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Johnson & Johnson Ltd. Versus Commissioner of Central Excise & ST (LTU) , Mumbai

2015 (8) TMI 23 - CESTAT MUMBAI

Penalty u/s 11AC - Valuation of goods - Rule 8 - appellant, at the outset, submitted that they are not disputing the duty demanded by the Revenue as the same was paid by the appellant even before issue of show cause notice, they are only disputing the penalty imposed under Section 11AC and Rule 25 of the Central Excise Rules, 2002. - Held that:- With the new cost of production it was found that there has been a short levy of ₹ 54,97,281/-. The said amount along with interest was thereafter .....

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y mistake on their part.

Even this was not done. This only points to wilful misstatement and suppression of facts on the part of the appellant. The fact that they paid the duty in the month of February, to our mind, is of no consequence as once the Assistant Director (Costs) came into the picture and went into the various costing details, the appellant was left with no option. Under the circumstances, we are of the considered view that the ingredients of Section 11AC are satisfied an .....

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lant and cross objections filed by the Commissioner of Central Excise, Aurangabad. The first appeal is with reference to the order passed by the Commissioner of Central Excise, Mumbai vide order-in-original No. 12/2005 dated 2.11.2005. The second appeal which is consequent to the first order-in-original and is related, is passed by Commissioner of Central Excise, Aurangabad vide order-in-original No. 34/CEX/2006 dated 31.8.2006 and the cross objections are filed by the Commissioner, Aurangabad w .....

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ufactured at Dharavi unit. The appellant is valuing the said goods under Rule 8 of the Central Excise Valuation Rules read with Section 4(1)(b) of the Central Excise Act, 1944. There is no dispute between the appellant and the Revenue about the applicability of the said rule or the section. The dispute in this case is started with the value of the goods arrived at by following Rule 8 of the Central Excise Valuation Rules. 3. Learned senior counsel for the appellant, at the outset, submitted that .....

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Cost Accountant. On 22.8.2004, a general letter was issued by the excise authority to the appellant stating that on scrutiny of ER-1 returns for the period April 2004 to July 2004. It was observed that there was downfall in Revenue compared to the same period last year. The appellant replied vide letter dated 31.8.2004. Subsequently on 14.12.2004, a letter was issued by the Assistant Director (Costs) requesting to convey suitable date for verification of cost of production for the year 2003-04. .....

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25.2.2005 were issued by the Dharavi unit to the Aurangabad unit and based upon the supplementary invoices, the Aurangabad unit took the credit of the same. 4.1 The learned senior counsel submitted that in the first appeal, the issue to be decided is whether penalty under Section 11AC of the Central Excise Act and Rule 25 of the Central Excise Rules is imposable. The learned senior counsel submitted that there was no suppression with intent to evade payment of duty. In support of his contention, .....

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the standard cost of production will be followed by the appellant for payment of central excise duty for the year 2004. It was submitted that enquiries in August were general in nature and not related to any specific doubts with reference to the standard cost of production details. It was also submitted that the Assistant Director (Costs) has neither provided any report regarding verification of cost of production nor doubted the actual cost of production arrived at by the appellant on finalizat .....

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tted that when the actual cost of production provided by the appellant for the year 2004 is compared with the cost of production provided by the appellant for the year 2003, it can be seen that in relation to several of the products manufactured by the appellant, the cost of production has come down while in some other cases, it has gone up and these facts have not been disputed by the department. It was further submitted that there is no loss of revenue to the Government as the situation is rev .....

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vs. CCE, Daman reported in 2009 (241) ELT 153 (Tri.-Ahmd.); (iv) Super Forgings & Steel Ltd. vs. CCE, Kolkata reported in 2007 (208) ELT 153 (Tri.-Kolkata), (v) Ispat Industries Ltd. vs. CCE, Raigad reported in 2009 (240) ELT 616 (Tri.-Mum.). It was also submitted that the facts of the case of Automotive Stampings and Assemblies Ltd. vs. CCE reported in 2015-TIOL-836-CESTAT-MUM are distinguishable for various reasons and cannot be applied into the fact of the present case as there the goods .....

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of Rule 9(1)(b) of the Cenvat Credit Rules. It was submitted that this is against the decision of the Hon ble Karnataka High Court in the case of Karnataka Soaps & Detergents Ltd. vs. CCE reported in 2010 (258) ELT 62 (Kar.) Similar view has been taken in the following two cases:- (i) CCE vs. Jairaj Ispat Ltd. reported in 2009 (245) ELT 118 (AP), (ii) Godrej Industries Ltd. vs. CE reported in 2008 (232) ELT 108 (Tri.-Mum.). It was further submitted that reliance on the case of CCE vs. Ballar .....

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uction of various items and assessable value, however, the same was not supported by the details. The appellant was clearing the goods on self assessment basis as per the assessable value declared in the said letter dated 7.1.2004. It was submitted that the department thereafter wrote to them on 12.8.2004 that while the clearances affected by them during April to July 2004 had gone up but the revenue had come down and asked them to explain the matter. There was no response. Thereafter the depart .....

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Assistant Director (Costs). After reference to the Assistant Director (Costs), the Assistant Director (Costs) asked the appellant vide letter dated 14.12.2004 to submit the cost data of various products along with the details. After the said letter and detailed discussion between Assistant Director (Costs) and the appellant s representative, the cost of production of various items was computed. Based upon this exercise, the appellant was required to pay substantial amount of duty which they pai .....

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e department asked them the reasons for fall in revenue, initially no reply was sent. After the second letter where various details were specifically asked, the appellant did reply. However, a perusal of the reply will indicate that they tried to give vague answer and mislead the department and insisted that the values declared are correct. It is only when the department initiated enquiries with the specialist/expert i.e. Assistant Director (Costs) and he asked the details from the appellant tha .....

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tative, appellant should have opted for provisional assessment. Cost Accountant certificate dated 2.7.2004 was not provisional. 5.1 As far as the second appeal is concerned, the learned AR submits that since the duty which has been paid through the supplementary invoices and duty liability is based upon misstatement and suppression of facts with wilful intention, therefore, the appellant is not entitled to take the credit under Rule 9(1)(b). In support of his contention, the learned AR submitted .....

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of Section 11AC reads as under:- SECTION 11AC. Penalty for short-levy or non-levy of duty in certain cases. Where any duty of excise has not been levied or paid or short-levied or short paid or erroneously refunded, by reason of fraud or collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made there under with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (2) .....

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004. On 12.8.2004 a letter was sent (which was received on 18.8.2004) by Revenue to the appellant asking them the reasons for lower revenue in spite of the fact that the clearances have gone up. The appellant did not submit any reply. Again on 23.8.2004 a letter was sent by the Revenue raising nine specific queries. The said letter was replied vide letter dated 31.8.2004. A perusal of the said reply would indicate that the appellant justified the reduction in revenue due to lower assessable valu .....

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properly. A comparative chart indicating the declared assessable value before 2.1.2004 and declared value as on 2.1.2004 and the assessable value w.e.f. 2.1.2004 as ascertained after Assistant Director (Costs) came into picture are as under:- Sr. No. Description Assessable Value 6.8.2003 2.1.2004 18.2.2005 1 GUT 152 CM1 7.29 4.44 7.89 2 GUT 152 CM2 8.46 4.92 8.74 3 GUT 152 CM3 8.99 5.28 9.37 4 GUT 152 CM 1/0 7.26 4.25 7.55 5 GUT 152 CM 2/0 7.47 4.19 7.44 6 GUT 152 CM 3/0 7.94 4.01 7.12 7 GUT 152 .....

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CM 1/0 2.47 1.45 2.58 24 GUT 51 CM 2/0 2.54 1.42 2.52 25 GUT 51 CM 3/0 2.59 1.28 2.27 26 GUT 51 CM 4/0 3.67 2.01 3.55 27 GUT 51 CM 5/0 10.48 4.60 8.16 28 GUT 45 CM 3/0 2.59 2.42 4.30 29 GUT 45 CM 4/0 3.67 3.14 5.56 30 GUT 45 CM 5/0 10.48 4.60 8.16 31 GUT 38 CM 3/0 2.59 1.21 2.15 32 GUT 38 CM 4/0 3.67 1.57 2.78 33 GUT 38 CM 6/0 6.00 2.61 4.64 34 GUT 30 CM 5/0 10.48 2.30 4.08 It is seen from the chart, there was drastic reduction in declared values w.e.f. 2.1.2004. After thorough enquiry, the rev .....

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Central Excise Rules, 2002. Further, the certificate dated 2.1.2004 or the letter dated 7.1.2004 nowhere says that these are provisional figures and will be revised after the calendar year is over and the final values will be submitted thereafter. Even in 2003, no such exercise was carried out. In view of this position, this contention is also rejected. Incidentally, in the case of Karnataka Soaps & Detergents Ltd. (supra), the Hon ble Karnataka High Court, which was almost in the similar f .....

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and suppression of facts are evident inasmuch as if the assessable value of certain goods are getting reduced w.e.f. January 2004 from the earlier assessable values, the appellant should have checked thoroughly the data. Further, when the Revenue raised the doubt about the value in August 2004, it was the duty of the appellant to recheck whether there has been any mistake on their part. Even this was not done. This only points to wilful misstatement and suppression of facts on the part of the ap .....

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oted number of judgments. We have gone through the said judgments. The question whether there is any suppression of facts or wilful misstatement is an issue to be decided in the facts and circumstances of each and every case and there cannot be any generalization about the concept of revenue neutrality. In some circumstances where the concept of wilful misstatement and suppression is not evident or clear from the facts, help of concept of revenue neutrality can be taken to determine the same. Ho .....

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ny producer, manufacturer, registered person or a warehouse or a registered dealer;- (a) remove any exciseable goods in contravention of any of the provisions of these rules or the notifications issued under these rules; or (b) does not account for any exciseable goods produced or manufactured or stored by him; or (c) engages in the manufacture, production or storage or any exciseable goods without having applied for the registration certificate required under section 6 of the Act; or (d) contra .....

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committed, or [rupees two thousand] whichever is greater. (2) An order under sub-rule (1) shall be issued by the Central Excise Officer, following the principles of natural justice. In the present case, the assessee has removed the goods without correct determination of value and hence the duty and, therefore, penalty imposed is in order. 7. Coming to the second appeal of the appellant, we agree with the learned senior counsel s submission that the matter is squarely covered by the decision of t .....

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215) E.L.T. 489 (S.C.) and contends the finding of Tribunal is to be reversed. In Ballapur Industries case the Hon ble Supreme Court held as follows : Applying the above tests to the facts of the present case, we hold that the Department was not entitled to invoke the extended period of limitation vide the first show cause notice dated 21-5-1999. However, the second and third show cause notices dated 30-9-1999 for the period April, 1999 to June, 1999 and 18-11-1999 for the period July, 1999 to S .....

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his rule would apply to stock transfers also. In the said judgment it has been held in paragraphs 15 and 16 by their Lordships to the following effect : 15. Under Section 4(1)(a) normal price was the basis of the assessable value. It was the price at which goods were ordinarily sold by the assessee to the buyer in the course of wholesale trade. Under Section 4(1)(b) it was provided that if the price was not ascertainable for the reason that such goods were not sold or for any other reason, the n .....

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asis of the assessable value. Rule 57CC(1) proceeds on the basis that the manufacturer has taken credit of the specified duty on common inputs which needs to be reversed at eight per cent (i.e. the manufacturer needs to debit an amount equal to eight per cent of the price of the exempted final product charged for the sale of such goods. This amount is a presumptive sum calculated at eight per cent of the price charged. The rate of eight percent is the measure to calculate the presumptive sum. Fu .....

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o play. In the light of the above discussion, the adjudicating authority was required to adjudicate upon applicability of Rule 6(b)(i) and Rule 6(b)(ii). However, it has been held by the adjudicating authority that Rule 6(b)(i) is not applicable, hence, in our view the only issue which remains to be decided is whether all the requisite elements of costing like wages, profits etc. have been taken into account by the assessee herein as required under Rule 6(b)(ii). 16. In the case of Union of Indi .....

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o contend that assessee would not be certified to CENVAT credit only on the basis that additional duty has been paid, because of detection made by the department of suppression by assessee and said additional duty paid cannot be taken for purposes of extending CENVAT credit. It is to be seen that CENVAT credit in the instant case is granted under Rule 3 of CENVAT Credit Rules & it reads as under : Rule 3. CENVAT credit :- (1) A manufacturer or producer of final products shall be allowed to t .....

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Excise (Goods of Special Importance) Act, 1957 (58 of 1957); (v) The National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001), as amended by section 169 of the Finance Act, 2003 (32 of 2003) which was amended by section 3 of the Finance Act, 2004 (13 of 2004); (vi) The Education Cess on excisable goods leviable under clause 81 read with clause 83 of the Finance Bill (No. 2), 2004, which by virtue of the declaration made in the said Finance Bill under the .....

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any inputs used in the manufacture of intermediate products, by a job-worker availing the benefit of exemption specified in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 214/86-Central Excise, dated the 25th March, 1986, published vide number G.S.R. 547(E), dated the 25th March, 1986, and received by the manufacturer for use in, or in relation to, the manufacture of final products, on or after the first day of March, 2002. Explanation - For .....

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products lying in stock on the date on which any goods cease to be exempted goods or any goods become excisable. [(3) The CENVAT credit may be utilized for payment of- (a) any duty of excise on any final product; or (b) an amount equal to CENVAT credit taken on inputs if such inputs are removed as such or after being partially processed; or (c) an amount equal to the CENVAT credit taken on capital goods if such capital goods are removed as such; or (d) an amount under sub-rule (2) of rule 16 of .....

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tral Excise, dated the 8th July, 1999 [G.S.R. 509(E), dated 8th July, 1999] shall be utilized only for payment of duty on final products cleared after availing of the exemption under the said notification numbers 32/99-Central Excise, dated 8th July, 1999 and 33/99-Central Excise, dated the 8th July, 1999. [Provided also that the CENVAT credit of the duty paid on the inputs used in the manufacture of final products cleared after availing of the exemption under the notifications No. 39/2001-Centr .....

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Excise, dated the 9th September, 2003 [G.S.R. 717(E), dated the 9th September, 2003], Shall respectively be utilized only for payment of duty on final products, in respect of which exemption under the said notifications No. 39/2001-Central Excise, dated the 31st July, 2001, No. 56/2002-Central Excise, dated the 14th November, 2002, No. 57/2002-Central Excise, dated the 25th June, 2003, and No. 71/2003-Central Excise, dated the 9th September, 2003, is availed of.] [(4) When inputs or capital good .....

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AT credit as if it was a duty paid by the person who removed such goods under sub-rule (4). (6) Notwithstanding anything contained in sub-rule (1), - (a) CENVAT credit in respect of inputs or capital goods produced or manufactured, - [(i) by a hundred per cent. Export-oriented undertaking ......,.............. assessable value ] (ii) ..................... Explanation - Where the provisions of any other rule or notification provide for grant of partial or full exemption on condition of non- avail .....

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