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Nirlon Ltd. Versus Commissioner of Central Excise, Mumbai

2015 (5) TMI 101 - SUPREME COURT

Extended period of limitation - Valuation of Tyre Cord Yarn (TCY) and Tyre Cord Fabric (TCB) - captive consumption - difference between the goods which were cleared at the factory gate to be sold to the third parties and removed for captive consumption by the appellant itself - held that:- the two kinds of goods were not comparable with each other and therefore, the goods which were removed for captive consumption to be used by Tarapur Factory were to be valued under Rule 6(b)(ii) of the Rules a .....

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etition that when the entire exercise was revenue neutral, the appellant could not have achieved any purpose to evade the duty. - Therefore, it was not permissible for the respondent to invoke the proviso to Section 11A(1) of the Act and apply the extended period of limitation. In view thereof, we confirm the demand insofar as it pertains to show cause notice dated 25.02.2000. However, as far as show cause notice dated 03.03.2001 is concerned, the demand from February, 1996 till February, 2000 w .....

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se Tariff Act respectively. The aforesaid goods TCY and TCB are manufactured by the appellant at its Goregaon factory. The products so manufactured are sold by the appellant at the factory gate as well as removed for captive consumption to its another factory at Tarapur. At Tarapur factory, the said yarn are utilised for manufacturing final products. The dispute has arisen in respect of the valuation of the TCY which are removed for captive consumption and to be used at Tarapur factory of the re .....

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into by the Superintendent of Central Excise and he was not satisfied with this declaration as according to him, the price could not be declared at the same rate at which the goods are sold by the appellant at the factory gate to others. According to him, there was a difference between the goods which were cleared at the factory gate to be sold to the third parties and removed for captive consumption by the appellant itself for its Tarapur factory. This resulted in the appointment of a cost acc .....

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.02.2000 covering period from August, 1999 to January, 2000. In this show cause notice, amount of ₹ 78,20,365/- for the aforesaid period was demanded as differential duty under Rule 6(b)(ii) of the aforesaid Rules. The second show cause notice was issued on 03.03.2001 which was for the period from February, 1996, to June, 2000. Both these notices resulted in confirmation of the demands mentioned in the show cause notices as well as imposition of penalties upon the appellant. The appellant .....

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of goods were not comparable with each other and therefore, the goods which were removed for captive consumption to be used by Tarapur Factory were to be valued under Rule 6(b)(ii) of the Rules and the price declaration given by the appellant applying Rule 6(b)(i) of the said rules was erroneous. We also find that the appellant had even admitted some variations in the two types of goods in its reply to the show cause notices itself. In these circumstances, insofar as the opinion of the authorit .....

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is argument is that there was no mala fide on the part of the appellant and no intention to evade the duty. In order to buttress this submission, the learned senior counsel has pointed out the following aspects in his favour: - (i) The products sold at the factory gate and the products transferred to Tarapur factory were using identical raw materials and identical process. For this reason, the appellant believed that the products were comparable goods in terms of Rule 6(b)(i). (ii) Both the good .....

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ule 6(b)(ii) inasmuch as even if there was higher duty payable in terms of declaration under Rule 6(b)(ii) of the Rules, the appellant was entitled to take credit thereof in its entirety. Therefore, the entire exercise was revenue neutral. (v) In order to support his submission, it is pointed out that as soon as the second show cause notice was issued and the Revenue wanted the appellant to file price declaration under Rule 6(b)(ii) the appellant complied therewith and with effect from 01.04.200 .....

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