL Satara and not the bought but goods including those goods purchased from M./s. Kay Iron Works, their own group company. Further, if the cost of raw materials was increased due to market variations, the cost of manufacture of excisable goods also should have gone up. But in this present case, surprisingly, the assessable value of the excisable goods has gone down though the to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....these transactions cannot be isolated from the composite contract to term it as trading business; especially when the prices of such bought out goods are enriched at the cost of deficit in the assessable value of excisable goods and excise duty due thereon. I find, the Department is not attempting to charge duty on the traded items. The demand for duty is based on the actual manufacturing cost of the items manufactured by KBEPL. 23. KBEPL Satara have pleaded that Central Excise Invoice for sale of manufactured items represents transaction value under Section 4(1)(a) of the Central Excise Act, 1944 and there was no question of resorting to determination of value under Section 4(1(b) or Valuation Rules 2000. KBEPL have further pleaded that it is not the finding of the Department that KBEPL's price is influenced to the extent of price paid or payable on account of certain factors which involves price additionally recovered for supply of certain goods or services not considered in the price. KBEPL have also pleaded that there is nothing in Central Excise Law which gives the basis for ascertaining the price of bought out items and then balancing the price of the manufacture....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ave pleaded that in some jobs they have to suffer loss and the same has to be made good in other ones, it has not emerged from the study of the contracts as mentioned in Exhibit 'A' that KBEPL have incurred losses. They also have not brought before me any concrete case duly certified by Chartered/Cost Accountant to show the losses. It is observed that KBEPL have not maintained their inventories and store records for issue of raw materials contract-wise, and therefore, it is believed that in the middle of any financial year, it is not possible for KBEPL to ascertain contract-wise profit or loss. It automatically follows that one has to rely on the Balance Sheet to know the costing, profit and loss in the business. The Department has, therefore, rightly relied on the facts and figures declared in the Balance Sheet of KBEPL and the Company's books of accounts. It is also observed that provisions of Section 4 of the Central Excise Act, 1944 read with Central Excise Valuation [Determination of Price of Excisable Goods] Rules 2000 are quite competent to take care of any type of transaction and price pattern and it cannot be accepted that there is no method or guideline prescr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3 3279306 4,10,887 3 2002-03 92112457 28,38,075 4653234 -18,15,159 The above. computation shows that in the year 2000-01 and 2003-04, KBEPL have incurred negative manufacturing expenses. It is doubtful as to whether it can happen so. It is very difficult to understand as to how the manufacturing expenses for processing raw materials worth Rs. 6.25 Crores could be just Rs. 4.11 lakhs. I find that in the said cost computation sheets KBEPL have loaded depreciation component on bought out goods to increase their sale price. It is not understood when no plant, machinery etc. is required for bought out goods to be supplied to customers, how depreciation and that too to a considerable extent like Rs. 25.28 lakhs, Rs. 29.57 lakhs, Rs. 25.15 lakhs and Rs. 7.45 lakhs can be loaded in the years 2000-01 to 2003-04 respectively. Further, in the year 2002+03 the cost computation sheet has loaded exorbitant Admn, Selling and Distribution expenses on bought out goods to the extent of Rs. 71.79 lakhs. Therefore, I find that these Cost Computation Sheets which are not signed or certified by Cost Accountant and which bear fundamental grave errors as mentioned above, c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s at higher price and made profit out of it. The profit so obtained in the trading activities should also go to enhance the value of turbines according to the Department and duty was assessed accordingly. This view of the Department cannot be sustained in view of the law stated by their Lordships of the Supreme Court in Baroda Electric Meters Ltd Vs. CCE 1997 (94) ELT 13 (S.C.) M/s KBEPL have placed reliance on the bold lines of this para which is inappropriate inasmuch as the alternators and turbines are fixed to earth upon which they become immovable property and consequently not liable to duty; whereas the spares in question which are supplied are detachable/removable and can be sold independently and secondly the value addition is under dispute in this case, therefore, this ruling is out of context. iii. In the case of CCE, New Delhi Vs Guru Nanak Refrigeration Corpn. 2003(153) ELT 249(SC), the issue involved was Valuation(Central Excise)- Normal Price-Refrigeration machinery parts sold by assessee in wholesale trade at the price which was approved by the Excise Authorities-Show cause notice issued on the ground that the cost of production of the goods was more than th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ued strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression. In the instant case, there is no necessity of computation of value of clearances and the deliberate actions on the part of M/s KBEPL namely issuance of Central Excise invoices when nil returns are filed with the Department and forging the signatures of the transporter as deposed by one of the transporters, as also non- maintenance of records is sufficient evidence to prove the intent of M/s KBEPL. Therefore, the present ruling is not of utility. v. In the case of Hindalco Industries Ltd. Vs CCE, Allahabad 2003(161) ELT 346 (Tri- Delhi), the issue involved was Notional interest on advances shown in balance sheet alleging gain from advances, having been made without considering relevant factors, and ignoring the much bigger debit balance entries in same balance sheet is not sustainable. It was also alleged that the rep....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for captive consumption including administrative overhead and worker salaries- if not enquired by the Department could not be raised at a later date. In this ruling a multitude of factors are deliberated upon but the main plank is the Cost Accountant's report which was stated to be erroneous but M/s KBEPL have not adduced any evidence to disprove the cost accountant's report nor produced any certified calculations so as to deliberate. The other issues of this ruling are case specific. Therefore, the ruling is out of context" 4.9 During the course of arguments revenue has relied upon the decision of the Hon'ble Supreme Court in the case of Fiat India Pvt Ltd [2012 (283) E.L.T. 161 (S.C)]. It is not the case that the appellant was selling the goods at price lower than the cost of production and incurring loss. Even the cost auditor has not concluded that the appellant was selling the goods and earning loss. Hence the ratio of this decision cannot be directly applied to the present case. However the para's which enunciate the principles in law are being reproduced below: 51. Excise is a tax on the production and manufacture of goods and Section 4 of the Act provid....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reason for the assessees to sell their cars at a lower price than the manufacturing cost and profit is to penetrate the market and this will constitute extra commercial consideration and not the sole consideration. As we have already noticed, the duty of excise is chargeable on the goods with reference to its value then the normal price on which the goods are sold shall be deemed to be the value, provided : (1) the buyer is not a related person and (2) the price is the sole consideration. These twin conditions have to be satisfied for the case to fall under Section 4(1)(a) of the Act. We have demonstrated in the instant cases, the price is not the sole consideration when the assessees sold their cars in the wholesale trade. Therefore, the assessing authority was justified in invoking clause(b) of Section 4(1) to arrive at the value of the exercisable goods for the purpose of levy of duty of excise, since the proper price could not be ascertained. Since, Section 4(1)(b) of the Act applies, the valuation requires to be done on the basis of the 1975 Valuation Rules. 61. After amendment of Section 4 :- Section 4 lays down that the valuation of excisable goods....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ve perused the clarifications issued by the CBEC vide Circular dated 15-1-2014 (Supra) issued aftermath the decision in the case of Fiat India (supra), which is reproduced below:- 2. The first issue is whether the declared transaction value can be rejected in all cases where the transaction value is lower than the manufacturing cost and profit. The Hon'ble Supreme Court has not ruled that transaction value can be rejected in all cases where the declared value is lower than the manufacturing cost and profit. At paragraph 66 in the FIAT judgment, the Hon'ble Court has declined to hold its earlier judgment in case of Collector of Central Excise, New Delhi v. Guru Nanak Refrigeration Corpn. [2003 (153) E.L.T. 249 (S.C.)] per incuriam, distinguishing it on the basis of the facts of the case, though the transaction value in case of M/s. Guru Nanak Refrigeration Corpn. was less than the manufacturing cost and profit. The Hon'ble Supreme Court has cautioned against drawing general conclusions and inferences quoting the truism stated by Lord Halsbury that "a case is only an authority for what it actually decides and not for what may seem to follow logically from it." 2.1 F....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s could not be regarded as sales in the ordinary course of sale or trade, nor could the declared value be accepted as the normal price for sale of cars. As the main reason for selling cars at a lower price than the manufacturing cost and profit was to penetrate the market, the apex court held that this would constitute extra-commercial consideration and not the sole consideration. Since the price was not the sole consideration for sale of cars, the Court held that the Department was justified in invoking the provisions of Valuation Rules for the purpose of levy of excise duty. On perusal of the above clarifications, it is noted that the Board has accepted that mere sale of price lower than the manufacturing cost cannot be made the criterion to reject the transaction value unless the aspects such as the percentage of loss at which such sale takes place and the period for which such loss takes place, reasons of sale at such loss, etc. are examined to ascertain if there was any "extra commercial consideration". The Board has also accepted the fact that the Apex Court in its judgment has observed that selling of final products below the manufacturing cost was intended....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e to form part of section 4 value even under new section 4 definition. It may also be noted that where the assessee charges an amount as price for his goods, the amount so charged and paid or payable for the goods will form the assessable value. If, however, in addition to the amount charged a price from the buyer, the assessee also recovers any other amount by reason of sale or in connection with sale, then such amount shall also form part of the transaction value for valuation and assessment purposes...." The entire demand made by the impugned order on the basis of the cost of production as per the cost auditor report is contrary to the concept of transaction value introduced from 2000. In light of the decisions referred above, after introduction of the concept of "transaction value" in the scheme of Section 4 of the Central Excise Act, 1944, revenue had could have rejected the transaction value between the buyer and seller only after demonstrating that the price charged is not the sole consideration and has been influenced by some additional commercial consideration. Impugned order seeks to reject the contract value/ transaction value without even showing what was additional ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Excluding Taxes 129068706 94481370 89613167 124126637 12 Actual assessable Value 53777229 25860648 37243767 92232510 13 Undervaluation 75291477 68620722 52369400 31894127 Total Undervaluation 228175726 Statement II Table Showing the Calculations of Total Cost, Reasonable Sale Value on the basis of average profit margin and actual sale value of Bought Out Goods S N Particulars 2000-01 2001-02 2002-03 2003-04 1 Material Consumed 83457654 77372987 46749452 5224300 4 Employee Cost 419028 537842 542957 625681 5 Interest 3413704 3413704 2427636 234599 6 Adm, selling and Distribution Expenses 2964970 3569628 3059446 305610 7 Other Expenses 231963 272267 219584 27466 8 Total Cost 90487319 85166428 52999075 6417656 9 Profit Margin (%) 1.78 2.8 2.18 2.96 10 Pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd margin for each product or service or activity, produced or provided by an entity including a non-profit entity, for any period, in compliance with Cost Accounting Standards issued by the Institute. 4.7 Cost Statements:-Cost Statements, in relation to an entity, includes plant-wise, factory wise or service Centre wise: i) quantitative details of capacity, production, trade purchases, sales and stock; ii) quantitative, rates and value details of consumption of materials, utilities, and other inputs; iii) cost sheet showing element-wise, total as well as per unit, cost of production of goods or provision of services, cost of sales and margin for each product or service; iv) reconciliation of profits, or in case of an entity carrying on any activity not for profit, of surplus, as per cost accounts and as per financial accounts; v) reconciliation of indirect taxes showing details of total clearance of goods/services, assessable value, duties/ taxes paid, CENVAT or VAT or Service Tax credit utilized, duties/taxes recovered and interest / penalty paid; vi) statement of value addition and distribution of earnings; ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd purchase price is claimed to be trading profit by the appellant. The total value of the bought out items as per the show cause notice which have been purchased by the appellant from their sister concern as percentage of the total purchase value of bought out items is in range of 17% to 28% for the three years where the data is free from defect. In the year 2003-04 and 2004-05 the purchases from sister concern exceed the total purchase value of bought out item hence left out from the analysis. Further from the figures as above it is observed that constantly from the year 2000-01 to 2003-04 the purchase value of bought out items have declined. It is the submission of the appellant that prices of the bought out item or the manufactured goods supplied by them is also approved by the was approved by the Director of Sugar, a statutory Authority. Commissioner while analyzing the contracts has also noted that appellants in respect of the supplies made under the contracts entered into with the sugar industries has given the breakup of the prices for the individual item to the purchasers and the prices have been agreed to. Further as per the terms of contract, appellant were required to p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Goa. The industrial electricity connection is used only for their domestic purposes limiting the consumption to 250 to 400 units per month supported by electricity bills issued by Electricity Department of Goa during the concerned period. c. The diesel generator set installed in the factory was rusted and in unusable condition. KC Goa have not incurred any expenditure on purchase of diesel for the said generator set during the Show Cause Notice period. d. No registers were maintained at KC Goa to record production of excisable goods. This has been corroborated by Shri Mirza in his statement dated 27/01/2005. e. KC Goa has not maintained any Store Books or Issue Slips for raw materials, dispatch list for finished excisable goods but such record is found in KBEPL Satara for the said goods. f. There is no qualified staff with KC Goa to manufacture precision machinery required for sugar plants. g. During Panchanama no finished excisable goods similar to those said to have been manufactured and sold by KC Goa were found in the factory of KC Goa. h. During Panchanama no stock of raw materials was found except 1MT of MS Flats. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....voices and handed over the same to his higher authorities. q. The excisable goods said to be manufactured by KC Goa were shown to have been transported under Lorry Receipts of M/s. Vishwas Transport Co. but the same is denied by owner of the said Transport Company, Mr. V.R. Kulkarni. He has also confirmed that there is no other transport company by the same name in Goa. Shri B.N. Agarwal, Assistant Manager Accounts of KBEPL also could not show any evidence of freight/transportation charges paid to M/s. Vishwas Transport Co. r. It is found that Shri Nipane has written the Lorry Receipts of M/s. Vishwas Transport Co. and the same were given to him by Factory Manager of M/s. Kay Iron Works, Satara. Therefore, it is observed that the Lorry Receipts of M/s. Vishwas Transport were fabricated by KBEPL Satara. s. The other transporter M/s. Bhosale Tempo Service has also stated that he has not transported any goods from KC Goa to Satara and vice versa. t. In case of transportation shown to have been done by M/s. Siddhakala Transport Co., he has denied to have transported goods from KC Goa to KBEPL Satara but he has transported the goods of KBEPL Satara to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Cheg Plate for pan 217008 97 16/10/00 Dhanlaxmi SSK 640867 195 69 30/01/02 Pan Calanderia 43500 177A 30/01/02 Dhanlaxmi SSK 157740 263 70 30/01/02 Pan Calanderia 43500 178A 30/01/02 Dhanlaxmi SSK 157740 263 1 12/04/02 Gross Hopper 57540 1 01/04/02 Dhanlaxmi SSK 217342 278 2 13/04/02 Shell for vacuum Pan 274000 2 14/04/02 Markendya sugar 1034960 278 I find that as per KBEPL's submissions, KC Goa has paid Central Excise duty worth Rs. 95,01,741/- [PLA Rs. 40,14,559/- + CENVAT Rs. 54,87,182/-] during the period from April 2000 to March 2004, in Goa Commissionerate. However, I find that KC Goa has availed benefit of SSI exemption and concessional rate of duty on the goods shown to have been manufactured by them and KBEPL have saved Excise Duty thereon as the goods, in fact, have been manufactured by KBEPL at Satara and were liable to duty @ 16% ad valorem. Further, the motive for this manipulation done by the company is clearly the flexibility it provided to further manipulate the prices between the manufactured items and the bought out items. But f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ings have been done with the knowledge of the Department, removal of goods cannot be regarded as clandestine. But in our case, only after the completion of the investigations, it is established that the clandestine activity has taken place and prior knowledge to the department was not there. iv. In the case of CCE Vs HMM Ltd 1995 (76) ELT 497 (SC); it has been held that limitation for extended period not invokable unless show cause notice puts assessee to notice specifically as to which of the various commissions and omissions are committed. The specific problem related to non-declaration of waste/bye-product which is not the contention in our case. Hence the case does not merit consideration here. v. In the case of Nizam Sugar Factory Vs CCE, AP 2006 (197) ELT 465 (SC); the Apex Court has ruled that when all relevant facts are in knowledge of authorities when first show cause notice issued, while issuing second and third show cause notices, same or similar facts could not be taken as suppression of facts on part of assessee as these facts already in knowledge of the authorities. In the present show cause notice, all the allegations are being levelled for the firs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Chandra, Goa and the said goods were dispatched against the duty paying documents issued by them. As per the contract referred to above the premises of the sub contractor were also open for inspection and verification by the purchaser. Further interestingly, in the period of dispute itself in the impugned order itself reference has been made to Purchase Order, of Goa unit against which the goods were supplied by the Appellant 1 (Sl No 39 in table in para 3 of the impugned order). 4.17 It is also the case of the revenue while alleging undervaluation, that the Appellant 1, was overvaluing the value of bought items from M/s Kay Chandra Goa, while issuing the invoices in respect of these goods to the purchaser (table in para 39 of the impugned order). Cost auditor report also notes that these were the bought out items by the appellant. That being so, do revenue not admit that the goods were actually manufactured and cleared by the Goa Unit. Moreover while alleging the goods to be clandestinely cleared by the Appellant the duty is being demanded on the purchase value of the goods from Goa Unit and not on the sale value indicated in the invoices issued by the appellant. If these goods....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Officers on 26-6-2008 in respect of KC Goa for the period from April 2003 to Feb, 2008 in which the 'Gist of Objection' has been shown as nil. We, however, note that the demand relates to the period from 1-10-2000 to 10-1-2005 whereas the audit period is from April 03 to Feb, 08. Thus only the part period is covered by the Audit and not full period. We have also perused the evidences as recorded in para 30 of the findings portion of the Order of the Commissioner. No satisfactory rebuttal is prima facie forthcoming against these evidences, in the appeal memorandum filed by KBEPL. The Commissioner has observed that since KBEPL were illegally showing the goods to have been manufactured at Goa and paying duty, such payment cannot be taken to be the payment of duty and, therefore, the benefit of Cenvat duty paid at Goa is not admissible. This defies logic. Once payment at Goa is not denied, whether it is duty or not, it has to be offset against the duty payable at KBEPL, Satara." 4.19 Even if the charge of clandestine clearance of the goods in garb of the goods manufactured at Goa is to be upheld, tribunal has categorically held that the amounts paid at Goa need to be offset against ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ls have not been honoured or have been rejected by the customers though a period of about five years is over. I also find that the escalation bills have been raised on two sugar factories, namely, M/s. Shri Dhanlaxmi SSK Niyamit and M/s. The Markandeya Co-op Sugar Mills Ltd.; who have agreed and provided the scope for escalation in the contracted price. Therefore, the plea of the KBEPL in this regard cannot be accepted. I find that Section 4 has clearly provided that the price for the goods whether payable at the time of sale or at any other time forms part of assessable value on which Central Excise duty is required to be paid. The assessee has relied upon the ruling of KCP Ltd Vs. CCE, Chennai. The issue involved was that evidence produced by appellants to prove duty paid items purchased from outside and sent to site - appellants not liable to pay excise duty on escalation cost in respect of bought out items, demand not sustainable in respect of bought out items. In the present case, the Department has proved that the price of the bought-out goods is already over-valued and so the question of further escalation of bought-out goods does not arise. In view of this, the ruling is no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tedly the claim of escalation made by the appellants from their buyer was one-sided and has not been agreed to by the receiver of the goods. Commissioner has in the impugned order in para 35 specifically observed to this effect, however taking after taking note of this she concluded that the appellant should have paid the duty at the time of raising the escalation bills without awaiting the receipt of the escalation amount claimed. In the same para it has also been recorded that appellant has raised the escalation bill only in respect of two sugar factories namely Shri Dhanalaxmi SSK Niyamit and M/s markandeya Coop Sugar Mills Ltd., as per Annexure C to the Show Cause Notice reproduced below: S.No. Invoice No and Date Name of Customer Escalation Bill raised (Rs.) CENVAT duty @16% (Rs.) 1 KBE/307 31.03.2003 M/s Shree Dhanlaxmi SSK 5946197 951392 2 KBE/28A 30.06.2003 M/s Shree Dhanlaxmi SSK 11837111 1893938 3 KBE/28B 30.06.2003 M/s Markandeya Coop Sugar Mills Ltd 4775672 764108 Total 22558980 3609438 4.16 Extract of Annexure to show cause notice - "Statement Showing the Sale Price of Bought Ou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g detailed calculations with all documentary evidence as stated above. If the Purchasers fail to remit the payment due to the Sellers as stated above and the Sellers do not hear from the Purchasers even within 60 days, the Sellers may draw the correct amount of escalation as per escalation clause due to them through Letter of Credit. In the same manner, if the Purchasers is entitled for refund of the price due to de-escalation, the Sellers shall deduct the same from their subsequent bills within 60 days from the publication of RBI bulletin and send to the Purchasers details thereof immediately within 45 days from the publication of the RBI bulletin. Otherwise the Purchasers shall have the right to recover the said amount drawn in excess by the Sellers in any lawful manner. Excise duty and sales tax also will be charged on final escalation amount checked and passed by the Purchasers. The Sellers shall provide all documentary proof in support of payment of excise duty and sales tax on escalation. Payment of excise duty and sales tax should be made in the same manner as mentioned above. The documents for escalation claims should be sent through registered post. PROVIDED FURTH....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for determining the final amount which has to be allowed for escalation. In the present case revenue has not adduced any single evidence to show that appellant have received any amount against the escalation bills issued by them to the purchaser. The escalation bills are not even finalized till today. On the contrary applicant has produced the letter dated 03.03.2008 from the Commissioner for Cane Development and Director of Sugar Bangalore. Against the escalation bills raised by the appellant as reflecting in Show Cause Notice to M/s Shree Dhanalaxmi SSK for an amount of Rs 1,77,83,308/- having duty component of Rs. 28,45,330/- as per the letter dated 03.03.2008, the escalation amount allowed is Rs. 29,88,940/- having the component of duty and taxes of Rs 7,08,565/-. This clearly establishes that the escalation amount as claimed by the appellant in the escalation bills is not the amount received by them but is the amount which is subsequently determined and agreed to by the purchaser. 4.24 Appellants do not deny that the duty needs to be paid on the escalation amount received by them. However as per them the said duty shall be paid only on finalization of the escalation bills. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to have been paid under the Act. To keep the matter in focus, the exact question is which is the month in which the duty ought to have been paid. 49. Under the Rules, goods become exigible to duty on removal. Assessment is to be done by assessee itself by way of self-assessment. In a case where duty is payable on the basis of the value, the assessee is to apply the rate of duty to the value and pay the duty on or before the sixth day of the month succeeding the month in which removal of the goods takes place. Undoubtedly, if the removal takes place in March, the payment is to be made by 31st of March. 50. We have also noticed what happens if there is provisional assessment. In the case of provisional assessment, the assessee entertains a doubt regarding the actual value or the rate of duty. He applies and he is permitted under the order to remove goods on a provisional assessment. The assessment is thereafter finalized. When the provisional assessment is finalized, the assessee becomes liable however to pay interest from the first date of the month succeeding the month for which the amount is determined. We have no doubt in our mind that under Rule 7(4), the expr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and confirmed demand of Excise Duty on such escalation bills even though that the Appellant had contended that Excise Duty becomes payable only on finalization of escalation bills and not at the time of issuance, because the buyer may not agree to pay the whole amount as claimed by the Applicant. However, the Respondent has noted that no such dispute has been raised by any of the buyers of the Application with respect to the Escalation Bills and accordingly, Excise Duty is to be levied on the entire amount of the escalation bill. 4. The Applicant states that the Letter dated 03.03.2008 issued by the Commissioner of Cane Development and Director of Sugar, Karnataka is on such letter wherein it is clearly seen that contrary to the finding recorded by the Respondent, the buyer did object to the escalation bills issued by the Applicant and ultimately finalized the said escalation bills at a much lower amount than what had been claimed by the Applicant. Copy of the aforesaid letter dated 03.03.2008 is annexed hereto and marked as Exhibit "A" to this Application. 5. That as the findings on this issue (under paragraph 36 of the OIO) clearly fail to consider dispute lett....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Mobilisation advance paid for Supply Total Advance paid of Rs. 2,79,00,000.00 Less: 15% Adjusted 2,17,13,686.00 Balance to be adjusted: 61,86,314.00 Retention amount of performance 5% Entry Tax at 26 Total Deduction in Supply Bills (B)(I) 2,17,13,686.00 84,02,646.00 32,50,954.00 3,33,67,286.00 Deduction made by DSSK Ltd., in Erection Bills: 1. Adjustment of Mobilisation advance paid for erection Total Advance paid of Rs. 7,50,000.00 3,60,588.00 Less: 15% Adjusted 3,60,588.00 2,40,392.00 Balance to be adjusted 3,89,412.00 49,040.00 Retention amount of performance 6,50,020.00 TDS Deductions Total Deduction in Erection Bills (B)(II) Total Deductions (B) (1)+(II) (3,33,67,286 +6,50,020) 3,40,17,306.00 Balance Payable (A) - (B) 13,04,63,414.00 Less: Paid 12,90,90,831.00 Balance Payable towards Supply & Erection 13,72,583.00 Add: Amount Certified Escalation Payable 29,88,940.00 Amount of Taxes & Duties on Certified Escalation ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... He shall withdraw the case filed in the court of Satara and shall furnish copy of the court order. The Dakshina Kannada SSK Ltd., is directed to take an undertaking letter from M/s. KAY-Bouvet Engineering (P) Ltd., before settling his dues on a stamped paper duly vetted by an advocate Sd/- Commissioner of Cane Development and Director of Sugar, Bangalore 1) Secretary to Government, Co operation Department, M.S. Building, Bangalore. 2) The Managing Director, Karnataka State Co operative Sugar Factories Federation, Malleswaram, Bangalore. 3) M/s. Kay Bouvet Engineering (P) Ltd., N-3, Additional MIDC Area, Satara, Maharashtra. Sd/- Commissioner of Cane Development and Director of Sugar, Bangalore" 4.27 We are of the view that this Miscellaneous Application needs to be allowed. In the same order demand has been made holding the value of the goods as per the contract to be undervalued on the basis of the cost production determined on the basis of the Cost Auditor report. Demand has also been confirmed in respect of the same goods by taking the escalation claimed on the value of supplies made as per contractual agreement. In the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....w Cause Notice on the issue of CENVAT credit in respect of supply to M/s. Dhanlaxmi SSK was issued to them and so the matter was known to the Department. I find that it was different issue relating to wrong availment of CENVAT credit on bought out goods sent directly to M/s. Dhanlaxmi and credit availed by KBEPL at Satara. I find that in the said case no documents/records relating to the pricing of excisable goods or bought out goods were the subject matter of that Show Cause Notice and the said issue was limited to non- receipt of inputs in the factory of KBEPL at Satara. Hence, I find that this argument of KBEPL is not acceptable. I also find that KBEPL have mis-declared the assessable value on Central Excise invoices as 'transaction value' with intent to evade payment of excise duty, when they were clearly aware that no separate transaction value for the each of the excisable goods was specified in the contract. KBEPL have also failed to bring to notice of the Department copies of Contracts/Work Orders which have quoted lump sum, contract amount and not separate transaction value. It is also proved beyond doubt that KC Goa have not manufactured excisable goods shown to h....