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TMI Blog2013 (8) TMI 461X X X X Extracts X X X X X X X X Extracts X X X X ..... Dec'08 65,57,303/- 65,57,303/- 1,25,00,000 The issued involved in these appeals is common. Therefore, they are taken up together for disposal. 3. Briefly stated the facts are that the appellants are engaged in the manufacture of wire rods falling under Chapter sub-heading 72142090 of CETA, 1985. The appellants received inputs, i.e. billets, from their Jamshedpur unit on payment of duty on the value determined 115%/110% of cost of production in terms of Rule 8 of the Central Excise Valuation Rules, 2000. The duty paid on the billets was taken as credit by the appellants. The appellants manufactured wire rods and stock transferred the same to their Borivali unit on payment of duty. However, on scrutiny of records by the department, it was observed that the appellants while computing the cost of production of wire rods only took into consideration the cost of production of the billets instead of 115% /110% of the cost of production of the billets, 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 product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng in the Rule, then the same should be construed as actual cost of production and cannot be taken as notional value of the said goods. The contention is that the issue involved before the Hon'ble Supreme Court was related to Rule 6(b)(ii) of the Valuation Rules, 1975 which is similar to Rule 8 of the Central Excise Valuation Rules, 2000. The appellants also placed reliance on the Tribunal's decision in the case of Rajasthan Spinning & Weaving Mills vs. CCE 2005 (179) ELT 70 (T), wherein, while deciding the issue related to value of yarn captively consumed in the manufacture of fabrics, the Tribunal held that Rule 6(b)(ii) used the word "cost or production" and the same is to be understood as actual cost of production. The appellant also placed reliance on the Hon'ble Supreme Court's decision in the case of HBL Aircraft Batteries vs. CCE 2004 (167) ELT 483 (SC) and contended that where the actual cost of goods is available, the notional value should not 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 rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion if cost of raw material is taken as 165, then the cost of production of goods manufactured at third factory would be Rs.291.5 i.e. [{(150 x 110%) + 100 x 110%]. This method of determination of the value of the intermediate goods would make the value of the final product much greater than the actual sale price of the goods. 4.4 The contention of the appellants is that the demand beyond the normal period of limitation is not maintainable since the demand is purely interpretational and accordingly they are also no liable for any penalty and interest and fine is not imposable. 5. The contention of the department is that the main argument advanced by the appellants is that the appellants' Jamshedpur and Tarapur units belong to the same company. Therefore, the duty paid on 110% of the cost of production includes 10% notional profit which they deduct while calculating the cost of billets received from Jamshedpur. 5.1 The contention of the department 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neutrality because there is always a time lag between the duty paid to the Govt. and credit utilized. 5.5 So far as the limitation of time is concerned, the contention of the department is that the adjudicating authority while deciding the issue has clearly held that the appellants never disclosed to the department that they are reducing the costing of billets coming from Jamshedpur unit while calculating the assessable value of wire rods made out of billets supplied by Jamshedpur unit. It was only on CERA audit that the department could detect this modus operandi of suppression of the value. The department placed reliance on the Hon'ble Supreme Court's Decisions in the case of Madras Petrochem Ltd. vs. CCE, Madras 1999 (108) ELT 611 (SC), CCE, Mumbai vs. Mahindra & Mahindra Ltd. 2005 (179) ELT 21 (SC) and CCE, Vishakapatnam vs. Mehta & CO. 2011 (2640 ELT 481 (SC) and the Tribunal's decision in the case of Crompton Greaves Ltd. vs. CCE, Aurangabad 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot envisage notional profit of 15/10%. Therefore, the cost of billets at Tarapur unit would be 115/110% of the cost of production of billets. So far as the Hon'ble Supreme Court's decision in the case of Union Carbide (supra) is concerned, the decision relates to Rule 6(b)(ii) of the erstwhile Central Excise Valuation Rules, 1975, which is reproduced below:- "(ii) if the value cannot be determined under sub-clause (i), on the cost of production or manufacture including profits, if any, which the assessee would have normally earned on the sale of such goods." Rule 6(b)(ii) envisages inclusion of notional profit which is not relevant to this case which is covered under Rule 8 of the Valuation Rules, 2000 and the provisions of Rule 6(b)(ii) are not similar to the provisions of Rule 8 of the Valuation Rules as claimed by the appellants. Similarly, the Tribunal's decision in the case of Rajasthan Spinning & Weaving Mills vs.CCE (supra) cited by the 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to show that the law was clear and different but also shows that the appellant was in the know of the act of short payment of duty, which is supported by the fact that they were claiming cenvat credit of the entire duty paid on 115/110% of the cost of production and while computing the value of wire rods instead of 115/110% of the cost of production. The appellants failed to show anything contrary. Therefore, extended period is rightly invoked. 6.4 As regards the hypothetical question raised by the appellants that in case the appellants have 10 factory situated at different location, then the value of the intermediate goods determined in the manner adopted by the department would be much greater than the actual sale price of the goods and the same would give the said meaning to Rule 8. It is pertinent that there cannot be real answer to hypothetical question, especially when the provisions of law are clear and real facts are available for arriving at the value in case of captive consumption and law cannot be held to be absurd by merely taking shelter of hypothetical situation. Further, it is well settled principle in law that court cannot read anything into the statutory provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evident. 18. The Larger Bench of Tribunal in Jay Yuhshin Ltd. v. CCE, New Delhi [2000 (119) E.L.T. 718] held that it has to be shown that the 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 the present case there are two assessees albeit belonging to the same group. For the purposes of Central Excise law the Goregoan unit is different from the one at Tarapur. It is the Goregoan unit who pays the duty the credit of which is taken by Tarapur unit. When two units are involved, according to the Bench, the plea of revenue neutrality is not available. 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. The Larger Bench in the above cited case has al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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