TMI Blog2009 (7) TMI 293X X X X Extracts X X X X X X X X Extracts X X X X ..... ased on value of comparable goods making adjustments, as per Rule 6(b)(i) – Sub-clause (ii) can be invoked only if value cannot be determined under sub-clause (i) - while applying Rule 6(b)(i), it is the general factory gate price under Section 4(1)(a) to be adopted – such price more representative price than contract price to buyer - while holding that in this case, the assessable value is to be determined under Rule 6(b)(ii) of CEVR, 1975, read with the Board’s Circular No. 258/92/96-CX., dated 30-10-96, set aside the impugned order and remand the matter to the original adjudicating authority for re-quantification of the duty demand - E/467/2001 - 491/2009-EX(PB) - Dated:- 27-7-2009 - S/Shri B.L. Narsimhan and V. Laxmikumaran, Advocates, for the Appellant. Shri V.K. Choudhary, SDR, for the Respondent. [Order per: Rakesh Kumar, Member (T)]. - This appeal is being heard for de novo decision in pursuance of Hon'ble Supreme Court's directions vide order dated 12-11-07 in Civil Appeal No. 4975/02 filed by Commissioner of Central Excise, Allahabad [2007 (218) E.L.T. 321 (S.C.)] against this Tribunal's Final order No. 71/2002-A, dated 20th February, 2002 [2002 (142) E.L.T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the goods produced or manufactured by the appellant was not available for the reason that the entire production of SDS was being stock transferred by them to their Barabanki unit, there were other manufacturers of comparable goods in the same area who were selling the goods to independent buyers and it is that value which should have been adopted by the appellant for payment of duty in respect of the goods cleared to their Barabanki unit. On inquiry by the Department, it was found that there were three other units - M/s. K.M. Sugar Mills, Distillery Division, Faizabad, M/s. Kisan Sahkari Chini Mills, Ghosi and M/s. Saraiya Distillery, Sardar Nagar, Gorakhpur located near the area where appellant's unit is located and all these units were having sales to independent buyers, the highest of which should have been adopted by the appellant for discharging duty liability in respect of clearances of SDS to their unit at Barabanki. According to the Department on the basis of the price of comparable goods being manufactured by other manufacturers - M/s. K.M. Sugar Mills, M/s. Kisan Sahkari Chini Mills and M/s. Saraiya Distillery, the assessable value of SDS manufactured by the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nity sold SDS on a particular date in the year is totally illegal and that for the period from April, 1999 to December, 1999, the appellant had paid duty on higher assessable value than what was proposed in the show cause notices and, therefore, there is absolutely no basis for demanding differential duty for this period. With regard to the second contention, the Tribunal observing that the communication dated 31-1-2000 addressed by the appellant to the Superintendent, Central Excise, Barabanki clearly shows that after finalizing of the costing for the year 1999-2000 it was found that the cost had gone up from Rs. 13.50 per litre to Rs. 17.43 per litre and that they had computed the differential amount of Central Excise Duty for the period from April, 1999 to December, 1999 on this basis as per details given in the communication, but the Commissioner has not even referred to this contention raised by the appellant which shows total non-application by the Commissioner on this issue, set aside the demand for this period. As regards, the demand for the period from April, 1994 to March, 1999, the Tribunal set aside the demand on the ground that there is no reason given by the revenue a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nganj and Barabanki. The assessee tried to make a distinction by submitting that the product was captively consumed. CEGAT appears to have taken the stand that one day high price cannot be applied even though Rule 6(b) may apply. There is no dispute relating to the period from April 1999 to December 1999. For the period from April 1994 to February, 1999, the same was covered by a show cause notice dated 26-3-1999 and for the period March 1999 it is covered by a show cause notice dated 31-8-1999. CEGAT had come to the conclusion that no principle has been formulated and expressly no reason has been given. The stress is on nearly ascertainable equivalent as the expression 'ascertainable' means ascertained. There may be different rates for different periods. There may be cases where even for the periods the highest and the average prices may be taken. The proviso to Rule 6(b)(i) is relevant: "On the value of the comparable goods produced or manufactured by the assessee or by any other assessee: Provided that in determining the value under this sub-clause, the proper officer shall make such adjustments as appear to him reasonable, taking into consideration all relevant factors and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at in determining value under this sub-clause the Proper Officer shall make such adjustments as appeared to him as reasonable, taking into consideration the relevant factors and in particular difference, if any in the material characteristic of the goods to be assessed are comparable goods. If the value cannot be determined under clause (i) of Rule 6(b), as per clause (ii) of Rule 6(b), value is to be determined on cost of production or manufacture including profits, if any, which the assessee would have normally earned on the sale of such goods. In this case, clause (i) of Rule 6(b) is not applicable as the appellant transferred their entire production of SDS to their Barabanki and as such there are no sales by them. The SDS manufactured by other manufacturers in the vicinity, whose price is sought to be adopted by the Department is not comparable to the SDS being manufactured by the appellant, as while the appellant produced SDS out of the molasses purchased at controlled price, other manufactures in the vicinity, whose price is sought to be adopted by the Department, were manufacturing SDS out of free sale molasses being procured at much higher price. Beside this, the prices of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above-mentioned principles laid down by the Hon'ble Supreme Court in the case of A.K. Roy and another v. Voltas Limited (supra). (vi) In this case, since the goods manufactured by other manufacturers in the vicinity, whose price is sought to be adopted, are not comparable with the goods manufactured by the appellant for the reason that the source of molasses was different and since the other manufacturer's sales were at contract prices to different classes of buyers and as such general normal price at factory gate was not available, Rule 6(b)(i) was not applicable and the duty had been correctly paid by the appellant on the basis of value determined on the basis of cost of production under Rule 6(b)(ii). (vii) Since whatever duty the appellant were paying in respect of removal of SDS from their Captainganj unit to their Barabanki unit Modvat credit of that duty was available to their unit at Barabanki, as such there is revenue neutrality. Therefore, there could not have been any intention on the part of the appellant to evade any duty and in any case, the duty demand from the appellant is meaningless. Ever since, the duty on SDS is introduced w.e.f. 1-3-94, the appellant had de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the price shown in the purchase order received from Nasik Unit while the same goods were being cleared to their customers at much higher prices. The Department sought the highest price in respect of sales to other buyers to be adopted in respect of the goods stock transferred to Nasik and the Tribunal upheld this practice. The ratio of this judgment is squarely applicable to the present case. (iv) The contract price of other manufacturers has been correctly adopted. (v) For determining the assessable value of the goods cleared for captive consumption, before invoking Rule 6(b)(ii) and determining the same on the basis of cost of production and profit, first, Rule 6(b)(i) has to be ruled out. In this case, since the price at which comparable goods were being sold by other manufacturers in the same vicinity is available, it is that price which has to be adopted. (vi) As regards, the appellant's plea of limitation, the same cannot be considered in these remand proceedings on, as per para '10' of this Hon'ble Supreme Court's order remanding this matter to the Tribunal, the points to be determined by the Tribunal are as to whether - (a) Rule 6(b)(i) is applicable or Rule 6(b)(ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugar Mills to sell 40% of their molasses production to the distillery units engaged in the manufacture of Denatured Ethyl Alcohol for further use in the manufacture of chemicals and this molasses was to be supplied to the distillery units at negotiated price. (iii) Duty on the SDS was introduced w.e.f. 1-4-94 and since very beginning the appellant had been paying duty on the SDS stock transferred to their Barabanki unit on the value determined on the costing basis under Rule 6(b)(ii) of the CEVR and the price determined under Rule 6(b)(ii) was being declared to the Department from time to time. Since the balance sheet of the appellant's company was being finalized in the month of September, for payment of duty in respect of clearances of SDS to Barabanki unit, the appellant were adopting cost of the previous financial year and paying duty on the value determined on the basis of the previous year's cost. As and when the balance sheet of the current year was finalized, the costing for that year used to be determined and accordingly the assessable used to be re-determined and in case the re-determined assessable value was more than the assessable value on which the duty was paid, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entified the manufacturers of comparable goods, thereafter highest price of each manufacture during a particular year was determined and thereafter highest of the three manufacturer's highest prices was adopted as the assessable value in respect of the clearances of the appellant during that year. 3.2 Thus, the main points of dispute in this case are as to whether the assessable value of the goods manufactured by the appellant is to be determined under Rule 6(b)(i) or 6(b)(ii) of the CEVR and if it is to be determined under Rule 6(b)(i) how it must be determined and whether the above-mentioned method adopted by the Department for determining the value under Rule 6(b)(i) is correct. If on merits, the decision is in favour of the Department, another important question to be decided is as to whether the extended limitation period under proviso to Section 11A(i) is available to the Department and also whether the provisions of Sections 11AC and 11AB are applicable. 4. For deciding the question relating to valuation of the goods, it would be worthwhile first discussing the scheme of valuation under the provisions of Section 4 and the Central Excise (Valuation) Rules, 1975, as the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umed by him or on behalf of him in production of other articles. As per Rule 6(b)(i), in such a situation, the assessable value of the goods shall be based on the value of comparable goods produced or manufactured by the assessee or by any other assessee, with the proviso that in determining the assessable value under this sub-clause, the Proper Officer shall make such adjustments as appear to him reasonable, taking into consideration all the relevant factors and in particular, the difference, if any, in the material characteristics of the goods to be assessed and of the comparable goods. Rule 6(b)(ii) provides that if the value cannot be determined under sub-clause (i) of Rule 6(b), the same should be determined on the basis of the cost of production or manufacturing including profits, if any, which the assessee would have normally earned on the sale of such goods. Thus for invoking sub-clause (ii) of Rule 6(b), first the sub-clause (i) has to be ruled out and sub-clause (ii) can be invoked only if the value cannot be determined under sub-clause (i). From the wordings of sub-clause (i) of Rule 6(b), it is clear that first it has to be seen as to whether the assessee is manufacturi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the character of the normal price. 4.2.3 When it is not possible to determine the value under clause 6(b)(i) and same has to be determined under 6(b)(ii), this value would be the cost of manufacture or production of the goods plus profits, which the assessee would have normally earned on the sale of such goods. The profit margin has to be added to the cost of manufacture to make the computed assessable value as close as possible to the "normal price". As per the judgment of the Larger Bench decision of the Tribunal in the case of Raymonds Ltd. v. CCE, Aurangabad reported in 2001 (129) E.L.T. 327 (Tribunal-LB) and also the judgment of the Hon'ble Supreme Court in the case of CCE, Aurangabad v. Raymonds Ltd. reported in 2006 (204) E.L.T. 3 (S.C.) while determining the value of the goods under Rule 6(b)(ii), the profit to be included is the notional profit which the assessee would have earned in normal course and not the actual profit and the notional profit has to be added even if during the particular year there is loss. In this regard as per the Board Circular No. 258/92/96-CX., dated 30-10-96 the "profit before tax" as percentage of cost of production taken from the previous ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent while adopting the other manufacturer's price has not made any adjustment for difference in the price of molasses, which has to be made in terms of the proviso to Rule 6(b)(i). In this regard, reliance has been placed on the Tribunal's judgment in the case of CCE, Chandigarh v. AEE Civil Workshop-cum-store, PSEB, Mohali (supra) as well as the Tribunal judgment in the case of Asstt. Executive Engineer, P.S.E.B. v. Collr. of C. Ex., Chandigarh (supra). If such adjustment cannot be made, the recourse must be taken to Rule 6(b)(ii). 6. As regards, the first point raised by the appellant, since the entire production of SDS of the appellant's unit at Captainganj is stock transferred to their unit at Barabanki for use in the manufacture of chemicals and there are no sale of this item, in accordance with the provisions of Section 4(1)(b), the nearest ascertainable equivalent of the normal price has to be determined under CEVR and it is Rule 6(b) of CEVR, 1975 which is applicable to this situation. But for determining assessable value under Rule 6(b), first clause (i) has to be applied under which the nearest ascertainable equivalent, of normal price is determined on the basis of valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at which the goods are available to any wholesale dealer. In view of this, we are of the view that price of the goods stock transferred by the appellant cannot be determined under Rule 6(b)(i). Beside this, even if the contract price is accepted, there is one more problem in determining the price under Rule 6(b)(i) based on the prices of the comparable goods being sold by M/s. Saraiya Distillery, M/s. Kisan Sahkari Chini Mills and M/s. K.M. Sugar Mills. While determining the price value under Rule 6(b)(i) based on price of comparable goods of other manufacturers, as per proviso to this sub-rule, the adjustments have to be made by the Assessing Officer, as appear to him reasonable, taking into consideration all the relevant factors and in particular the difference, if any, in the material characteristic of the goods to be assessed and of the comparable goods. As mentioned above, the Tribunal in the case of CCE, Chandigarh v. AEE Civil Workshop-cum-store, PSEB, Mohali (supra) and also in the case of Asstt. Executive Engineer, P.S.E.B. v. Collr. of C. Ex., Chandigarh (supra) has held that while determining the price of the goods cleared for captive consumption under Rule 6(b)(i) on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edful. 7. Next question is the question of limitation and applicability of the provisions of Sections 11AB and 11AC. We do not accept the learned DR's contention that since Hon'ble Supreme Court's order does not give any directions about the issue of limitation, this issue cannot be considered. In the Tribunal's order No. 71/02-A, dated 20-2-02 [2002 (142) E.L.T. 455 (Tribunal)] the questions of limitation and of applicability of Sections 11AB and 11AC were not examined as the Tribunal's decision on the main issue involved i.e. the question of valuation was in the appellant's favour and the duty demands were set aside. But since the Tribunal's order has been set aside and remanded for de novo decision with regard to issue of valuation, all the other issues are also open and if some duty demand is upheld on merit, the question of limitation and applicability of Sections 11AB and 11AC would also have to be examined. 7.1 In this case from the very beginning, the appellant had been declaring the price by filing the price declaration under Rule 173C from time to time and those prices have been approved by the Jurisdictional Authorities. Beside this, the appellants were also filing R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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