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2003 (12) TMI 116
Issues:
1. Imposition of penalty under Section 11AC of the Central Excise Act.
2. Role and liability of the company secretary in Central Excise matters.
Analysis:
Issue 1: Imposition of penalty under Section 11AC of the Central Excise Act:
The appellants challenged the penalty imposed under Section 11AC of the Central Excise Act, arguing that since the duty was paid before the issuance of the show cause notice, no penalty should be imposed. The appellants relied on various judgments, including the case of Amritsar Crown Caps (P) Ltd. v. CCE, Chandigarh, and Ashok Leyland Ltd. v. CCE Chennai. They contended that penalties under Section 11AC and Section 11AB should not be imposed in cases where the duty has been paid before the notice. Additionally, they argued that even if a penalty is warranted, it should not be equivalent to the duty amount. The appellants also cited precedents where penalties under Section 11AC were reduced by the Tribunal and High Courts, emphasizing the discretionary power to reduce penalties.
On the other hand, the Revenue argued that penalties should be imposed if suppression is proven, regardless of duty payment before the show cause notice. They relied on judgments such as Tamil Nadu Housing Board v. CCE Madras and Elephanta Gases Ltd. v. CCE, Pune-I to support their stance on imposing penalties even when duty has been paid before the notice.
The Tribunal reviewed the arguments and precedents presented by both parties. It noted its consistent stance in previous cases, such as Ashok Leyland Ltd. v. CCE Chennai and G.K. Steels (CBE) Ltd. v. CCE, Coimbatore, where it held that penalties under Sections 11AB and 11AC are not applicable when the demand amount is paid before the issuance of the show cause notice. Therefore, the Tribunal set aside the penalty imposed under Section 11AC of the Central Excise Act in this case.
Issue 2: Role and liability of the company secretary in Central Excise matters:
The Tribunal also addressed the penalty imposed on the company secretary, highlighting that the secretary's role primarily involves administrative tasks and not day-to-day operational matters related to Central Excise. Consequently, the Tribunal overturned the penalty imposed on the company secretary, emphasizing that the secretary should not be held liable for the company's Central Excise affairs. Both appeals filed by the appellant company and its secretary were allowed, providing consequential relief as per the law.
In conclusion, the Tribunal ruled in favor of the appellants, setting aside the penalty under Section 11AC of the Central Excise Act and revoking the penalty imposed on the company secretary based on their respective roles and responsibilities within the company.
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2003 (12) TMI 115
Issues:
Dispute on Customs valuation of Sodium Hydrosulphite and Citric Acid imports.
Detailed Analysis:
The subject proceedings involved a dispute on the Customs valuation of 100 MT of Sodium Hydrosulphite and 200 MT of Citric Acid imported by M/s. Varsha Plastic Pvt. Ltd., Kandla. The declared value for assessment was US $ 600 per MT for Sodium Hydrosulphite and US $ 785 per MT for Citric Acid. A Show Cause Notice was issued alleging undervaluation based on an investigation by the Directorate of Revenue Intelligence. The Commissioner of Customs, Kandla increased the assessable value to US $ 800 per MT for Sodium Hydrosulphite and US $ 935 per MT for Citric Acid, citing higher values of similar imports and a confession by the Director of the importing company. The appellants contested the allegation, arguing that the declared value was accurate and no misdeclaration occurred. They presented evidence of lower import prices by another party, which was rejected as provisional. The appellants' explanation for the quantity difference was also dismissed as it was not presented earlier in the investigation proceedings. The appellants emphasized that the transaction value should be the basis for customs valuation, citing legal precedents.
During the appeals, the appellants reiterated that the proceedings were contrary to established legal principles, emphasizing the importance of transaction value in customs valuation. They referred to legal decisions stating that reduced prices for buyers should not be rejected unless certain conditions are met. The appellants argued that the Revenue authority did not rely on relevant data about contemporary prices and highlighted that the evidence of import at comparable prices by another party was unjustly rejected as provisional. The statements of the Director of the importing company consistently maintained that the declared price was the full transaction value.
Upon reviewing the records and submissions, the Tribunal found that the impugned order lacked sufficient evidence. The rejection of transaction value based on comparable imports was deemed unreliable due to significant differences in quantities. The evidence of lower import prices by another party was unjustly dismissed as provisional. Despite seeking information on finalized assessments, no response was received from the Commissioner of Customs, Kandla. The Director of the importing company consistently denied under-valuation, leading the Tribunal to conclude that the finding on under-valuation and subsequent demands could not be sustained. Consequently, the impugned order was set aside, and the appeals were allowed in favor of the appellant with consequential relief.
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2003 (12) TMI 114
Demand duty - EOU goods cleared to DTA - cut rose flowers for export - interest and penalty - HELD THAT:- It is well settled in the case of M/s. Vikram Ispat v. Commissioner of Central Excise [2000 (8) TMI 111 - CEGAT, NEW DELHI] that goods produced in an EOU cannot be treated as imported goods and subjected to customs duty. The duty payable in respect of such goods is the duty of excise u/s 3 of the Central Excise Act, 1944. Therefore, the duty demand made in the impugned order u/s 28 of the Customs Act is not sustainable. Accordingly, we set aside the impugned order and allow the present appeal. However, we make it clear that revenue authorities will be at liberty to demand duty on the imported inputs, if any, used in the production of the cut-flowers in question.
The appeal is disposed of as above.
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2003 (12) TMI 113
Issues:
1. Applicability of central excise duty under MRP Scheme vs. Section 4 of the Central Excise Act.
2. Interpretation of sale transactions between the appellant, DGS & D, and different departments.
3. Comparison with previous tribunal decisions on similar cases.
Analysis:
1. The primary issue in this appeal was the applicability of central excise duty by the appellant under the MRP Scheme as opposed to Section 4 of the Central Excise Act. The appellant, a manufacturer of air-conditioners, had affixed MRP on its products under the Standards of Weights and Measures Rules. The dispute arose when the Revenue demanded duty based on assessment under Section 4 of the Act, which was affirmed by the Commissioner of Central Excise, leading the appellant to file this appeal.
2. The appellant contended that the sale transactions were directly made to different departments, despite negotiations with DGS & D regarding rates and conditions. The appellant highlighted specific communications showing direct sales to entities like Mahanagar Telephone Nigam Limited (MTNL), refuting the Revenue's argument that sales were in bulk quantities to DGS & D. The tribunal noted that the negotiation with DGS & D was solely related to rates and conditions, with actual sales being made directly to various departments for each individual air-conditioner.
3. The tribunal analyzed previous decisions, including one involving Bharti Systel Ltd. v. CCE, Chandigarh, to distinguish the present case. In the Bharti Systel case, sales were admitted to be in bulk to entities like Department of Telecommunications (DOT) and MTNL, involving rental basis transactions without transfer of ownership. However, in the current case, the tribunal found that there were retail sales to different departments, making Section 4A directly applicable. Relying on the nature of transactions and the direct sales to departments, the tribunal set aside the impugned order and allowed the appeal.
This comprehensive analysis of the judgment highlights the key issues, arguments presented, tribunal's reasoning, and the final decision, providing a detailed understanding of the legal complexities involved in the case.
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2003 (12) TMI 111
Issues:
1. Recovery of credit on gases escaping during filling in cylinders.
2. Interpretation of Rule 57D regarding escaped gases as waste.
3. Applicability of previous tribunal decisions on similar cases.
4. Consideration of physical existence of goods lost by evaporation.
Analysis:
1. The case involved the recovery of credit taken on gases that escaped into the atmosphere during the process of filling cylinders with medical and industrial grade oxygen and argon. The issue was whether these escaped gases could be considered as used in the manufacture of the final product, leading to the liability to reverse the credit taken on them.
2. The Commissioner (Appeals) relied on a previous unreported decision of the Tribunal, which held that the escaped gases would be considered waste within the meaning of Rule 57D. The Tribunal emphasized that the decision of the Tribunal in a previous case, where oxygen lost during cylinder filling was not considered waste, did not affect the current case's judgment. The Tribunal clarified that goods lost due to evaporation or spillage still have physical existence and are covered by Rule 57D.
3. The Tribunal also discussed two other decisions to support its interpretation of Rule 57D. In one case, it was held that the loss by means of evaporation during storage was not covered by Rule 57D as it did not occur during the manufacturing process. In another case, it was determined that goods lost by spillage during manufacturing were not considered waste under Rule 57D. However, the Tribunal distinguished these cases from the current situation where the loss occurred during the filling of cylinders.
4. The Tribunal further emphasized that goods with physical existence, even if lost by evaporation, are covered by Rule 57D. It referred to a judgment of the Allahabad High Court, which held that credit of duty paid on the entire quantity of a substance used by the assessee should be allowed, even if some quantity was not contained in the finished product. The Tribunal concluded that the escaped gases in this case should be considered waste under Rule 57D, and the appeal was dismissed accordingly.
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2003 (12) TMI 110
Issues:
Appeal against adjudication order passed by Commissioner of Customs regarding demand of Customs duty and confiscation of goods under Customs Act for contravening provisions of Notification No. 110/95.
Analysis:
The appellants, engaged in manufacturing textile items, imported goods under EPCG scheme and later obtained approval to set up a 100% EOU. They then requested cancellation of EPCG licences as unutilized. A show cause notice was issued for demand of Customs duty and confiscation of goods. The adjudicating authority ordered confiscation and redemption of goods on payment of fine and duty.
The appellants argued that Board's Circular dated 10-11-99 clarified that goods imported under EPCG scheme, later approved for 100% EOU, could be released subject to scheme conditions. They cited Supreme Court decisions emphasizing the binding nature of Board's Circulars. Revenue contended that Circular did not apply as warehousing period had expired, citing a Supreme Court decision on duty rates for warehoused goods.
The Tribunal found that goods were imported under EPCG scheme and later approved for 100% EOU, as per facts undisputed by Revenue. The Board's Circular allowed release of such goods subject to scheme conditions. The Tribunal held that Circular must be followed, rejecting Revenue's argument on expired warehousing period. The impugned order was set aside, and the matter remanded for fresh consideration in light of the Circular, granting appellants an opportunity to be heard. The appeal was allowed by way of remand.
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2003 (12) TMI 109
Eligibility of furnace oil as a 'consumable' for duty exemption under Notification No. 1/95-C.E - 100% Export Oriented Unit - Interpretation of statutes - period of limitation under the proviso to Section 11A(1) - HELD THAT:- There is no dispute, in the instant case, of furnace oil having been used as a fuel for the boilers. The boilers generated steam and the latter was used in the drying stage of the process of manufacture of Instant Tea Powder. The furnace oil was, thus, consumed in the process. It fell in the category of consumables indisputably, and undisputedly too. Therefore, we hold that the furnace oil brought into the EOU and used in the boilers during 1-1-2000 to 21-5-2000 was exempt from payment of Central Excise duty in terms of Entry No. 7 of Annexure-I to Notification No. 1/95-C.E., dated 4-1-95.
In the case of Waterbase [2000 (8) TMI 538 - CEGAT, CHENNAI], the question was whether the benefit of exemption under Notification No. 1/95-C.E. was available to HSD oil and furnace oil used by the assessee (100% EOU) in their aquaculture farms after the issuance of Notification No. 10/95-C.E., dated 23-2-95 which exempted from duty various excisable goods brought into aquaculture farms of 100% EOUs. This Tribunal held that the assessee had the right to choose that Notification which extended the benefit to him. Again, this decision does not appear to be relevant to the facts of the present case in which the party has claimed only under one notification viz. 1/95-C.E. for the relevant period.
We have not heard anybody say that 'consumable' could be so construed as to exclude fuels like furnace oil used in boilers. In the cases of Mangalore Chemicals [1991 (8) TMI 83 - SUPREME COURT] and Fertilizers [1991 (8) TMI 83 - SUPREME COURT] and Novopan India [1994 (9) TMI 67 - SUPREME COURT], it was held by the Court that, once an assessee was found to fall within the ambit of an Exemption Notification, full effect should be given to the exemption by a liberal interpretation of the terms of the notification. This ruling appears to have a say in the instant case. The appellants had, admittedly, satisfied all the substantive conditions of Notification No. 1/95-C.E. to come within its purview. The only dispute was whether the "furnace oil" which was procured without payment of duty fell within the coverage of "consumables" under Entry No. 7. When construed in terms of the Apex Court's ruling, the entry would squarely cover the appellants,' furnace oil. We need not consider the learned Counsel's plea for giving retrospective effect to Notification No. 40/2000-C.E.
In the result, we set aside the impugned order to the extent it relates to the demand of duty for the period, 1-1-2000 to 21-5-2000. The appeal stands allowed.
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2003 (12) TMI 106
Issues:
1. Availment of Cenvat credit on supplementary invoices.
2. Applicability of Rule 57AE on the timing of supplementary invoices.
3. Denial of credit based on Rule 57AB and Rule 57AE provisions.
4. Interpretation of Rule 57AB in relation to duty paid variations.
5. Receipt of goods under supplementary invoices.
Issue 1: Availment of Cenvat credit on supplementary invoices
The appellant, engaged in manufacturing excisable goods, availed Cenvat credit based on supplementary invoices issued by their sister unit for additional duty paid. The Revenue objected to this, leading to a show cause notice proposing disallowance of credit, interest, and penalty. The appellant argued that the amended Rule 57AE should apply to them as the supplementary invoices were raised post-amendment, enabling them to claim credit. The Tribunal agreed, emphasizing that the appellant was entitled to credit as the duty was paid by the input manufacturer and the amended provisions allowed for such credit based on supplementary invoices.
Issue 2: Applicability of Rule 57AE on the timing of supplementary invoices
The Tribunal noted that the supplementary invoices were raised after the amendment to Rule 57AE, which permitted credit based on such invoices issued by input manufacturers. The Tribunal found no justification in denying the appellant the benefit of credit or imposing penalties, ultimately setting aside the impugned order and granting relief to the appellant.
Issue 3: Denial of credit based on Rule 57AB and Rule 57AE provisions
The Tribunal highlighted that Rule 57AB governs the credit of duty paid on received inputs and emphasized that the credit should be equal to the duty paid. It noted that the provisions of Rule 57AE, dealing with documents and accounts, cannot override the fundamental principle that credit must match the duty paid. The Tribunal disagreed with the Revenue's argument against granting credit based on the supplementary invoices.
Issue 4: Interpretation of Rule 57AB in relation to duty paid variations
The Tribunal clarified that if the supplier pays additional duty, as in this case, the recipient factory should accrue additional credit per Rule 57AB. It emphasized that variations in duty paid should correspond to variations in credit, ensuring that the credit aligns with the actual duty paid.
Issue 5: Receipt of goods under supplementary invoices
The Tribunal addressed the Commissioner's argument that goods cannot be received under supplementary invoices, stating that such invoices are issued post-removal and delivery of goods under the original invoice. It concurred with the decision to grant credit for the supplementary invoices, rejecting the notion that goods were received under them.
This detailed analysis of the judgment from the Appellate Tribunal CESTAT, Mumbai covers the issues related to the availment of Cenvat credit on supplementary invoices, the timing and applicability of relevant rules, the denial of credit based on specific provisions, the interpretation of Rule 57AB, and the receipt of goods under supplementary invoices.
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2003 (12) TMI 105
Issues:
Whether Modvat credit taken by the assessee was in contravention of Rules 57AA and 57BB of the Central Excise Rules, and whether the piston ring set cleared by the assessee has undergone a manufacturing process.
Analysis:
Manufacturing Process Issue:
The appellants, engaged in manufacturing pistons and related components, import piston rings and assemble them into piston ring sets tailored to specific vehicle models. The issue was whether this assembly process constitutes manufacturing. The Revenue argued that no manufacturing occurred, considering the imported rings as finished products. However, the Tribunal found that a new article emerged from the assembly process, distinct in character and use, tailored to specific vehicle models. Each model requires a unique specification for the piston ring set, supporting the conclusion that the assembly process amounted to manufacturing under Section 2(f) of the Central Excise Act, 1944.
Modvat Credit Entitlement Issue:
The Revenue denied the appellants Modvat credit on the duty paid for imported rings, claiming the assembly process did not qualify as manufacturing. The Tribunal disagreed, noting that the piston ring sets were cleared at a higher value, with duty paid accordingly. Citing a precedent, the Tribunal emphasized the liberal approach to input credit, allowing credit for any item used in or in relation to manufacture. Rule 57B allowed credit for accessories cleared with the final product, even if the activity did not amount to manufacturing. The Tribunal found the denial of credit unjustified and set aside the order, allowing the appeals.
Conclusion:
The Tribunal held that the assembly process undertaken by the appellants constituted manufacturing, as a new distinct product emerged tailored to specific vehicle models. The denial of Modvat credit by the Revenue was deemed unjustified, as the piston ring sets were cleared at a higher value with duty paid, entitling the appellants to credit under Rule 57B. The appeals were allowed, setting aside the impugned order.
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2003 (12) TMI 104
Issues:
Whether excise duty is leviable on Water Purification and Filteration System mounted on a base frame by a company engaged in job work.
Analysis:
The appeals revolved around the issue of whether excise duty is applicable on Water Purification and Filteration Systems mounted on a base frame by a company engaged in job work. The Appellant Company contended that the process of mounting the system on a base frame does not amount to manufacture under Section 2(f) of the Central Excise Act. They argued that the items imported by them were complete systems capable of independent functioning, and there was no change in their characteristics before and after mounting. They relied on previous decisions to support their stance, emphasizing that the process did not result in a new commercial commodity. Furthermore, they claimed entitlement to Modvat credit to cover any duty liability and argued against the invocation of the extended period of limitation for demanding duty.
On the contrary, the Department argued that the assembly of various components by the Appellants resulted in the creation of a new product, a Water Purification and Filteration System. They contended that this assembly process constituted manufacture as it led to the emergence of a distinct product with different characteristics, name, and use. The Department relied on a previous decision to support their argument that combining filtering and purifying machinery into one system creates a new commercially different product. Additionally, they highlighted that not all parts used were duty paid, further supporting their claim that a new product emerged from the assembly process.
The Tribunal, after considering both sides' submissions, referred to the Supreme Court's definition of manufacture, emphasizing that a new and different article must emerge with distinctive name, character, or use for excise duty to be leviable. They noted that the Appellants received various components from a supplier and assembled them to create different types of Water Purification and Filteration Systems. The Tribunal concluded that the assembly process resulted in the creation of a new and commercially different commodity, falling within the definition of manufacture under Section 2(f) of the Central Excise Act. They upheld the demand for Central Excise duty on the Appellants and imposed a reduced penalty, citing suppression of the fact of manufacturing the goods from the Department as the basis for invoking the extended period of limitation. The penalty on the Director was set aside due to lack of evidence of personal knowledge regarding the liability of the goods to confiscation.
In conclusion, the Tribunal upheld the demand for Central Excise duty on the Water Purification and Filteration Systems mounted on a base frame by the company engaged in job work, considering the assembly process as constituting manufacture under the Central Excise Act. They also imposed a reduced penalty on the company while setting aside the penalty on the Director.
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2003 (12) TMI 103
Issues:
1. Extension of the period for issuance of show cause notice under Section 110(2) of the Customs Act, 1962.
2. Compliance with the proviso to Section 110(2) regarding the extension of time.
3. Requirement of showing sufficient cause for extending the time period.
4. Interpretation of the judgment of Punjab and Haryana High Court in Tarsem Kumar v. Collector of Central Excise, Chandigarh.
Extension of the Period for Issuance of Show Cause Notice:
The Customs authorities seized certain goods but failed to issue a show cause notice within the stipulated six months as per Section 110(2) of the Customs Act, 1962. The Commissioner of Customs sought to extend this period by issuing a show cause notice proposing the extension, which was done in all four cases. However, the orders extending the period were issued after the expiry of the initial six months from the date of seizure.
Compliance with the Proviso to Section 110(2):
The appellants argued that since the orders extending the six months' period were issued after the expiry of the initial period, they did not comply with the proviso to Section 110(2) of the Act. The appellants contended that the extension of time should only be granted upon showing sufficient cause, which they believed was lacking in these cases. Citing the judgment of Punjab and Haryana High Court in Tarsem Kumar v. Collector of Central Excise, Chandigarh, the appellants claimed that the right to reclaim seized goods arises if the extension is not granted before the expiry of the initial six months.
Requirement of Showing Sufficient Cause:
The appellants emphasized the necessity of demonstrating sufficient cause for extending the time period, as mandated by the proviso to Section 110(2). They argued that the absence of evident cause in these cases rendered the extensions invalid. The reliance on the judgment of Punjab and Haryana High Court further supported their contention that the failure to extend the period before its expiry entitles the owner to reclaim the seized goods.
Interpretation of Punjab and Haryana High Court's Judgment:
The Tribunal noted that the facts were undisputed, and the Departmental Representative could not provide any contradictory decision to the judgment of Punjab and Haryana High Court in Tarsem Kumar's case. Relying on the precedent set by the High Court, the Tribunal concluded that the impugned orders, issued after the expiry of the initial six months without a valid extension, were liable to be set aside. The Tribunal held that the right to claim the return of seized goods arises if the extension is not granted before the initial period lapses, in line with the interpretation of the High Court judgment.
Conclusion:
The Tribunal allowed the appeals, setting aside the impugned orders due to the failure to extend the period within the prescribed time frame, as per the proviso to Section 110(2) of the Customs Act, 1962. The judgment highlighted the significance of showing sufficient cause for extending the time period and affirmed the right of the appellants to reclaim the seized goods based on the interpretation of the Punjab and Haryana High Court's decision in a similar case.
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2003 (12) TMI 101
Valuation (Central Excise) - manufacture of liquid chlorine - inclusion of packing charges in assessable value post amendment to Section 4 - HELD THAT:- The ratio of the decision in CCE v. Indian Oxygen [1988 (8) TMI 98 - SUPREME COURT], would still be applicable in spite of the amendment brought to Section 4(1)(a). When we examine the decision, we find that the Supreme Court has treated the supply of the gases and the supply of the cylinders as two separate transactions. Transactions in the present case are identical in nature. If that be so, the supply of chlorine and supply of tonners are to be treated as two separate transactions. Once these transactions are treated as separate, it cannot be contended that the rental paid by the buyer is an amount which he is liable to pay by reason of, or in connection with the sale. Admittedly, sale is only that of chlorine. The tonner in which it is supplied is durable and returnable packing. We cannot, therefore, agree with the Commissioner that the rental paid by the buyer to the appellant in respect of the tonners has to be treated as part of the transaction value.
In the present case, there is no allegation or finding that the buyers of the goods are related and that delivery was not at the time and place of removal and price is not the sole consideration for sale. If that be so, there is no scope for taking recourse to Valuation Rules. A similar view has been taken by us on the scope of amended Section 4(1) in Filament India and Ors. v. CCE,[2003 (6) TMI 110 - CESTAT, NEW DELHI].
Thus, there is no merit in the Revenue seeking to rely on clarification issued by the Board under Circular No. 354/81/2000-TRU, dated 30-6-2000 in the context of introduction of new section for valuation w.e.f. 1-7-2000. In the result, we set aside the order impugned and allow the appeal.
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2003 (12) TMI 98
Issues:
1. Duty demand raised in respect of defective chairs
2. Additional Trade discount given to distributors
3. Eligibility for exemption under Notification No. 5/98
4. Destruction of chairs during testing
5. Inclusion of cost of freight in the assessable value of chairs
Analysis:
1. Duty demand raised in respect of defective chairs:
The appellant provided a guarantee for their chairs, offering credit equivalent to the value of goods if damaged due to manufacturing defects. The impugned order raised duty demand based on an alleged additional realization on all chairs sold. The circular in question indicated a replacement policy and reimbursement of damaged goods. The Tribunal found that the amount in question was related to freight costs and not the value of goods. The demand was set aside as there was no additional realization beyond the invoice price.
2. Additional Trade discount given to distributors:
The second demand was for an Additional Trade discount given to distributors, alleged to be reimbursement for damaged goods. The circular provided for adjustment of the discount based on actual damages, indicating a reimbursement nature. The Tribunal held that the discount, although uniformly given, was liable to be adjusted for damages post-sale. As per precedent, damage discounts were not eligible for deduction, leading to the confirmation of this demand.
3. Eligibility for exemption under Notification No. 5/98:
The demand under this issue related to the denial of exemption based on the aggregation of production from all factories. Condition No. 10 of the notification did not require aggregation, as it referred to products manufactured in the same factory. The Tribunal concluded that there was no need to aggregate production from all factories for exemption eligibility, setting aside this demand.
4. Destruction of chairs during testing:
The demand for chairs destroyed during testing was challenged, citing precedent that destroyed goods during testing were not liable for excise duty. The Tribunal referred to relevant decisions confirming the non-liability of duty for goods destroyed during testing. As the appellant failed to provide accounts of destroyed goods, the demand was set aside.
5. Inclusion of cost of freight in the assessable value of chairs:
The final demand was based on the inclusion of freight cost in the assessable value of chairs dispatched to buyers. The appellant argued that the sales were on an ex-factory basis, as evidenced by invoices and documents. Citing a Supreme Court decision, the Tribunal held that since the sales were ex-factory, there was no justification for including freight costs in the assessable value. The demand on this count was deemed unsustainable.
In conclusion, the Tribunal confirmed the duty demand related to the Additional Trade discount, while setting aside the rest of the duty demands and penalties, ruling in favor of the appellant on multiple issues.
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2003 (12) TMI 94
Demand - EOU - excise duty on different goods - 100% export-oriented - eligibility to the exemption contained in Notification 2/95 - Penalty - HELD THAT:- As to the aspect peculiar to the case of Opal Fabrics the contention that notice having been issued demanding excise duty u/s 11A of Rs. 7,01,795/- on goods cleared to the domestic tariff area, custom duty to this extent could not be confirmed by the Commissioner has to be accepted. The notice has correctly demanded excise duty on goods cleared from the factory to a buyer in India. The order of the Commissioner confirming the customs duty and imposing penalty under the Customs Act, 1962 to this extent is clearly incorrect, this part of the order is set aside. The Commissioner shall adjudicate on this aspect of the notice afresh.
The appellant was required to keep separate accounts of imported indigenous goods without payment of duty and the identity of the goods fall short could clearly be established with reference to such accounts. It is not contended that these accounts were not kept or incorrectly kept. Therefore we find no ground to interfere with the Commissioner (Appeals)'s confirming the demanding duty of the imported yarn fall short, demanding interest on such goods and imposing penalty on this appellant. There being no absolutely no explanation for the removal we do not find the quantum of penalty incommensurate with the gravity of the offence.
We now take up the issue that remains in the appeals under the Central Excise Act of Opal Fabrics and Bhagatram Parmanand and the sole issue for consideration in the other appeals whether the benefit of the exemption contained in Notification No. 2/95 will be available in a case where the 100% EOU has not made any exports physically of its final products, and it has earned foreign exchange only by means of sales against payment in foreign exchange to buyers in India. Duty is demanded from Prime Furnishing and Angana Textiles on the rejects and waste of yarn that they cleared to the domestic tariff area; from Bhagatram Parmanand and Opal Fabrics on the finished goods (yarn and fabrics respectively) and rejects and wastes and from Indian Polyfins Limited on the waste.
The benefit of the exemption contained in Notification 2/95 will not apply in the case before us because there has been no physical exports thereof. The second answer is contained in the decision of the Larger Bench of the Tribunal in Himalaya International Ltd. v. CCE, [2003 (5) TMI 79 - CEGAT, NEW DELHI]. In this decision, the Larger Bench of the Tribunal has on its view, that the judgment of the Supreme Court in SIV Industries Ltd. v. CCE [2000 (3) TMI 162 - SUPREME COURT] was not concerned with the cases of goods cleared from 100% EOU to the domestic tariff area which were not allowed to be sold, held the circular of the board not to be binding and said that the decision in Kuntal Granites is no good law. Hence even if it is concluded that the goods were not allowed to be sold in India, the proviso u/s 3(1) would apply.
To sum up, the position would be that the value of goods (including waste, scrap and remnant) which will be entitled to the benefit of the exemption in Notification 2/95 would be 50% of the value of goods exported out of the country. Goods cleared beyond this value limit would be liable to duty as applicable without the benefit of the notification. A note of caution has to be founded here. The reference in Clause (b) to "free on board value" cannot be construed literally as to mean that the value of the goods exported other than in FOB terms (e.g. CIF, FOR, etc.) should not be counted. These words actually provide a uniform measure to calculate the value of goods which are exported. Thus, for example they must be so construed as to exclude cost and insurance component in case of CIF.
Appeal allowed. Other appeals allowed in part.
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2003 (12) TMI 92
Mixture of soft drink concentrate and sugar - Valuation of syrup for Central Excise duty including sale price to related party, deduction of discounts, inclusion of lease charges for dispensing machine - HELD THAT:- In the present case, the assessee is selling part of the goods to unrelated dealers and part of the goods through a related person. Central Excise Law contains special provisions in relation to the valuation of goods sold to or through related persons prior to the introduction of new provisions in 1-7-2000 and thereafter. However, the special provision is applicable only in cases where the goods were exclusively sold to or through related persons and not otherwise. This is clear from the wording of the provisions themselves.
In any event, even if the valuation was sought to be made based on the sale price of the related person, there was no warrant to refuse deduction of discount. Assessable value under the law is the net price received by the assessee or its related person and not the gross price. It is well settled that all discounts by whatever name they are called are eligible for deduction from the gross price for the purpose of assessment of the goods, provided the discounts are known in advance and are not returnable. Uniformity is not a criterion at all. In the present case no contention has been raised that these discounts were not actually given or that they were returnable. In fact, the discounts were given in the invoices at the time of sales themselves. Therefore, the denial of the discounts was clearly against settled law.
We find no authority for the inclusion of the lease charges on the dispensing machine in the assessable value of syrup. Sale of syrup and leasing of dispensing machine are two separate activities. Considerations for them are also separate. There is no warrant in law for the inclusion of the consideration for different activity in the assessable value of excisable goods, definition of 'transaction value' in the new section notwithstanding. It is clear from a perusal of that definition that what is included is any additional amount charged as price, by reason of or in connection with the sale of the goods under assessment, and not amounts charged in connection with or by reason of sale of other goods or provision of other services. Therefore, there was no justification for inclusion of lease charge also.
In view of what has been stated above, the impugned order is not sustainable. It is set aside and the appeal is allowed with consequential relief, if any, to the appellant.
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2003 (12) TMI 90
Issues:
- Discrepancy in redemption fines and penalties for imported goods.
Analysis:
The judgment involves seven appeals with different appellants but a common issue regarding the imported goods and respondents. The goods in question were old and used diesel engines, ordered to be confiscated with redemption fines and penalties imposed. The redemption fines and penalties varied across the appeals, lacking uniformity in comparison to the values determined. The Tribunal examined the issue comprehensively.
The Tribunal considered two main aspects: loading of valuation and redemption fine. Regarding the loading of valuation, the learned Advocate did not press the issue, leading to its rejection. Concerning the redemption fine, the Tribunal delved into the guidelines provided in the Custom Appraising Manual regarding the margin of profit and the norms for imposition of redemption fines. The Manual outlined specific criteria for determining redemption fines based on market value and the nature of the imported goods.
The Tribunal emphasized the distinction between basic articles and other articles in determining redemption fines. It highlighted that second-hand goods, like the imported diesel engines, were categorized as 'Restricted' under the Exim Policy 1997-2002, not 'prohibited/banned'. The Tribunal reduced the redemption fine to 45% of the c.i.f. value, considering the goods as Capital Goods machinery. Additionally, the penalty was set at 5% of the same c.i.f. value to maintain consistency across the appeals.
In conclusion, the Tribunal disposed of the appeals by addressing the discrepancies in redemption fines and penalties for the imported goods. By applying the relevant guidelines and considering the nature of the goods, the Tribunal ensured a fair and uniform approach in determining the fines and penalties across the appeals.
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2003 (12) TMI 87
Manufacturer - Job Work - Brand Name - The draft job work agreement between the Joint Venture company (applicant) and Metropolitan Trading Company envisages that the latter will undertake manufacture of readymade garments and clothing accessories on a job work basis, including washing, ironing etc., at the rates and other terms to be mutually agreed upon between them. The Joint Venture company will supply the raw materials for such manufacture - Held that:- the applicant cannot claim to be a manufacturer for some purposes and a non-manufacturer for other purposes. - The argument of the applicant that the introduction of clause 5(I) in the notification No. 8/2002-CE, dated 1.3.2002 is to overcome the difficulty of following a non-manufacturer to claim the benefit of SSI exemption notification (which benefit such a non-manufacturer would not otherwise be able to claim) is fallacious. The objective of clause 5(I) is only to clarify, beyond doubt, that for the purpose of the SSI notification (and not merely for purposes of payment of duty) the expression "manufacturer" would include the person made liable for payment of duty in respect of excisable goods falling under Chapter 61 & 62 of CET and manufactured on job work basis - a person cannot be deemed not to be a manufacturer of goods (though liable to pay duty) and yet be a manufacturer (of the same goods) for availing the benefit of SSI exemption.
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2003 (12) TMI 86
SSI Exemption - Opting out - Whether an assessee who paid the duty at the normal rate at the commencement of the financial year under the provisions of Notification 1/93 and thereafter was eligible to avail the benefit of Notification 1/93 during the same financial year if he satisfies other conditions? - HELD THAT:- In the present case, the assessee M/s. Ankit Packaging Ltd. did not opt for not availing the benefit. Instead, it wrote on 10-4-1998 stating that it was availing the benefit of the exemption and was clearing the goods in terms of the notification. Therefore, the finding of the lower authority is contrary to the appellant's option. The notification calls for specific opting out by a manufacturer. There was no requirement to opt in.
In the present case, the assessee has also written to the department informing that it was wanting to avail the exemption notification. In the face of such opting in, there was no justification for interpreting the payment of duty on some goods as opting out. Moreover, the assessee has also explained his reason for clearing some goods on payment of duty at the beginning of the financial year; it required some time to compute the aggregate value of the clearances made during the preceding financial year, so as to be sure that it had not exceeded the qualifying value limit during the preceding financial year. Thus, paying duty on the goods cleared during the opening days of the Financial Year was only erring in favour of the revenue and not foregoing an exemption. Such caution in an assessee cannot be turned against him.
We find that a similar issue had come up before us in the case of C.C.E., Coimbatore v. Marutham Textiles (P) Ltd. and Others [2003 (2) TMI 86 - CEGAT, NEW DELHI] and we took the view that clearance of some goods in the beginning of the financial year on payment of duty was no ground for holding that the assessee who was an entitled small scale unit, has opted out of the benefit of Notification No. 1/93.
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2003 (12) TMI 85
Issues: Delay in implementing tribunal orders, refund of deposited amount, responsibility for delay, apology by Commissioner, further proceedings
In the case before the Appellate Tribunal CESTAT, New Delhi, the appellant filed an application seeking implementation of the tribunal's final order dated 3-9-2001, which allowed the appeal and directed refund of a deposited amount of Rs. 50,000. Despite repeated requests and letters to the customs authorities, no action was taken to assess the duty for clearance as per the tribunal's order. The appellant approached the Commissioner of Customs and the Chairman of C.B.E. & C. for refund and compliance, but received no response, leading to the filing of a miscellaneous application by the appellant. During the hearing on 22-4-2003, the Tribunal directed the Commissioner of Customs to file an affidavit responding to the delay in implementing the order, which was followed by subsequent affidavits and hearings to address the issue.
The Commissioner, in his affidavits, mentioned the refund of Rs. 50,000 and the final assessment of duty on the Bill of Entry. However, the Tribunal found the Commissioner's explanation unsatisfactory, noting that the Department was aware of the tribunal orders but failed to act promptly. The Commissioner's defense of not having a certified copy of the orders was deemed inadequate, especially considering the presence of a Departmental Representative in the case. The Tribunal emphasized the Commissioner's duty to verify the authenticity of orders when presented by the party. The Tribunal also considered the delay in implementing the orders, acknowledging that the present Commissioner, who assumed office on 11-11-2002, may not be solely responsible for the delay.
During the proceedings, the learned Counsel for the appellant sought permission to withdraw from the case due to lack of instructions from the appellant. Despite issuing a notice to the appellant, there was no response. The Tribunal refrained from delving into the reasons for the appellant's lack of response or inability to pay dues for clearance. An Amicus Curiae, Shri M. Chandrasekharan, submitted that the current Commissioner, who assumed office in 2002, should not be held entirely accountable for the delay. In light of the Commissioner's unqualified apology for the delay, the Tribunal accepted the apology and dropped further proceedings against him. The Tribunal recommended an inquiry by the Central Board of Excise and Customs to determine the individuals responsible for the delay in implementing the tribunal's orders.
In conclusion, the Tribunal acknowledged the delay in implementing the tribunal orders, addressed the refund of the deposited amount, considered the responsibility for the delay, accepted the Commissioner's apology, and recommended further investigation by the Central Board of Excise and Customs to identify those accountable for the delay.
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2003 (12) TMI 84
Issues involved: Calculation of interest u/s Section 27A of the Customs Act, 1962 on refund amount; Liability of officers for delay in implementing Tribunal's order.
Calculation of interest u/s Section 27A of the Customs Act, 1962 on refund amount: The Tribunal directed the respondent to return the amount to the applicant with interest at 12%. The Commissioner stated that the entire amount had been paid with interest calculated at 12% from 30-4-97 to 30-6-2003, as per Section 27A which mandates interest payment if duty ordered to be refunded is not refunded within three months from the date of application. The applicant claimed interest from the date of deposit or from the date of the final order. However, the Tribunal held that interest payment till the date of refund was sufficient, citing precedents and provisions under Section 11BB of the Central Excise Act, 1944 and Section 27A of the Customs Act, 1962.
Liability of officers for delay in implementing Tribunal's order: Due to delay in implementing the Tribunal's order for refund, the Revenue had to pay interest to the assessee. The Tribunal expressed concern over the burden on public funds due to such delays and recommended an inquiry by the Central Board of Excise and Customs to determine the responsible officers and fix liability. A report on the steps taken in this regard was to be submitted to the Tribunal by a specified date, with a copy of the order sent to the Chairman, CBEC.
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