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2015 (10) TMI 2402 - CESTAT MUMBAI

2015 (10) TMI 2402 - CESTAT MUMBAI - TMI - Valuation of goods - Undervaluation of goods - Job works - conversion of DTA unit into EOU unit - Benefit of notification 23/2003 - Held that:- During investigations of contract between one party and the respondents was recovered. In terms of the contract with M/s Sulakhi Limited it is clear that it is valid for 10 years from 1 may 2003 as per clause 2.1 and 11.2 of the agreement. It prescribes in paragraph 4 that the material supplied by the respondent .....

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e respondent and one of the processors following has emerged.

From the statements recorded it is apparent that the price at which spent goods were being cleared from the respondent s premises was linked to the price at which the processed goods were to be sold back to the respondents. This is clear from the statements recorded and from the terms of the contract. In the circumstances it cannot be said that the price negotiated between the respondent and the processors was price determi .....

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al transaction price whereas in case of clearance of an EOU unit the assessable value should be the price in the course of International trade.

Having arrived at the conclusion that the domestic transaction value is to be accepted as the assessable value, due consideration has not been given to the arguments regarding alternate method of valuation in case the domestic transaction value is not accepted as assessable value. The respondents have raised many issues, like using common proc .....

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n and Commissioners observation regarding with any neutrality is misplaced.

Extended period has been invoked on account of recovery of the contract between the respondents and one of the processorís in the year 2008. The said agreement was not in the knowledge of the revenue and the terms of transaction between the respondents and the processorís were not in the knowledge of the Department and were not declared to the Department. I find that the terms between the respondents and it pr .....

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oudhary, Member (Judicial) And Mr. Raju, Member (Technical) For the Petitioner : Shri.Hitesh Shah, Commissioner (AR) For the Respondent : Shri.M.P.Baxi, Advocate ORDER Per: Raju 1. The appeal is directed against Order-in-Original No.05/CEX/COMMR/KOP/2012 dated 27/02/2012 passed by Commissioner of Central Excise, Goa. 2. M/s USV Ltd. manufactures pharmaceuticals and consumes DMF and IPA as raw materials for the same. During this process spent DMF and a spent mixture of DMF and IPA is generated. M .....

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ssion was granted some time in 2006. There were also periods in subsequent years when their job work permission under EOU scheme was not available and hence they were unable to clear the goods for reprocessing without payment of duty under job work scheme. During these periods, when they did not have the permission under job work they cleared the goods on payment of duty. 2.2 Prior to September 2005 M/s USV had entered into an agreement with M/s Sulakhi about the terms of the transaction. The sa .....

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l supply and impart to the Processor the technical information of the said product for the purpose of enabling the Processor to process the said product and obtain the said Processed Product. 4.2 The said Products and the said Processed Product shall belong to the Company and shall remain the property of the Company and at no time, whether during the continuance of this Agreement or after its termination, shall the Processor be untitled to claim any right or interest in any of the said materials .....

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ided by the company. The processor shall also report to the Company the issues during the period and the closing stock of the said materials, work in process and finished goods at the end of every week and also as at each month and by the third day of the following month. The Processor shall also be liable to give the above information whenever a request is made by the Company in that behalf. The processor acknowledges that the Company has to make ON LINE entries in SAP ERP Package installed by .....

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he company. In the event the same do not meet the specifications the processor shall reprocess the same at its own cost and labour. 4.5 It is agreed and accepted that against each consignment of the said Product, the Processor shall at least recover and dispatch to the Company 63% of the said Processed Product is quantity confirming to the technical information including the specifications provided by the company. In case the recovery is less than the agreed percentage of 63%, the processor shal .....

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the yield in such manner that may be directed by the Company from time to time. In such an event the company will adjust the value of such shortfall in the product to be calculated at its prevailing price, from any amount due and or payable to the processor and the company will have charge on all (tangible/intangible) belonging to the Processor against all amounts due from the processor. 8. Processing charges: 8.1 The Company shall pay to the Processor, the processing charges at ₹ 8.70 Per .....

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, delegate performance of this agreement or make over this Agreement or the rights hereunder or any part thereof without obtaining the previous consent in writing of the Company. In the event of the Processor appointing sub-agents with the permission of the Company as above, it shall be the primary liability of the Processor to ensure that the sub-agent duty complies with the terms of this Agreement. The Company shall hold the Processor liable and/or responsible for any breach by any sub-agent. .....

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agreement. The processor shall not have or claim any right, title, or claim either on the said product said processed product and work in process. 14. Consequence of Termination: 14.1 Upon the termination or purported termination of this agreement or sooner determination thereof for any reason whatsoever, the processor shall forthwith: (a) cease to process and manufacture the said product; (b) return the technical information to the company (c)deliver to company at such place as may be specified .....

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nt for whatever reason shall be without prejudice to any claims or rights of the action accrued prior to such termination or determination to the company against the processor. 2.3 There was however, no such agreement recovered in respect of M/s Sahastra and M/s Sangadeep. The new EOU unit continued to make clearances of spent material for reprocessing to the aforesaid units. Since for certain periods there was no job work permission available under EOU scheme the spent material had to be cleare .....

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V ₹ 50 - 54 per KG 2.4 In this background investigation was conducted. Show cause notices were issued to M/s USV alleging that they have undervalued the assessable value of the spent DMF and spent DMF/IPV mix and have failing to pay correct Central Excise duty leviable under the Central Excise act. It was alleged in the show cause notice that prior to conversion of DTA unit into EOU unit they were mentioning a price of ₹ 21 per KG in their job work challans and immediately after conv .....

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d goods) rules 1988 or 2007 as the case may be. Under these circumstances it was alleged that the valuation cannot be done under rule 4-7 of CVR 1988 or rule 3-9 of CVR 2007. Therefore the value declared has to be rejected under rule 10A of CVR 1988 or rule 12 of CVR 2007 and valuation has to be done under residual rule 8 of CVR 1988 or rule 9 of CVR 2007. 2.5 During the investigation statements of following persons were recorded: i) Bhalchandra Namdev Katkar Plant Manager of M/s USV Ltd ii) Pra .....

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t to be changed by resorting to residual rule 8 of CVR 1988 or rule 9 of CVR 2007. To arrive at the assessable value of the goods the notice attempts to calculate backwards from the assessable value of the prime material imported at the material time. To arrive at the assessable value of the spent material by employing residual method of calculation was made of the spent material required and the processing costs paid to the processors. 2.7 The Commissioner dropped the proceedings under the show .....

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xtended period invoked for demanding duty is justifiable; and iv) Whether penalty is imposable as proposed under various clauses in the notices 2.8 On the first issue the Commissioner decided in favour of the appellants and the revenue is not in appeal and therefore, the issue is settled. On the 2nd issue the Commissioner observed: i) There is no evidence of any extra consideration flowing from the processor to the appellants ii) Income tax authorities and sale tax authorities have not challenge .....

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ed, and the same has not been challenged. 2.9 On the basis of above he held that there is a transaction value available between the assessee and the processor and the same should be accepted as assessable value of any other. An appeal against the aforesaid order has been filed on the following grounds: i) The valuation of the goods should have been done under rule 8 of CVR 1988 or rule 9 of CVR 2007 as the transaction is not independent/fair. The reasons for stating that the sales are not indepe .....

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sation paid by the processor. In the statements recorded the employees of the respondent have clearly admitted that their technical persons regularly visited the job workers premises to check the stock position of the spent and reprocessed goods. On the bases of these facts it was claimed that this transaction between these parties was not an independent transaction. ii) It was also alleged that the Commissioner erred in concluding that there is no strong evidence to prove collusion, fraud or i .....

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if the transaction between the respondents and the processor is that of a job work or that of sale. He argued that as per loan licensee agreement para 4.1 to 4.5 of the said agreement (reproduced in part in para 2.2 above) it is clear that the transaction between the respondent and the processor is that of a job worker and not sale. 4.1 It was also argued that the said agreement was reached between the parties before the said unit was converted to an EOU unit. It was argued that the processing c .....

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ether do you have separate storage facility for imported and indigenously procured Fresh DMF/IPA in the EOU? A. We do not have separate storage facility for imported and indigenously procured fresh DMF and IPA in EOU. However, we have separate storage tanks to store fresh DMF/IPA, Crude DMF/IPA, Crude DMF+IPA Mix and re-processed DMF and IPA in EOU. Q.No.5 So, is it true that in EOU, you mix up Fresh DMF procured indigenously and imported in one tank in such a manner that both quantities cannot .....

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Chemicals for job work of reprocess of Crude/Spent DMF. Q.No.14 Is it true that through the Crude DMF is supplied to M/s.Sulaki Chemicals Pvt. Ltd. and M/s.Sahastra Chemicals for reprocessing, it is property of and owned by M/s.USV Ltd. (EOU) as per the said agreement. A. Yes it is true Q.No.17 Is it true that all the Crude DMF supplied by M/s.USV Ltd. (EOU) to M/s.Sulaki Chemicals Pvt.Ltd. and M/s.Sahastra Chemicals is bound to be returned to M/s.USV Ltd. (EOU) after reprocessing, and that, M/s .....

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never sold Crude DMF supplied by M/s.USV Ltd. (EOU) or reprocessed DMF manufactured out of the said Crude DMF to any other party other than M/s.USV Ltd. (EOU) Q.22 Why have you paid excise duty on supply of Crude/Spent DMF to M/s.Sulaki Chemicals Pvt. Ltd. and M/s.Sahastra Chemicals during the period from September 20005 to March 2006 and September 2006 though the said Spent/Crude DMF is sent to M/s.Sulaki Chemicals Pvt. Ltd. and M/s.Sahastra Chemicals on job work basis? A. We have paid excise d .....

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t technical personal of M/s.USV Ltd. regularly visit the job workers premises viz., M/.Sulaki Chemicals Pvt. Ltd. and M/s.Sahastra Chemicals to supervise quality control and to check stock position of Crude/Spent and re-processed DMF? A. Yes; it is true. Q.No.27 Is it true that if the recovery is less than 63% during the course of distillation at the job worker s end i.e. M/s.Sulaki Chemicals Pvt. Ltd. and M/s.Sahastra Chemicals, the job workers are liable to reimburse to M/s.USV Ltd. value of .....

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selling them IPA+DMF Mixture. It is appears from our input invoices of M/s.Nayomi Chemisol that IPA and DMF manufactured by M/s.Sangdeep Acid Chem Pvt. Ltd. is supplied to us. However, there is no binding clause on M/s.Sangdeep Acid Chem Pvt. Ltd. to supply us reprocessed IPA and DMF mixture supplied by us. We are purchasing IPA and DMF from M/s.Nayomi Chemisol as fresh IPA/DMF and we may not getting IPA/DMF re-processed out of IPA+DMF mixture supplied by us to M/s.Sangdeep Acid Chem Pvt. Ltd., .....

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ls Pvt. Ltd. and M/s.Sahastra Chemicals for purchase of Crude/Spent DMF @ ₹ 5/- kg. and so we have accepted the said price as assessable value of the said goods for payment of excise duty during the said period. Q.No.5 Whether have you determined assessable value of Crude/Spent DMF sent to M/s.Sulaki Chemicals Pvt. Ltd. and M/s.Sahastra Chemicals in accordance with the provisions of Section 3 of the Central Excise Act, 1944 read with Customs Act, 1962 and Customs Tariff Act, 1975? A. Prese .....

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s withboth the above named officers as I do not know the fact. Q.No.6 Is it true that prior to conversion of M-3 Plant into EOU you have supplied Crude DMF to M/s.Sulaki Chemicals Pvt. Ltd., and M/s.Sahastra Chemicals on job work basis for reprocessing of DMF by way of distillation considering the price of Crude/Spent DMF @ ₹ 21/- per Kg? A. Yes; it is true. Q.No.9 Is it true that while 100% of Crude/Spent DMF sent to M/s.Sulaki Chemicals Pvt. Ltd. and M/s.Sahastra Chemicals is returned ba .....

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ing job work permission was under process; and so during the said period the Crude/Spent DMF was sent by following sale transaction procedure by issue of C.Ex. Invoices. Q.No.21 Do you know as to what factors were considered by M/s.USV Lt. (EOU) while placing PO on M/s.Sulaki Chemicals and M/s.Sahastra Chemicals to negotiate the purchase price between ₹ 22/- to ₹ 24/- per kg? A. I do not know the details on this as the same is dealt with by Commercial Deptt. Of our company located at .....

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nverted a part of our unit as EOU. We are required to remove Spent/Crude DMF for reprocessing to M/s.Sulaki Chemicals and M/s.Sahastra Chemicals. We have been doing this for last few years on job work basis without payment of duty; however, on conversion into EOU, we were not able to remove such Spent/Crude DMF without specific job work permission from C.Ex. Deptt. Since we cannot stop removal of spent/Crude DMF for reprocessing, we had no alternative but to remove such material for reprocessing .....

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DMF Mixture removed by us. Q.No.3 It is seen from records of your factory that prior to 01/09/2005 when Spent/Crude DMF was sent for job work outside the factory of USV the price was ₹ 21/- per kg. however, when the same material viz., Spent/Crude DMF is sold on invoice during the period from September 2005 to November 2006, the price is shown as ₹ 5/-per kg. Please explain for the sudden & steep variation in the price. A. I would like to state due to mistake the price of re-proc .....

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cate from the competent authority for determination of assessable value of Spent/Crude DMF and IPA+DMF Mixture removed out of factory USV-EOU during the period from September 2005 to November 2006. A. In view of my reply to Question No.2 above, there was no need to obtain Cost Certificate from competent authority to determine assessable value of Spent/Crude DMF and IPA+DMF mixture, because we have invited quotations from M/s.Sulaki Chemicals as well as M/s.Sahastra Chemicals and based on the quo .....

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Rs.8.70 per kg. iv) sub-total Rs.14.20 per kg. v) Conversion ratio of 63% Rs.8.94 per kg vi) Price of reprocessed MDF Rs.23.14 per kg. Q.No.6 Please state as to whether job work contract between USV and Sulaki Chemicals/Sahastra Chemicals was submitted to Central Excise Deptt. A. The same was not submitted as it was not mandatory to do so. 4.4 Learned AR brought our attention to the statement of Shri Krutarth Arul Shah, director of M/s Sangadeep Acid Chem Pvt Ltd. In the statement he has inter a .....

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e from M/s.USV Ltd. (DTA unit & EOU) subject it to the distillation process to obtain pure IPA and pure DMF. The said material is sold back to M/s.USV Ltd. (DTA unit and EOU) through our sister concern M/s.Nayomi Chemisol, who are Registered Central Excise Dealer. Q.No.5 Whether do you have any contract with M/s.USV Ltd. (DTA & EOU) for purchase or job work in respect of processing of Spent IPA+DMF Mixture? A. We do not have any contract with M/s.USV Ltd. (DTA unit & EOU) Q.No.6 What .....

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to M/s.Nayomi Chemisol is further sold back to M/s.USV Ltd. (DTA Unit & EOU) Q.No.10 Whether do the officials of M/s.USV Ltd. visit your factory for verification of stocks as well as supervision of process and quality control of purification/distillation process of Spent/Crude IPA+DMF Mixture? A. No. Q.No.11 Who does determine the price for Spent/Crude IPA+DMF Mixture purchased from M/s.USV Ltd. (DTA unit & EOU)? A. M/s.Sangdeep Acid Chem Pvt. Ltd. determine the price for Spent/Crude IP .....

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U)? A. Yes; it is true. Q.No.13 Do you agree that price of pure IPA and pure DMFs is ranging from ₹ 26 per kg to ₹ 57 per kg. if procured from indigenous market or international market? A. Yes; it is true but there is difference in the prices of DMF and IPA if manufactured by original manufacturers and if obtained by way of distillation of impure materials. Q.18 From the replies given by you above, does it not appear that there is abnormal reduction from the ordinary competitive pri .....

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kg. for Spent/Crude IPA+DMF Mixture. If this rate is compared to international market or indigenous market of original manufacturers, there appears reduction in the price but we have explained the reasons. Q.No.19 As agreed by you the entire quantityof IPA and DMF processed/purified/distilled by you out of Spent/Crude IPA+DMF Mixture purchased by you from M/s.USV Ltd. (EOU) is again sold back to M/s.USV Ltd. (EOU) through M/s.Nayomi Chemisol, which is your sister concern. Therefore, is it not co .....

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td., the rate quoted for re-purchase of pure IPA and pure DMF, we sell this material back to M/s.USV Ltd. So, if there is any restriction of any kind that is of quality and rate of the material purchased and sold back to M/s.USV Ltd. Q.No.20 Do you agree that purity of the processed/distilled/purified IPA and DMF is the same with that of other pure IPA and pure DMF sold by original manufacturers in the market? A. Yes; I do agree. 4.5 Learned AR brought our attention to the decision of Tribunal i .....

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ver questioned the aforesaid view of the Tribunal and argued that since the respondent is hundred per cent export oriented unit, any sale or clearance of cotton fabric by the respondent to DTP should be treated as transaction sale and therefore Rule 4 would be applicable. However, this argument has to be rejected in view of proviso to Section 3 of the Central Excise Act, 1944 which reads as under : Duties specified in the [Schedule to the Central Section 3. Excise Tariff Act, 1985] to be levied. .....

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zone and brought to any other place in India; or (ii) By a hundred per cent export-oriented undertaking and allowed to be sold in India; shall be an amount equal to the aggregate of the duties of customs which would be leviable under section 12 of the Customs Act, 1962 (52 of 1962), on like goods produced or manufactured outside India if imported into India, and where the said duties of customs are chargeable by reference to their value; the value of such excisable goods shall, notwithstanding a .....

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leviable under Section 12 of the Customs Act, on like goods produced or manufactured outside India if imported into India and where the said duties of custom are chargeable by reference to their value, the value of such excisable goods shall be determined, in accordance with the provisions of the Customs Act and Customs Tariff Act, 1975. 11. Keeping in view the aforesaid proviso to Section 3 of the Central Excise Act, in our opinion the Tribunal has rightly held that the sale price charged to c .....

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unal has made certain observations on facts but without any material before it. 4.7 On the basis of the above evidence and citations, the learned AR vehemently argued that there is a strong evidence to prove that the purchase and sale prices between the respondents and the processors are interlinked and dependent on each other and should be rejected as a normal sale price. 4.8 On the issue of revenue neutrality, the learned AR, argued that this principle is not applicable to current situation as .....

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n alternate scheme; (b) Where the scheme opted for by the assessee is found to have been misused (in contradistinction to mere deviation or failure to observe all the conditions) the existence of an alternate scheme would not be an acceptable defence; (c) With particular reference to Modvat scheme (which has occasioned this reference) 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 cre .....

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. We further find that under Rules, 2004, a burden is cast upon the manufacturer to ensure that Cenvat credit is correctly claimed by them and proper records are maintained in that regard. 33. The assessee, in response to the show cause notice had stated that there is no provision in Central Excise Law to disclose the details of the credit or to submit the duty paying documents, which in our opinion is false and an attempt to deliberately contravene the provisions of the Act, 1944 and the rules .....

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may be had to the judgment of the Apex Court in the case of Usha Rectifier Corporation (I) Ltd. (supra), whereunder the Apex Court has held that where the assessee had not disclosed the fact of manufacturing of the goods to the department and the knowledge of manufacture came to be acquired by the department only subsequently and in view of non-disclosure of such information by the assessee and suppression of relevant facts would rightly result in invocation of extended period of limitation. (R .....

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Ltd. (supra) has explained that proviso to Section 11 comes into play only when suppression etc. is established or stands admitted. (Reference paragraph no. 18). 38. So far as the judgment of the Apex Court in the case of Continental Foundation Joint Venture (supra) relied upon by the learned counsel for the assessee is concerned, the same is clearly distinguishable in the facts of the present case. In the said case, there were various circulars of department operating at different points of tim .....

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ssue as to whether crushing of bigger stones or boulders into smaller pieces amounts to manufacture. In these facts, it was held that if the assessee had not taken licence or he did not pay the duty, the extended period of limitation could not be invoked. 40. For the reasons recorded above, we find that the Tribunal under the order impugned is not justified in recording a finding that the extended period of limitation cannot be invoked, inasmuch as from what has been recorded by us herein above, .....

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respondents have clearly failed in the responsibility and therefore extended period has been correctly invoked. 4.11 Learned AR asserted that since the contracts were not brought to the notice of the Department, there was no way Department could have known that the transaction of sale and purchase between the respondents and the processor was interlinked. For this purpose he relied on the decision of Tribunal in case of CCE Chandigarh Vs. Punjab tractors Limited (2010 (259) ELT 123). He brought .....

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d to the Department. In the said decision it has been held that where the contract between the respondents and the buyer s has not been disclosed to the Department extended period can be invoked. 5. Learned Counsel for the respondent asserted that the material being cleared is spent material, that is to say, it is a waste material and hence no central excise duty can be levied on this material. In support of his claim he cited Tribunal or decision in case of Aurobindo Pharma Ltd. (2006 (200) ELT .....

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is factory to the processor. He asserted that the price of imported product cannot be used to arrive at the price of the spent material cleared from his factory. 5.2 He asserted that the notice presumes a job charges of ₹ 8.7 per KG across-the-board. The notice does not give any reason why the same job charges have been adopted for all commodities across the board. He also asserted that rate mention in loan licensee agreement applicable to DMF has been applied to the DMF/IPV mixture also. .....

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during which they had job work permission under EOU scheme, they had not entered into sale or purchase of said goods. 5.4 He stated that the sale of goods by respondent to the processor is an independent sale and it is the transaction value as per Customs law. He asserted that that is no evidence of any flow back from the processor to the respondent and therefore the value declared for the sale of goods by respondent to the processor has to be accepted and cannot be rejected under law. 5.5 He a .....

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DMF/IPV is totally different from the spent DMF and DMF/IPV mix therefore not comparison can be made. 5.7 He asserted that in the notice to substantiate the allegation in support of invoking extended period following allegations have been made: i) The respondents have not declared their arrangements regarding reciprocal and conditional sale and purchase of goods to the Department. The Department was not made aware of the fact that hundred percent of the material by the processor has to be suppli .....

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t for declaration of the purity of materials cleared or their arrangement with the processors. He asserted that when there is no requirement of any declaration no allegation of misdeclaration or suppression can be made. He asserted that Commissioner has also in an order (para 23) observed that the activity of respondents clearing spent goods either for job work or for sale on payment of duty was a long-standing practice known to the Department. Commissioner has observed that the allegation of su .....

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ed Counsel further submitted that the issue of the applicability of Notification No.23/2003CE was under dispute in parallel proceedings undertaken much before issue of the impugned notice. He asserted that there is an order lapping period between the two proceedings. He pointed out that the impugned order in original also refers to the order in appeal issued by the Commissioner (appeals) in the parallel proceedings regarding applicability of Notification No.23/2003 CE dated 31/03/2003. 5.10 He f .....

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first proviso to paragraph 3 of the said notification. The said condition and proviso reads as under: 3. Notwithstanding anything contained in this notification, the exemption herewith shall also apply to goods which on importation into India or procurement, are used for the purpose of manufacture of finished goods or services and such finished goods and services, (including by-products, rejects, waste and scrap arising in the course of production, manufacture, processing or packaging of such g .....

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ects, waste and scrap) or, services are cleared to the warehouse appointed or registered under notification of the Government of India in the Ministry of Finance (Department of Revenue) No.26/98-Central Excise (NT) dated the 15th July 1998 or No.46/2001-Central Excise (N) dated the 26th June 2001 or cleared to the warehouse authorised to carry out manufacturing process or other operation under Section 65 of the Customs Act, 1962 (52 of 1962) and under the Manufacture and other operations in ware .....

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onal duty leviable under Section 3 of the said Customs Tariff Act, read with exemption notification in this regard, if any, no exemption in respect of inputs utilized for the purpose of manufacture of such finished goods (including rejects, waste, scrap, remnant and by products) shall be available under this notification) 6.1 According to this proviso in case the exempted material imported under this notification is used in Manufacturer of any finish goods including waste which are exempt on non .....

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could not have covered the issue regarding undervaluation. In this regard he relied on the Honble Supreme Court decision in case of CCE, Guntur Vs. JOCIL Limited (2008 (226) ELT 8 (SC) wherein it has been held as follows The question before the CESTAT was whether the Department was entitled to invoke extended period of limitation under Section 11A of Central Excise Act in the matter of loading the price of soap noodles with the value by-products. By the impugned judgment the tribunal held that .....

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the loading of the price of soap noodles. 3. In the aforestated circumstances, the impugned order is set aside. The matter is remitted to the tribunal for fresh consideration in accordance with law. It implies that if two show cause notices relate to different issues, extended period can be invoked in the second notice. 6.3 on the issue of revenue neutrality the learned AR pointed out that the law limits the availability of CENVAT credit of duty paid by an EOU. He pointed out that rule 3 (7) of .....

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6 and 7 of Notification No. 23/2003-Central Excise, dated the 31st March, 2003 [G.S.R. 266(E), dated the 31st March, 2003] and used in the manufacture of the final products or in providing an output service, in any other place in India, in case the unit pays excise duty under section 3 of the Excise Act read with serial number 2 of the Notification No. 23/2003-Central Excise, dated the 31st March, 2003 [G.S.R. 266(E), dated the 31st March, 2003], shall be admissible equivalent to the amount cal .....

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e Technology Park or in a Software Technology Park, as the case may be, on which such unit pays excise duty under section 3 of the Excise Act read with serial number 2 of the Notification No. 23/2003-Central Excise, dated 31st March, 2003 [G.S.R. 266(E), dated the 31st March, 2003] shall be equal to [X multiplied by [(1+BCD/200) multiplied by (CVD/100)]] : On this basis learned AR asserted that it was not possible for the job workers to claim the credit of entire duty paid by the appellant. 7. I .....

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e of Morarjee Brembana Ltd Vs. CCE, Nagpur - 2003 (154) ELT 500 (Tri-Mumbai), wherein it has been held that for clearance from an EOU sale price charged to a customer in India cannot be held to be a price in the course of International Trade. In para 13 of the said decision following has been held as follows: 13. We have considered the submissions made by the appellants and find considerable force in their submission. The circular of the Board also realizes the fact that the value is required to .....

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has considerable force. It is well known that the manufacturer is able to realize higher amount for sales made to developed countries like America, UK, France etc. and the same amount cannot be realized for identical goods when the exports are made to underdeveloped countries like Bangladesh, Malaysia, Similarly the value under Rules 5 & 6 cannot be determined in view of the peculiar nature of the product. The value of the fabric not only depend upon the quality of yarn, count of yarn, but .....

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rved in the above paras that additional duties under the Textiles and Textile Articles Act is not payable by the manufacturer of fabric in India. Therefore the same will not form part of the component of CVD. Hence in the calculation given by the appellants as reproduced above, the additional duty under the Textiles and Textile Articles Act is not required to be considered. The value thus is required to be recomputed by allowing the deduction mentioned in the example given above but without cons .....

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ned counsel has argued that the said decision is not applicable as the imported product is different from the product being cleared from the EOU. I find that the aforesaid judgement lays down a principal that the domestic sale price cannot be a basis that for determining the assessable value in case of clearance from an EOU. It does not lay down any principal regarding how the valuation is to be done, but only lays down how it cannot be done. It clearly lays down that domestic price cannot be a .....

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uld never form the basis of a price in course of International trade. The assertion that the price of the spent DMF declared on the job work challans prior to the appellants converting part of the unit as EOU is not relevant is also correct. Domestic sale price cannot be the basis to arrive at the value of goods cleared by an EOU. Drastic drop in the value from ₹ 21 to ₹ 5 may be a cause of suspicion but it cannot be the basis to arrive at the assessable value. Thus any reliance on l .....

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lied by the respondents to the processor would be the property of the respondent, proper records of the raw materials will be made and reported to the respondents by the processes. It described in paragraph 4 and 5 that the product will be of a particular specification, failing which the processor has to pay damages. The agreement also fixes the processing charges for the job. There was however, no such agreement recovered in respect of M/s Sahastra and M/s Sangadeep. During the examination of v .....

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ed by M/s.USV Ltd. (EOU) as per the said agreement, the processers are not allowed to sell the processed goods to anybody else and they have never done so, their technical person visits and supervises the process at processor s factory. He also stated that in case of less recovery of final product penalty is being imposed on the processors. In case of M/s.Sangdeep Acid Chem Pvt. Ltd., he clarified that there is no binding clause on M/s.Sangdeep Acid Chem Pvt. Ltd. to supply them reprocessed IPA .....

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that they have received Purchase Orders from M/s.Sulaki Chemicals Pvt. Ltd. and M/s.Sahastra Chemicals for purchase of Crude/Spent DMF @ ₹ 5/- kg. and they have accepted the said price as assessable value of the said goods for payment of excise duty during the said period, he does not know how the assessable value was the determined and Shri DA Pandit, General Manager (Commercial) and Shri Vijay Dhanawade, Purchase Department Head would know how it was determined. He also confirmed that hu .....

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erted a part of our unit as EOU and they were required to remove Spent/Crude DMF for reprocessing to M/s.Sulaki Chemicals and M/s.Sahastra Chemicals. They have been doing this for last few years on job work basis without payment of duty; however, on conversion into EOU, they were not able to remove such Spent/Crude DMF without specific job work permission from C.Ex. Deptt. Since they could not stop removal of spent/Crude DMF for reprocessing, they had no alternative but to remove such material f .....

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sable value of IPA+DMF Mixture removed by them. He also clarified that due to mistake the price of re-processed material was being shown on job work challans prior to 01/09/2005 for many years as ₹ 21/- per kg. He asserted that if one goes through the current cost construction of the same material being sent on the job work basis, it can be seen that the price of reprocessed DMF comes to around ₹ 21/- per kg. considering the price of Spent/Crude DMF as ₹ 5/- per kg. and job cha .....

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plant and engaged in the business of distillation/purification of Spent IPA+DMF mixture purchased from M/s.USV Ltd. He further deposed that they procure Spent/Crude IPA+DMF Mixture from M/s.USV Ltd. (DTA unit & EOU) subject it to the distillation process to obtain pure IPA and pure DMF. The said material is sold back to M/s.USV Ltd. (DTA unit and EOU) through their sister concern M/s.Nayomi Chemisol, who are Registered Central Excise Dealer. He also clarified that processed/purified/distill .....

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Ltd. (DTA unit & EOU). He reasoned that they are a small company and are undertaking distillation of spent material. They have a limited market for the above reasons and considering that we have to sell pure DMF & pure IPA back to M/s.USV Ltd. for ₹ 26/- per kg. and ₹ 35/- per kg, therefore they have quoted the rate of ₹ 7.50 per kg. for Spent/Crude IPA+DMF Mixture. There is no written or unwritten restriction from M/s.USV Ltd. but considering the quality of the spent .....

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om these statements it is apparent that the price at which spent goods were being cleared from the respondents premises was linked to the price at which the processed goods were to be sold back to the respondents. This is clear from the statements recorded and from the terms of the contract. In the circumstances it cannot be said that the price negotiated between the respondent and the processors was price determined on an arms length. The price of spent goods was directly linked to the price .....

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pting the assessable value of the same products of EOU unit. The Commissioner has failed to appreciate that the transaction in case of a DTA sale is a local transaction price whereas in case of clearance of an EOU unit the assessable value should be the price in the course of International trade. 7.4 The issue that needs to be decided is that under these circumstances, what should be the basis of arriving at the assessable value for the purpose of Levy of Central Excise duty. The show cause noti .....

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es it seems logical to work backwards from the value of imported DMF/IPV. It is seen that that is not enough discussion on the alternate method of valuation in the order in original, as the Commissioner has treated the domestic sale value as a sale in the course of International trade as the transaction value under rule 4(2) of CVR 1988 or rule 3(2) of CVR 2007. In fact the Commissioner while crystallising the issues has formed the question as ii) Whether the assessable value determined by the n .....

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cause notice which have not been answered in the order of Commissioner as he has accepted the domestic sale price as the assessable value. 8 The Commissioner in his findings on the issue of limitation has relied on the revenue neutrality. The learned AR brought to our attention that the processor and the respondents are two different legal entities. He cited the decision of the larger bench of the Tribunal in case of Jay Yushin2000(119)ELT 718, where in paragraph 13 (c), it has been held that Wi .....

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he above it is clear that it is not a case of revenue neutral situation and Commissioners observation regarding with any neutrality is misplaced. 8.3 The notification 72/2003 C. E. Prescribes the format of Monthly return to be filed by an EOU. Instruction 10 (a) clearly mentions that where goods attract advalorem rate of duty, the assessable value means the value as per proviso to section 3 (1) of Central Excise act, 1944 (one of 1944). It is seen that respondents have clearly ignored this and p .....

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the price of imported goods. The Commissioner has accepted these arguments, however he has ignored the fact that it is the responsibility of the respondents to declare the correct assessable value. The Commissioner was of the opinion that the respondents have declared the correct assessable value and therefore did not give much credence to these arguments. While it is correct to say that there is no need to declare these facts but the revenue but it is the responsibility of the respondents to t .....

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to the show cause notice had stated that there is no provision in Central Excise Law to disclose the details of the credit or to submit the duty paying documents, which in our opinion is false and an attempt to deliberately contravene the provisions of the Act, 1944 and the rules made thereunder with an intent to evade the duty. 34. In our opinion, the facts of the present case clearly suggest willful suppression of material facts by the assessee as well as contravention of the provisions of the .....

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ds to the department and the knowledge of manufacture came to be acquired by the department only subsequently and in view of non-disclosure of such information by the assessee and suppression of relevant facts would rightly result in invocation of extended period of limitation. (Reference paragraph no. 12). We find that in this case too the responsibility of arriving at correct assessable value is of the respondents. The respondents have claimed that they had no responsibility to declare the arr .....

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ssibility of modification 23/03 CE is concerned. That being so extended period cannot be invoked in respect of the same set of clearance by a show cause notice issued on a later date. The learned AR argued that while the clearances may be the same the issue under dispute is totally different in so much as in the impugned notice the issue of proper assessable value was to be decided. In this regard learned AR relied on the decision of Honourable Supreme Court in the case of JOCIL 2008(226)ELT 8(S .....

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