TMI Blog2013 (11) TMI 694X X X X Extracts X X X X X X X X Extracts X X X X ..... ing their nexus with negotiated price of machine. - Decided in favor of assessee. - E/1711-1712/2005 - Final Order Nos. A/57430-57431-EX(DB) - Dated:- 26-7-2013 - Mrs. Archana Wadhwa and Shri Mathew John, JJ. For the Appellant: Shri O.P. Agarwal, C.A. For the Respondent: Shri I. Beg, DR JUDGEMENT Per Mathew John: There are two appeals being considered in this proceeding. Both arise from the same impugned order. The main appellant is M/s. Black Stone Polymers and other is by Shri. Basant Dhoot, partner of M/s. Black Stone Polymers. 2. The matter relates to valuation of re-treading materials, for heavy earth moving machines, manufactured and cleared by the main appellant during the period 1996-97 and 1997-98. 3. The facts of the case are that the main appellant was manufacturing re-treading and supplying 97% to 98% of their production to M/s. Black Stone Rubber Industries Pvt. Ltd. (hereinafter referred to as the buyer ). During 1996-97 the buyer paid an amount of Rs. 6,84,780/- as compensation to the appellants in addition to the declared price of the goods. During 1997-1998 the buyer paid Rs. 6,50,500/- in similar manner. The case of Revenue is that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d production as per the ends of the buyer. The deposit shall be made available to the manufacturer in the following manner:- First Rs. 10 lacs before 31st March, 1996 Next Rs. 10 lacs before 31st August, 1996 Balance Rs. 5 lacs before 31st October 1996. The deposit shall be liable to be adjusted against supply of material not exceeding 50% amount of the invoice against each supply. 4 That in the event of failure of buyer to provide the non-interest bearing deposit as stipulated in clause No. 3 above, it undertakes to compensate the manufacturer by making reimbursement of 90% of its actual interest cost for the financial year 1996-97 and financial year 1997-98 inclusive of interest on the partner s capital account. The buyer undertakes in such an event, to arrange the finance at minimum possible interest rate. 5 That the manufacturer undertakes to supply the material to the buyer at the following price specifically agreed to in this agreement: First 45,000 kgs of Retreading material @ Rs. Rs. 40 per kg Next 20,000 kgs of Retreading material @ Rs. Rs. 42 per kg Next 10,000 kgs of Retreading material @ Rs. Rs. 46 per kg Next 25,000 kgs of Retreading material @ Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause the product of that company has a better reputation and can command better price in the market. So he submits that the case made out by Revenue has no merits. 8. We have considered arguments on both sides. 9. In the first place we note that Revenue has not made any demand of duty based on price of goods produced by MRF Ltd. These are just mentioned by Revenue to argue that the goods were sold at artificially low prices. The demand is only om extra consideration received by the appellants from the buyers of excisable goods as compensation . 10. This is also not a case of interest free advance made available to the appellants by the buyer because no such advance was made available it is only a fiction created in the agreement. The buyers have paid extra money over and above the price paid. Now the question is whether this has to be kept out of the assessable value of the goods in view of the various decisions quoted. 11 We have scrutinished the decisions quoted. None of the decisions are on facts of the nature involved in this case. The case of ISPL Industries, the issue was whether notional interest on advances received by manufacturer is to be taken into account for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law for the time being in force or at a price, being the maximum, fixed under any such law, then, notwithstanding anything contained in clause (iii) of this proviso, the price of the maximum price, as the case may be, so fixed, shall, in relation to the goods so sold, be deemed to be the normal price thereof; (iii) where the assessee so arranges that the goods are generally not sold by him in the course of wholesale trade except to or through a related person, the normal price of the goods sold by the assessee to or through such related person shall be deemed to be the price at which they are ordinarily sold by the related person in the course of wholesale trade at the time of removal, to dealers (not being related persons) or where such goods are not sold to such dealers, to dealers (being related persons), who sell such goods in retail; (b) where the normal price of such goods is not ascertainable for the reason that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof determined in such manner as may be prescribed. 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further the issue whether there is any suppression or not on the part of an assessee is to be determined with reference to assessee s actions and not with reference to how the department detected the suppressed information. So we do not find any merit in the argument that the suppressed information was detected by auditing the books of accounts and hence it cannot be considered as suppression. 17. For the above reason we are not in agreement with the arguments canvassed by the appellants. Since we do not see any merit in the argument of the appellants the appeal filed by the main appellant is dismissed. 18. The Hon Supreme Court in the case of Prakash Metal Works Vs. CCE-2007 (216) E.L.T. 660 (S.C.) has ruled that separate penalties can be imposed on the firm as well as the partner. The matter involved a case of clandestine removal where in the partner played specific role in the clandestine removal. In the facts of this case, the partner s actions and t6he firm s actions which form the basis of the case is the same and we are of the view that it is not necessary to impose a separate penalty on the partner. So penalty imposed on the partner is set aside and the appeal filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted upto 90% of the actual interest cost for the two financial years, 1996-97 and 1997-98. 23. It is in this background that Revenue has treated the entire compensation given by the buyer for setting up of a factory as a part of the assessable value of the goods and has confirmed demand of duty by taking the entire compensation into consideration. On the other hand the appellants contention is that such compensation is for setting up of the factory so given by the buyer so as to ensure uninterrupted supply of the goods, i.e., tread rubber, which is an input for the buyer. The price fixed between the appellant and the buyer is a contracted price, which in uninfluenced with the fact of grant of compensation by the buyers. The same was fixed by taking into account the expected cost of production and prevailing market price of tread rubber. They have relied upon various decisions of the Tribunal laying down that once factory gate sale price is available the same becomes the normal assessable value in terms of the erstwhile provision of section 4 of Central Excise Act and has to be adopted in all cases. In as much as the appellant have been selling the tread rubber to other buyers at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that agreement dtd. 16.01.95, which was not extendable beyond 31.03.95, was entered with a view to set up the appellants factory ensuring 90% of the goods supplied to BSRI. The appellant was free to dispose of the balance goods in the market to the other buyers. 26. The question required to be decided is as to whether the compensation amount received from BSRI on account of reimbursement of 90% of interest is to be included in the assessable value of their final product or not such addition of interest to the assessable value would be possible only if the Revenue establishes that the cost of the final product stands depressed on account of such interest free loan or reimbursement of the interest. The question required to be decided is as to whether such compensation given by the buyer was with a view to depress the value of their final product or was with a view to ensure continuous supply of tread rubber. 27. While dealing with the said question, I find that the appellants are not selling their entire 100% production to BSRI. The sales are also being effected by them to independent wholesale buyers. Such sales are also being effected by them to independent wholesale buyers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making reference in the subsequent paras. 30. Before I do that, I would like to deal with an observation made by the adjudicating authority. While dealing with the percentage of normal sales at the factory gate to independent wholesale buyers, it stands observed by the adjudicating authority that the appellant was manufacturing different qualities of tread rubber such as tread rubber supreme , tread rubber noble and tread rubber . The material supplied to buyers other than BSRI was meant for retreading of car/truck tyers whereas material supplied to BSRI was used for retreading and repair of tyres used in heavy earth moving machine. I must say that apart from making the above observation, there is no relevant material on record to substantiate the above fact. Neither the appellant has been put to notice to show that the tread rubber sold to other independent wholesale buyers, was different in quality than the one sold to BSRI, nor the adjudicating authority has himself referred to any evidence to that effect. In fact, I find that under the heading, discussion Findings , the Addl. Commissioner is rejecting the appellants stand on the ground that clearances to other buyers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne for those who have made the advance and the other who have not, it would require no further proof of the lower price having been influenced by the interest free advance made by the buyer. Otherwise burden to proof that interest free advance has influenced the price would lie on the Revenue. No presumption can be drawn by mere facts of interest free advance by the buyer to the manufacturer. By applying the ratio of the above decision of Honble Supreme Court to the facts of the case, it is seen that the tread rubber is being sold to independent wholesale buyers as also to BSRI at the same price. This fact is sufficient to establish that the price in case of sale to BSRI is not influenced by the fact of compensation given by BSRI to set up the factory. It has to be held that such compensation stands given by BSRI for setting up of the factory for manufacture of tread rubber for ensuring continued supply of tread rubber to them, which fact is also beneficial to the buyer. This is normal business deal. 33. Similarly in the case of VST Industries Ltd. reported in 1998 (2) SCC 24, the court negated the case of Revenue for reloading the assessable value by adding notional interest on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosed in the appeal that the price of tread rubber charged by MRF Ltd. in the financial year 1997-98 was Rs. 50.93 per kg. whereas by including the compensation price, the price in the appellant s goods for the said financial year 1997-98 would become Rs. 58.98 per kg. Admittedly the tread rubber being manufactured by MRF Ltd. being branded and better in quality would command more value than tread rubber manufactured by the assessee and as such by no stretch of imagination, the artificial value arrived at by the Revenue which is more than the value charged by MRF Ltd. can be said to be the correct value and upheld. 35. In view of the above discussion, I hold that the price of the tread rubber sold by the appellant to BSRI was not influenced by the fact of grant of compensation by BSRI. 36. Apart from holding in favour of appellant, I also find that the demand is hit by bar of limitation. Admittedly, the fact of receipt of compensation was reflected by the appellant in their account books and was part of the profit loss account. If that be so, can it be said that the appellant suppressed or mis-stated any fact with intent to evade payment of duty. It has to be kept in min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeding with fixed idea that the compensation received was a additional consideration and as if that is accepted fact. Whereas this was, in fact, the disputed issue required to be decided. 37. In view of foregoing discussion, I am of the view that the appeals are required to be allowed on merits as also on limitation and demand as well as penalties on both the appellants are required to be set aside. 38. As there is no difference of opinion in the appeal of Shri Basant Dhoot, his appeal is allowed. Difference of Opinion Whether the appeals of M/s. Black Stone Polymers is to be rejected as held by ld. Member (Technical) or the same has to be allowed on merits as also on limitation as held by ld. Member (Judicial). Per D.N. Panda: 39. The appellant was manufacturer of re-treading rubber in Mogra, Jodhpur to meet 90% requirement of M/s. Blackstone Rubber Industries Pvt. Ltd. for the period 1996-97 to 1997-98 in terms of an agreement dated 16.1.1995. The recital of agreement at page 27 of appeal folder demonstrate that the appellant manufacturer and above buyer had mutual interest to serve specific purpose as embodied in the agreement. 40. The buyer having faced diffi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pleading so made. That gave a burial death to the Revenues proposition of under valuation and Revenue could not come up to prove its case when allegation of above nature made against appellant. 41. All the aforesaid facts and evidence are available in record. It was submitted on behalf of the appellant that when the appellant proved its case by comparison of the above two sale prices taking help of page 50, 95 read with page 58 of appeal folder, that proves that, there was no deflation to the sale price and assessable value need not be disturbed. It is also pleaded today that when all the facts were disclosed to the Revenue there cannot be a time barred adjudication. 42. On the other hand, Revenue pleads today that it is a case of under-valuation, such superficial plea fails to stand for no comparison of sale price of comparative case cited without any cogent evidence suggesting malafide of appellant. It is also unfortunate to note that at no stage cost of manufacture of goods by the appellant were called for testing. There is no possibility to send the matter back for re-examination in a reference by 3rd Member. 43. In view of the above, appellant should succeed in absence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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