TaxTMI 
TaxTMI 
2005 (10) TMI 129
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..... Appeal No. E/1509/05/MUM has been filed by IIL against imposition of penalty of Rs. 50,00,000/- under Rule 25 read with Rule 173Q of erstwhile Central Excise Rules, 1944, this penalty has been imposed by the Commissioner in the order demanding duty from IMIL. Since the issue in dispute in all the three cases is common, the same is being disposed off by this common order. The issue being common, we will deal with the facts in appeal No. E/1093/05-MUM filed by IIL which are as under: (i) IIL is engaged in the manufacture of HR Coils, Sheets, Plates, etc. which are cleared on payment of appropriate duty of excise. In the manufacture of such goods, it avails credit on inputs such as iron ore pellets etc. Adjacent to its plant, another group company namely IMIL also has its factory, wherein pig iron and molten metal are manufactured. The principal raw material for both the companies (IIL & IMIL) is iron ore pellets. Accordingly, in order to achieve economies of scales, both the companies follow a joint procurement policy in terms of which IIL placed orders on the suppliers for the quantities required by both the companies. (ii) The said quantities were received from one suppliers ....
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.... the Central Excise Act, 1944. (ii) That the transaction between the IIL & IMIL was one of sale as was evident from appellants own letter no. IIL/IMIL/EX/CERA/2K2/B dated 14-8-2003, wherein the appellant informed the Asst. Commissioner of Central Excise, Raigad that the transaction between the appellant and IMIL was sale of inputs as well as from the statement of Shri Mukund J. Chaporkar, Dy. Manager Commercial, and consequently the assessable value in respect the same was not determinable in terms of Board Circular 643/34/2002 dated 1-7-02 and the decision of Tribunal in the case of Vikas Laminators v. CCE - 2004 (170) E.L.T. 464, was not applicable. (iii) That since the goods were to reassessed to duty in terms of Rule 57AB/Rule 3(4) the assessable value in terms of Section 4(1)(a) i.e. the transaction value and that such value includes not only the price paid at the time of clearances but any consideration or additional consideration paid by the buyer at a later stage since it is not in dispute that appellant had recovered additional consideration towards certain expenses incurred by them by raising appropriate Debit Note on IMIL, the same were includible in the assessable d....
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....inciple of material procured on the principal's behalf would apply. Transaction between IIL & IMIL is that of transfer, the finding of the respondent that the same involves sale is not maintainable. The transaction value for inputs cleared in such cases, the value thereof has to be determined as provided vide circular No. 643/34/2002 dated 1-7-2002 wherein para 14 clarified as under : 14 How will valuation be done when inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, under the erstwhile sub-rule (1C) of Rule 57AB of the Central Excise Rules, 1944, or under Rule 3(4) of the Cenvat Credit Rules, 2001 or 2002? Where inputs or capital goods, on which credit has been taken, are removed as such on sale, there should be no problem in ascertaining the transaction value by application of Sec. 4(1)(a) or the Valuation Rules, [provided tariff values have not been fixed for the inputs or they are not assessed under Section 4A on the basis of MRP] There may be cases where the inputs or capital goods are removed as such to a sister unit of the assessee or to another factory of the same company and where no sale is involved. It may be n....
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....his letter, which is not a relied upon document in any case, does not induce us to conclude that the transactions between IIL & IMIL and vice versa is that of a sale as understood in commerce. (c) There is force in the submission that the transaction between IIL & IMIL can be regarded as that between partners, if not that of a principal and agent wherein the partners have a right to obtain the share of net assets especially on the said Venture of procurement. The transfer by one partner to another of the former's share of partnership assets cannot be held to be sale and this position in law is well settled by the Justice Bhagwati of the Gujarat High Court in CIT v. Mohanbhai Pamabhai - 120 ITR 49; following the same in this aspect in terms of joint procurement policy, the sharing of procurement cost cannot be regarded as sale. It only represents transfer of costs etc. of partner in the Jt. Venture of the partnership firm of IIL & IMIL. (d) The additional costs incurred after clearance of the Iron Ore Pellets, from the premises of the pellet manufacturer of, the seller in Goa cannot be added to the value to determine Excise Duty, as excise duty is on manufacture i.e. all cos....
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....4 or Cenvat Credit Rules 2001, cannot be a levy under Section 3 of the Central Excise Act, 1944 nor is it Modvat/Cenvat credit. Consequently the provisions of Section 11A(1) of the Central Excise Act, 1944 cannot be invoked to recover the said amount. The Rule 57AB and Rule 3(4) of the Cenvat Credit Rules provide as under: (4) When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, the manufacturer of the final products shall pay an amount equal to the duty of excise which is leviable on such goods at the rate applicable to such goods on the date of such removal and on the value determined for such goods under sub-section (2) of Section 3 or Section 4 or Section 4A of the Act, as the case may be, and such removal shall be made under the cover of an invoice referred to in rule 7. Since what is required in terms of these rules, is only an amount equivalent to duty of excise leviable at the rate applicable on the value determined in terms of Section 4 or Section 4A of the Central Excise Act, 1944. Therefore in absence of any authority specifically prescribed for recovery of such amounts, the present recovery orders cannot be uphel....