TaxTMI 
TaxTMI 
2024 (10) TMI 1822
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....of the case, leading to this appeal, are summarised herein below: 2.2 The appellants herein, M/s. Mahindra & Mahindra Ltd., are engaged in the manufacture of excisable goods, viz., engines for generating sets and engine kits, falling under Sub Heading No. 84082020 of the First Schedule to the Central Excise Tariff Act, 1985. 2.3 During the course of audit conducted on the records of Thane unit of the assessee-appellants, it was observed by the department that the appellants are supplying `diesel engines' and 'spare parts for diesel engines' to their other units and these are assessed to duty as per the provisions of Section 4(1)(b) of the Central Excise Act, 1944 read with Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 (herein after referred to as 'the Rules of 2000'). The department had objected to such method of payment of duty at 110% of the cost of production or manufacture of such goods under Rule 8 ibid, as the same are not applicable to their case, and the correct method of valuation is as per Rule 4 of the Rules of 2000. The department conducted investigation of the above case by recording statements ....
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....g for penalty under Section 11AC ibid read with Rule 25 of the Rules of 2002. The said SCN was adjudicated by the learned Commissioner of Central Excise, Pune-I vide impugned order dated 28.11.2013, in confirmation of the adjudged demands. Feeling aggrieved with the said adjudication order, the appellants have filed this appeal being No. 85720 of 2013 before the Tribunal. 3.1 Learned Advocate for the appellants submitted that they are engaged in the manufacture of engines for generating sets and its parts/Kits falling under Tariff Item 8408 20 20 of the Schedule to CETA, in their factory situated at Vasai in Thane District. The said engines being manufactured by the appellants were stock transferred to their own Units situated at different locations namely (i) Mahindra & Mahindra Limited, FES-Engine Application Business, Salamangalam Village, Chennai; (ii) Mahindra & Mahindra Limited,(Farm Equipment Sector-Engine Application Business), Plot No.25, Gat No.360, WMDC Industrial Area, Kharabwadi, Chakan, Pune; (iii) Unique Power Solutions, A/c. Mahindra & Mahindra Limited, C-12, SMA Industrial Area, Azadpur, G.T. Karnal Road, Delhi. For such stock transfer of said engines, the appel....
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....ce, under Rule 4 of Valuation Rules, based on Larger Bench of Tribunal judgment in Ispat Industries Ltd. vs. Commissioner of Central Excise, Raigad [2007 (209) ELT 195 (Tri. - LB)]. 3.5 In response to said audit observation, the appellants, brought to the notice of the department about the fact of their payment of duty has been done on the basis of CBEC Circular No.643/34/2002-TRU dated 1.7.2002 (point No.5) and claimed that said CBEC Circular is binding upon departmental authorities based on various Supreme Court judgments. It was further claimed by herthat to the best of their knowledge, said CBEC Circular dated 1.7.2002 was not withdrawn. It was further claimed that the matter is revenue-neutral, inasmuch as whatever duty paid by them on the engines stock transferred was available as credit to their recipient Units. 3.6 Under the aforesaid factual position, learned Advocate claimed that confirmation of demands along with interest and penalty, based on the allegation that sales price to independent buyers, under Rule 4 of Valuation Rules, would be applicable for stock transfer of engines for generating sets to their own Units, invoking extended period under Section 11(4) on....
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....scipline, as held by Hon'ble Supreme Court in various judgments, including in the case of Matador Foam [2005 (179) ELT 257 (SC)]. 3.10 In support of their stand on the valuation method adopted by them, the appellants stated that even after the said amendment of Rule 8 and deletion of Point No.5 of CBEC Circular dated 01.07.2002 w.e.f. 01.12.2013, the Tribunal have held that payment of duty on 110% of COP, on clearances to sister units/ own units is correct, even if part of the production is sold to independent buyers, in the following cases: (i) Commissioner of Central Excise, Indore Vs. Surya Roshni Ltd. - 2017 (357) E.L.T. 978 (Tri. Del.) (ii) Ultra Tech Cement Vs. CCE, Indore/Raipur- Final Order No. 57753- 57755/2017dated 08.11.2017 (iii) Rashtriya Ispat Nigam Ltd. Vs. Commissioner of C. Ex., Customs &, S.T. Visakhapatnam-I - 2019 (366) E.L.T.856 (T) (iv) Diamond Cements Vs. Commissioner of Customs, CGST & Central Excise, Bhopal - 2018-TIOL-1419-CESTAT-DEL (v) Indore composite Pvt. Ltd. Vs. CCE, Indore - Final Order No. 55986/2017 dated 11.08.2017 (vi) Kiran Global Chem Ltd. Vs. Commissioner, C. Ex. & Service Tax, Indo....
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....ansfer of goods to own Units. 3.13 In view of the above submissions made, learned Advocate claimed that valuation of engines of Gensets resorted to by the appellants by adopting 110% of COP is proper and legal. 3.14 Learned Advocate also submitted that demand for the period from September 2008 to March, 2012, beyond one year, is barred by limitation, in the absence of any conscious or deliberate suppression or wilful mis- statement, etc., on the basis of following evidences: (i) Appellants have been filing Monthly Returns in Form-ER-1 regularly and no objection was raised against self-assessments and, hence, extended period is not invokable, as held in various judicial forum including the judgement of Hon'ble Supreme Court in the case of Pahwa Chemicals v/s CCE - 2005 (189) E.L.T. 257 (S.C.). (ii) Central Excise records of the appellants were audited, from time to time, by Audit Parties from jurisdictional Commissionerate and no objections were raised and/or any adverse remarks were made. (iii) extended period is invocable only when there is positive act, other than mere inaction or failure, on the part of manufacturer and there must be consciou....
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.... said Notification No. 14/2013-C.E. (N.T.) amending the Rules of 2000, it is specifically stated that the amendments made to such Rules, will come into force with effect from the 01.12.2013 and not retrospectively. Further, in the case of Government of India Vs. India Tabacco Association [2005 (187) ELT 162(S.C.)] (para 26), the Hon'ble Supreme Court had observed as under :- "26. We are not oblivious of the fact that in certain situations, the Court having regard to the purport and object sought to be achieved by the legislative may construe the word "substitution" as an "amendment" having a prospective effect." Hence, the learned AR stated that the appellants are required to pay Central Excise Duty as per Rule 4 of the Rules of 2000. 4.3 In support of the stand taken by the Revenue, he relied upon the following case laws: (i) Ispat Industries Ltd. Vs. Commissioner of Central Excise, Raigad - 2007 (209)E.L.T. 185 (ri. - LB) (ii) Indian Drug Manufacturer's Association Vs. Union of India - 2000 (222) E.L.T. 22 (Bom.) (iii) Rashtriya Ispat Nigam Ltd., Vs. Commissioner of C. Ex., Cus. & S.T. Visakhapatnam-I - 2019 (366) E.L.T. 856 (Tri.....
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....he goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value; (b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed. Explanation .- For the removal of doubts, it is hereby declared that the price- cum-duty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the money value of the additional consideration, if any, flowing directly or indirectly from the buyer to the assessee in connection with the sale of such goods, and such price-cum-duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods. (2) The provisions of this section shall not apply in respect of any excisable goods for which a tariff value has been fixed under sub-section (2) of section 3. (3) For the purposes of this section,- (a) "assessee" means the person who is liable to pay the duty of excise under this Act and include....
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....dling, 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." Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. "4. The value of the excisable goods shall be based on the value of such goods sold by the assessee for delivery at any other time nearest to the time of the removal of goods under assessment, subject, if necessary, to such adjustment on account of the difference in the dates of delivery of such goods and of the excisable goods under assessment, as may appear reasonable. 5. Where any excisable goods are sold in the circumstances specified in clause (a) of sub-section (1) of section 4 of the Act except the circumstances in which the excisable goods are sold for delivery at a place other than the place of removal, then the value of such excisable goods shall be deemed to be the transaction value, excluding the cost of transportation from the place of removal up to the place of delivery of such excisable goods. Explanation 1 .- "Cost of transportation" includes - (i) the ac....
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.... Explanation 2 .- Where an assessee receives any advance payment from the buyer against delivery of any excisable goods, no notional interest on such advance shall be added to the value unless the Central Excise Officer has evidence to the effect that the advance received has influenced the fixation of the price of the goods by way of charging a lesser price from or by offering a special discount to the buyer who has made the advance deposit. Illustration 1 .- X, an assessee, sells his goods to Y against full advance payment at Rs. 100 per piece. However, X also sells such goods to Z without any advance payment at the same price of Rs. 100 per piece. No notional interest on the advance received by X is includible in the transaction value. Illustration 2 .- A, an assessee, manufactures and supplies certain goods as per design and specification furnished by B at a price of Rs. 10 lakhs A takes 50% of the price as advance against these goods and there is no sale of such goods to any other buyer. There is no evidence available with the Central Excise Officer that the notional interest on such advance has resulted in lowering of the prices. Thus, no notional i....
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....also related in terms of sub-clause (ii) or (iii) or (iv) of clause (b) of sub-section (3) of section 4 of the Act or the buyer is a holding company or subsidiary company of the assessee, then the value shall be determined in the manner prescribed in rule 9. Explanation .- In this clause "holding company" and "subsidiary company" shall have the same meanings as in the Companies Act, 1956 (1 of 1956); (b) in any other case, the value shall be determined as if they are not related persons for the purpose of sub-section (1) of section 4." 8. In the impugned order dated 10.07.2013, learned Commissioner of Central Excise, Thane-II had framed the issue for consideration by him as the valuation of stock transferred excisable goods, when the same goods are also sold to unrelated buyers and he had dealt with such issue of dispute and gave his findings as follows: (i) the value adopted for clearances to their own units was substantially low, even though provisional, when compared with the value of such goods which are sold to unrelated buyers in arm's length transactions; (ii) the legal provisions with respect to valuation did not alter the basic te....
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....y the appellants are largely similar and repetitive in nature. 9.2 Similarly, in the case of SCN dated 07.05.2013 issued to the appellants' unit at Chakan, Pune, learned Commissioner of Central Excise, Pune-I, on the basis of decision of the Tribunal in the case of Ispat Industries Limited (supra), he had held that Rule 8 ibid will not apply in case of stock transfer of diesel engines by the appellants to their other units. Further, he held that the Central Excise Valuation Rules have to be applied in a sequential manner and the interpretation consistent with the Central Excise Act, 1944 will have to be applied, in confirmation of the adjudged demands. 9.3The facts which are common in both the appeals are that the appellants are engaged in the manufacture of 'engines for diesel generating sets' and `spare parts/kits for engines' which attracts the excise duty as per the Central Excise Tariff Act, 1985. The engines form part of diesel generating sets which is used for generation of electricity. The appellants have different units situated under their own name and style as Mahindra & Mahindra units at (i) Vasai of Thane district; (ii) Chakan Taluka Khed of Pune ....
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....4.(1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall - a. in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value; b. in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed. (2) The provisions of this section shall not apply in respect of any excisable goods for which a tariff value has been fixed under sub-section (2) of Section 3. 2. As would be seen, for applicability of transaction value in a given case, for assessment purposes, the following requirements should be satisfied: a. The goods are sold by an assessee for delivery at the time of place of removal. The term "place of removal" has been defined basically to mean a factory or a warehouse; b. The assessee and the buyer of the goods are not related; and c. The price is the sole consideration for the....
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.... charges for packaging, the packaging charges will also form part of assessable value as it is a charge in connection with production and sale of the goods recovered from the buyer. Again, if any assessee charges warranty charges for any goods in a particular transaction, then the warranty charges shall be included in the transaction value for the goods and duty will be payable on this part of value recovered from the buyer. This will be so even if such warranty charges do not already form part of the price charged by the assessee for such transaction. In other words, if the warranty charges are charged separately and not considered as "price" of goods by the assessee, then also warranty charges will be includable in the transaction value forming basis of valuation. In this context, it may be clarified that it is immaterial whether the warranty is optional or mandatory. Since the value can be different for different transactions, wherever warranty charges are paid or payable to the assessee, in those transactions warranty charges shall form part of the assessable value. In those transactions where warranty charges are not recovered, the question of including warranty charges in tra....
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.... goods cleared from factory/warehouse shall be the normal transaction value of such goods at the depot, etc. at or about the same time on which the goods as being valued are removed from the factory or warehouse. It may be pertinent to take note of the definition of "normal transaction value" as given in the valuation rules. What it basically means is the transaction value at which the greatest aggregate quantity of goods from the depots etc. are sold at or about the time of removal of the goods being from the factory/warehouse. If, however, the identical goods are not sold by the assessee from depot/consignment agent's place on the date of removal from the factory/warehouse, the nearest date on which such goods were sold or would be sold shall be taken into account. In either case if there are series of sales at or about the same time, the normal transaction value for sale to independent buyers will have to be determined and taken as basis for valuation of goods at the time of removal from factory/warehouse. It follows from the Valuation Rules that in such categories of cases also if the price charges is with reference to delivery at a place other than the depot, etc. then the....
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....behalf of the buyer to the assessee. An Explanation has been added in the new rule only to remove any doubts with respect to its scope. 23. Where goods are sold through related persons, the transaction value is not applicable. However, there is some change in the definition of 'related persons' vis-à-vis the old definition. It includes "inter-connected undertakings" as defined in the Monopolies and Restrictive Trade Practices Act, 1969. The definition of inter-connected undertaking in the said Act reads as follows : "Inter-connected undertakings" means two or more under-takings which are inter-connected with each other in any of the following manner, namely :- ... 24. Thus the term inter-connected undertakings covers large categories of legal entities/undertakings to whom goods are sold by the assesses which may be held as "related person" under the new definition. It may be noted that under the erstwhile provisions under Section 4, except for the specifically named categories, namely, holding company, subsidiary company, a relative and a distributor of the assessee and any sub- distributor of such distributor, buyer was held to be related ....
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.... at Vasai of Thane district; (ii) Mahindra & Mahindra, unit at Chakan Taluka Khed of Pune (Farm Equipment Sector); (iii) Mahindra & Mahindra, unit at Salamangalam village of Padappai Taluka of Tamil Nadu (FES-Engine Application Business) and one another manufacturing unit on their account by M/s Unique Power Solutions, Azadpur of Delhi, all the four units are related to each other as 'inter connected undertakings' being part of the same body corporate and/or working under the same management. Hence, the transactions of clearance of goods as 'stock transfer' or otherwise, is to be treated as related party transactions. It is also an undisputed fact that the appellants have also sold some goods to independent buyers, from its various units. 10.2 If the transactions are between related persons, then for the purpose of determination of central excise duty, the value should be determined as per the Central Excise Valuation (Determination of the Price of Excisable Goods) Rules, 2000.Of these, each of the rule has a specific application for the purpose of determination of the value, as explained hereunder. These are: (i) Rules 1 and 2 are the preliminary provis....
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....table to such transaction value being the nearest to the time of removal. We do not find that the impugned orders have gone into the details of these aspects, to prove beyond doubt that such transaction value being adopted for demand of duty is the nearest to the time of removal and therefore the same has been applied in this case, in order to claim that these are being determined under Rule 4 ibid. Even the SCNs do not give any indication with respect to any of the details of such nature. On the other hand, we find from the records of the case, that the details have been furnished by the appellants in the case of Pune unit, to state that out of 351 clearances, the value adopted by the appellants as per CAS-4 certificates are the same as compared to the price adopted by the department for demand of duty in 309 cases, and the value adopted by them is higher in 31 cases and lower in 11 cases, which have not been taken into consideration while passing the impugned order. Therefore, we do not find that there exist sufficient grounds to claim that the valuation of impugned goods shall be done on the basis of Rule 4 ibid, as held in the impugned orders. 10.4 It is an undisputed that f....
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....ibid, in case of diesel engines being used by the other units of the assessee-appellants for manufacture of diesel generating sets in such other units. In other words, the diesel engines in such cases are not cleared as such, but only after being used for manufacture of some other final products viz., diesel generating sets, where those final products are later cleared to other independent buyers. 10.7 In the present case, as predominantly the clearances of engines are for use in manufacture of diesel generating sets, the value of clearances of impugned goods by the appellants would be on the basis of Rule 8 ibid, in terms of proviso clause to Rule 9 ibid, as discussed above in paragraph 10.6 above. However, for the limited number of cases, where the engines cleared/stock transferred by the appellants to their other units, which are cleared as such, the normal transaction value as per Rule 9 ibid would apply. 10.8 From the records of the case, and as per the submissions made by the appellants, the appellants had cleared diesel engines from one unit to their other units which are being used for further manufacture of diesel generating sets. However, in some cases these diesel ....
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....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 goods with reference to their value, then, on each removal of the goods, such value shall - ......................... 2. Rules 8, 9 and 10 of the Central Excise Valuation Rules, 2000 dealing with determination of assessable value in case of captive consumption and sale to related person have been amended vide notification no. 14/2013-Central Excise (N.T.), dated 22-11-2013 to clearly state that these rules apply irrespective of whether the whole or a part of the clearances of manufactured goods are covered by the circumstances given in these rules. Each clearance is required to be assessed according to section 4(1)(a) or the relevant rule dealing with the circumstances of clearance of the goods, as the case may be. 3. For example, if an assessee clears his goods in such a way that first removal of goods is to an independent buyers, some goods are captively consumed, second removal is to such a related person who is covered under rule 9 and third removal is to a person who is covered under rule 10, then the first remov....
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....ajasthan v. Mangilal Pindwal, Koteswar Vittal Kamath v. K. Rangappa Baliga and Co. and A.L.V.R.S.T. Veerappa Chettiar v. S. Michael. In West U.P. Sugar Mills Association case a three- Judges Bench of this Court held that the State Government by substituting the new rule in place of the old one never intended to keep alive the old rule. Having regard to the totality of the circumstances centring around the issue the Court held that the substitution had the effect of just deleting the old rule and making the new rule operative. In Mangilal Pindwal case this Court upheld the legislative practice of an amendment by substitution being incorporated in the text of a statute which had ceased to exist and held that the substitution would have the effect of amending the operation of law during the period in which it was in force. In Koteswar case a three-Judge Bench of this Court emphasized the distinction between 'supersession' of a rule arid 'substitution' of a rule and held that the process of substitution consists of two steps: first, the old rule is made to cease to exist and, next, the new rule is brought into existence in its place." In view of the above, we are of ....
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....ue of valuation decided by the Hon'ble Apex Court relates to value at the time of import of the goods and not of clearance of indigenously manufactured goods. Similarly, Larger Bench of the CESTAT in the case of Ispat Industries Ltd. decided the issue relating to transfer of part of final product to sister concern and balance to independent buyers and not the parts & components of the final products as involved in the present case. Similarly, in the case of M/s. Aquamall Water Solutions Ltd. the Hon'ble CESTAT decided transfer of goods to certain brands to depot and sale therefrom and rest through unrelated buyers, therefore, valuation is to be determined by the best judgment." 3. We note that Rule 8 of Central Excise Valuation Rules, 2000 were substituted vide Notification No. 14/2013-C.E. (N.T.), dated 22-11-2013. The scope of the new Rule vis-à-vis the old rule was explained in the Board Circular dated 25-11-2013. It was clarified that the new provision was introduced which clearly state their application irrespective of whether the whole or a part of clearances of manufactured goods are covered by the circumstances given in the said rule. The Board furth....
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....eal records. As mentioned above, the only point for decision is the valuation of product cleared by the respondent-assessee to their sister unit. Admittedly, in the present case, the goods were sold to independent buyers as well as cleared to sister unit. The Revenue relied on the decision of Tribunal in Ispat Industries vs. CCE, Raigad - 2007 (209) ELT 185 (Tri. LB). We note the finding of original authority recorded as below: "10. The assessee in their letter dated 28.05.2011 addressed to the Additional Commissioner as also in a letter dated 07.07.2011 addressed to the Assistant Commissioner (Audit) Indore clarified that as per the Board's Circular No.634/34/2002-CX dated 01.07.2000 and Rule 8 of the Valuation Rules, they have transferred the goods to their sister concern correctly as per 110% of the cost of production on the basis of CAS-4 Certificate. They have also referred to the case laws in their support. The main point involved in this case is that the party is not transferring on payment of duty the 'final product' from factory to their sister concern and not for sale therefrom. The reason for price difference in case of parts of the final product as ....
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....e Supreme Court in the case of Fiat India Pvt. Limited (supra) 10. By considering the totality of the facts and circumstances of the case and by following our earlier decision in the case of Surya Roshini (supra), we set aside the impugned order and allow the appeals." 15. It is a fact on record that the appellants have filed monthly Returns in Form-ER-1 regularly and no objection was raised by the department, at that time against self-assessments made by the appellants. Further, subsequent to audit conducted by the department, the appellants were also in correspondence with the department about the valuation method adopted by them. Thus, all the facts relating to the valuation of goods cleared by the appellants-assessee to their other units was within the knowledge of the department and there is no justification for demand of duty by invoking extended period under Section 11A(4)/11A(5) ibid. Further, issue of SCN dated 19.04.2023 for a subsequent period by invoking extended period, for the second time, on the same grounds of suppression of facts, after having issued the first SCN dated 01.12.2023 covering the past period invoking extended period on the grounds of suppr....
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....y considered the submissions made by both sides. We find that there is no dispute that the recipient units are the appellant's own units. Therefore if there is any differential duty, liability the same is available as Cenvat credit to the recipient units. As per the submission of Learned Counsel the recipient units have paid Rs.75.49crores and Rs 16.41 crores duty from PLA respectively. In such case the entire exercise of payment of duty and availment of credit is revenue neutral. This view is supported by the judgments cited by the Learned Counsel. The relevant orders are reproduced below :- CCE, C & ST v. Tarapur Grease India Pvt. Ltd. [2016 (334) E.L.T. 416 (Bom.)] .... CCE v. Special Steel Ltd. [2015 (329) E.L.T. 449 (Tri.)] .... CCE & C v. Indeos ABS Ltd. [2010 (254) E.L.T. 628 (Guj.)] .... STI Industries v. CCE [2015 (327) E.L.T. 514 (Tri.)] .... 5. In view of the above judgments, it has been consistently held that even though duty is payable and the recipient unit is part of the same entity and is eligible for Modvat/Cenvat credit paying duty from PLA also then it is a revenue neutral exercise. For this reason demand ....