TMI Blog2008 (11) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... 22-12-2006 (hereinafter referred to as "the Impugned Order") passed by the Commissioner, Central Excise Customs, Aurangabad. Vide the Impugned Order, the Commissioner has confirmed the duty demand of Rs. 1,11,72,637/- raised vide Show Cause Notice No. 44/CEX/2005 dated 14-12-2005 under proviso to Section 11A(1) of the Central Excise Act, 1944 against the PC together with interest and imposed penalty of Rs. 1,11,72,637/-. Further, the Commissioner has vide the Impugned Order also confirmed the duty demand of Rs. 53,89,632/- raised vide various other Show Cause Notices under Section 11A of the Central Excise Act, 1944 against the PC together with interest and imposed penalty of Rs. 25 lakhs. 2. Appeal No E/771/07-Mum has been filed by M/s. Endress + Houser (India) Ltd. (hereinafter referred to Sales Centre (SC)) against the imposition of penalty of Rs. 5,00,000/- vide the Impugned Order i.e. Order-in-Original No 48-56/CEX/2006 dated 22-12-2006 passed by the Commissioner of Central Excise and Customs, Aurangabad. 3. Appeal No E/860/03-Mum has been filed by the Revenue against the Order-in-Appeal No BPS (12)1/2003 dated 16-1-2003 passed by the Commissioner of Central Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance with the provisions of the Customs Act. Thus, the valuation of the goods will be on the basis of the principle laid down in Section 14 of the Customs Act read with the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 (hereinafter referred to as the "Customs Valuation Rules") 11. A joint reading of Section 14 of the Customs Act, Rule 3(i) of the Customs Valuation Rules mandates that the value of the goods on which the duty is to be charged would be the transaction value. Transaction value is defined as the value determined in accordance with Rule 4 of the Customs Valuation Rules. If the assessable value cannot be determined as per Rule 3(i), then Rule 3 (ii) provides that the value shall be determined by proceeding sequentially through Rules 5 to 8 of the Customs Valuation Rules. The relevant part of Section 14 of the Customs Act and Rule 3 of the Customs Valuation Rules are extracted hereunder: Section 14(1). For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force where under a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice for the goods imported by the PC and the SC from Endress + Hauser Flowtec, AG, Switzerland and from their associate companies may be accepted under Rule 4(3)(a) of the Customs Valuation Rules, 1988. After a period of three years, the Deputy Commissioner has done the periodical review of the Orders and once again accepted the transaction value. 15. PC has stated that in the present case, there is a price list circulated by the Group Company detailing prices of all items specification wise, which becomes the guideline for negotiating and accepting the prices in respect of each sale with related and unrelated customer and on which country factor discount rate is made applicable. The price at which the goods are sold by the PC to the SC is based on this inter company price list. This is evident from the statement of Mr. Shirish Limaye, Finance Controller of the PC, recorded under Section 14 of the Central Excise Act, 1944 on 21st March 2005. 16. It is submitted by the PC that where such inter company price list exists, the price of the goods as per the inter company price list is to be taken to reflect the correct sale value for the purpose of Customs Valuation in the absen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as for example, it is always the responsibility of the manufacturer to give performance guarantee of its product. How could SC give such guarantee, that too, without any agreement or contract with PC?, Thus, the expenses towards this element of cost should be added to the value at which PC transferred the products to SC. The same is the position with respect to the other elements of cost like inspection, testing, analysis and study design and drawing etc; (iv) Once the PC was not able to discharge the burden that their relationship has not influenced their sale price, the declared transaction value would have to be rejected. Once the transaction value is rejected, one will have to proceed to the remaining valuation rules, sequentially. The next rule is Rule 5, which has been adopted by the Commissioner. (v) As per Rule 5, one has to go by comparable value of identical or similar goods. In the present case, the sale value of identical goods, to unrelated buyers (the price at which SC was selling to their unrelated customers) was available and that is what has been adopted by the Commissioner. Value of no other comparable goods were available, since no identical or similar good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustoms Valuation Rules. 21. As stated above, in case of clearance of goods from a 100% EOU, the value of goods on which excise duty is to be levied, is to be determined as per Section 14 of the Customs Act read with the Customs Valuation Rules. 22. According to Rule 3(i), the value of the goods on which the duty is to be charged would be the transaction value. Transaction value has been defined under the Customs Valuation Rules to mean the value determined in accordance with Rule 4. Further, Rule 3(ii) provides that if the assessable value cannot be determined as per Rule 3(i), then the value shell be determined by proceeding sequentially through Rules 5 to 8 of the Customs Valuation Rules. 23. Where the value in terms of Rule 3(i) cannot be determined, Rule 3(ii) statutorily mandates to proceed sequentially through Rules 5 to 8 of the Customs Valuation Rules. 24. Rule 5 provides that subject to provisions of Rule 3, the value of imported goods shall be the transaction value of identical goods sold for exports to India and imported at or about the same time as the goods being valued. Thus, as per Rule 5, following two conditions are required to be cumulatively satis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral expenses in connection with sales in India of imported goods of the same class or kind; * the usual costs of transport and insurance and associated costs incurred within India; * the customs duties and other taxes payable in India by reason of importation or sale of the goods; 32. Thus, as per Rule 7, the assessable value is to be worked out considering the price at which the goods are sold by the seller in India, post its importation, to an unrelated person, after making the permissible deductions viz, general expenses in connection with the sales, insurance, transportation costs, taxes, etc. 33. In the present facts, the SC is, post clearance of goods from EOU, selling the goods to the unrelated buyers. Hence, the assessable value is to be computed on the basis of Rule 7, by considering price at which the goods are sold by the SC to the customers, after allowing the permissible deductions as per Rule 7 and Interpretative note thereto. 34. We find that the Endress + Hauser (India) Ltd. are working as SC and Endress + Hauser Flowtec (India) Pvt. Ltd. are working as PC. SC are conducting sales activities including procurement of purchase orders etc. They are doin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assistant Commissioner's Order dated 11-12-2002 simply stated that the PC and the SC were related and hence the sale price of the SC to independent customers would be the transaction value. The said Order was passed without issue of any show cause notice. The Assistant Commissioner did not examine any invoices and they were also not provided by the SC. In fact, he had in his Order directed the Range Superintendent to calculate the duty. In spite of these directions, the PC did not supply the details of the invoices. On appeal by the PC, the Commissioner (Appeals), vide Order-in-Appeal dated 16-1-2003, remanded the case back to the Assistant Commissioner to issue a proper show cause notice before deciding the case. For issuing the show cause notice, proper quantification of duty was required and for this details/copies of invoices of the SC were required. The jurisdictional officers made a number of attempts through correspondence and even summons to procure those invoices, but without success. As for example, in statement dated 30-6-2003 Shri Ajay Bhardwaj, Sr Accounts Manager of the SC, admitted that they had not yet supplied the information/documents sought for. Eventually, the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited Nations under Notification No. 108/95-CE dated 28-8-1995, the said exemption is clearly not available to the PC, which is a 100% EOU, as, by virtue of proviso to Section 5A (1) of the Central Excise Act, 1944, normal exemption notifications, are not applicable to 100% EOUs unless specifically mentioned in the exemption notification. Hence, differential duty of Rs. 90,612/- together with interest is recoverable from the PC. Mandatory penalty of Rs. 90,612/- is also payable by the PC. 41. We hold that the assessable value is to be worked out as per Rule 7 of the Customs Valuation Rules after making the permissible deductions. We, therefore, remand the case to the Commissioner to work out the assessable value on which the duty is to be paid in accordance with Rule 7 of the Customs Valuation Rules read with the interpretative notes thereto. We set aside the penalties imposed on PC and SC on this count. The issue of imposition of the penalties on PC and SC is, however, kept open. Needless to say that the quantum of the penalties to be imposed on PC and SC will depend upon the quantum of the duty liability determined in the light of the above. Appeal Nos. E/770/07 and E/771/07 f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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