TMI Blog2013 (8) TMI 461X X X X Extracts X X X X X X X X Extracts X X X X ..... te that if an unit chooses to suppress certain facts and thereby short pays duty, the consequences of such action would befall him. As per the Larger Bench in Jay Yuhshin Ltd. v. CCE, New Delhi [2000 (7) TMI 105 - CEGAT, COURT NO. I, NEW DELHI] - Revenue neutral situation comes about in relation to the credit available to the assessee himself and not by way of availability of credit to the buyer of the assessee's manufactured goods – In case two assessees albeit belonging to the same group - We are not aware as to what financial considerations the Goregoan unit had in mind when it chose to deliberately understate the value of the goods manufactured and cleared by it to the Tarapur unit nor are we expected to go into such calculations. Revenue neutrality is a concept known to both the units. The allegation of evasion does not get mitigated by the fact that one unit is entitled to take Modvat credit of duty paid by the other – Held that:- The appellants recognize the cost as 115%/110% of the cost of production which is nothing but a conscious and positive act on the part of the appellant. Similarly, short payment of duty by under valuation of wire rods is equally a conscious and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets, which resulted in short payment of duty. Accordingly the department initiated proceedings against the appellants for short payment of duty inasmuch as the assessable value of wire rods should be 115%/110% of the cost of production of billets. The adjudicating authorities confirmed the demands and imposed penalty and redemption fine as tabulated above. Aggrieved by the same, the appellants are in appeal. 4. The contention of the appellants is that the cost of billets cannot be equated to the assessable value of billets which contains the notional profit in the form of 10% or 15% addition in the cost of production. The contention is that CBEC circular dated 30.6.2000 clearly states that addition of 10% / 15% in the cost of production of the goods for the purpose of determining assessable value under Rule 8 is towards the notional profit of the stock transferring of goods. The contention is that in terms of CBEC circular dated 13.2.2003, the cost of production for the purpose of Rule 8 is to be determined based on CAS-4 issued by ICWAI, vide which it is clearly stated that the cost of material consumed shall be the cost of material, duties and taxes, freight inwards, insurance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be taken as cost. The appellant also placed reliance on the Hon'ble Supreme Court's decision in the case of Hindustan Polymers vs. CCE 1989 (43) ELT 165 (SC) wherein it was held: "It overlooks the use of the expression cost' in relation to packing in the clause (i) of Section 4(4)(d) of the Act. The word cost' has a definite connotation, and is used generally in contradistinction of the expression value'." 4.2 The contention of the appellants is that the duty paid on the wire rods has been taken as credit by their Borivali unit. The Borivali unit has manufactured wire and cleard the same on payment of appropriate central excise duty. The Borivali unit has paid excise duty of Rs.94.52 crores approximately in PLA during the period in dispute. Therefore, even if it is held that the differential duty demand is correct and payable, the subsequent events should be taken into consideration and relief to be given to successful parts is to be moulded. Therefore, even if the Revenue is right in its interpretation of Rule 8, it is not automatic that the demand of duty raised by them is to be confirmed. The appellant placed reliance on the Hon'ble Supreme Court's decision in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent is that there is no concept of 10% notional profit in the Valuation Rules. The Rule simply says 110% of the cost of production. The plausible explanation is available in para 5.7 of the CAS-4 where administrative overheads relating to activity other than manufacturing like marketing, management, corporate office expenses etc. are excluded while calculating cost of production. The legislature in its wisdom has provided for 10% notional increase to the cost of production for arriving at appropriate transaction value. 5.2 The contention of the department is that the adjudicating authority in his finding has recording that the appellants have failed to prove that 10% is nothing but notional profit. The department placed reliance on the Tribunal's decision in the case of Geco Electrical Corp. vs. CCE, Jalandhar 2011 (267) ELT 394, wherein it was held that the burden of proving any deduction from the invoice price is cast on the assessee. 5.3 The contention is that the appellant have follow 3 distinct modus operandi, one from 1994-2000 another from 2000-2003 and yet another from 2002 onwards which is the subject matter of the present appeals. In all these modus operandi they have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gabad 2004 (177) ELT 1032. 5.6 The contention of the department is that once the value is arrived at by the unit in respect of goods to be transferred to another unit, there is no scope for receiving unit to make any adjustment in the value specially when they are taking cenvat credit. The value shown in the invoices issued by Jamshedpur unit for transferring the goods for further processing at Tarapur unit represents transaction value. The claim that 15%/10% would not be included in the cost of material is not acceptable and CAS-4 does not stipulate that this method will be applied only once. So long as the goods are captively consumed in different units of the same company, this rule has to be applied. 6.1 We have carefully considered the submissions and perused the record. The department's case is that while computing the value of wire rods, the Tarapur unit has computed the value of wire rods only on the basis of cost of production of billets at Jamshedpur unit and not on 110% of cost of production of billets at Jamshedpur unit. The contention of the appellants is that the cost of billets cannot be equated with the assessable value of the billets which contain the notional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellants, relates to Rule 6(b)(ii). Similarly, the Hon'ble Supreme Court's decision in the case of HBL Aircraft Batteries vs. CCE (supra) relates to valuation relating to contract prices in case of different class of buyers and is not relevant to this case. In the case of Hindustan Polymers vs. CCE (supra), the question before the Hon'ble Supreme Court was regarding deduction of packing cost while determining the value and hence the case law is not relevant to the present case. 6.2 As already discussed above, the value of goods cleared for captive consumption would be 115/110% of the cost of production or manufacture of such goods and as per the Board circular dated 13.2.2003, the cost of production of captively consumed goods will have to be construed strictly in accordance with CAS-4. The relevant portion of CAS-4 is reproduced hereunder:- "5.1 Material consumed Material consumed shall include materials directly identified for production of goods such as: (a) indigenous materials (b) imported materials (c) bought out items (d) self manufactured items (e) process materials and other items Cost of material consumed s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw that court cannot read anything into the statutory provisions which is plain and ambiguous. 6.5 As regards the contention of the applicant that the case is revenue neutral, since in case they were required to pay higher duty on wire rods, the same was available to them as cenvat credit. The Tribunal while dealing with the aspect of revenue in the case of Nirlon Ltd. vs. CCE (supra) held as under:- "17. In the case of Amco Batteries Ltd. v. CCE, Bangalore [2003 (153)ELT 7 S.C.] the Hon'ble Supreme Court dealt with the concept of suppression with an intent to evade duty where Modvat credit is available to the unit. The Supreme Court observed thus "in the present case also, there is no material on record from which it could be inferred or established that duty of excise was not levied or paid by reason of any fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of the Act or the Rules made thereunder with intent to evade payment of duty. It was a bona fide belief on the part of the appellant that scrap and waste, which was recovered while manufacturing batteries was exempt from levy of excise duty. Further appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Larger Bench in the above cited case has also held that once an assessee has chosen to pay duty he has to take all the consequences of payment of duty. In the case before us the assessee chose to pay duty in preference to availment of benefit of Notification No. 217/86-CE and if any short payment occurs he has to take the consequences of short-levy/non-levy. In the case of CCE, Chandigarh vs.Dharampal Premchand Ltd. (supra), the Tribunal held as under:- "7.5 In none of the above judgments, Hon'ble Supreme Court has laid down a general principle that in a revenue neutral situation an assessee is not required to pay the duty. Dismissing Department's SLP on the ground that charging duty on an intermediate product whose Cenvat credit is available to the assessee, is revenue neutral, does not amount to laying down a general principle in this regard. There is no such provision in the Central Excise Act that in respect of goods cleared for captive consumption when the Cenvat credit of duty paid on such goods is available, no duty is required to be paid in such cases. Keeping in view the aspect of revenue neutrality, the Central Government by exemption Notification No. 67/95-C.E., ..... X X X X Extracts X X X X X X X X Extracts X X X X
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