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2015 (11) TMI 91 - CESTAT MUMBAI

2015 (11) TMI 91 - CESTAT MUMBAI - TMI - Valuation - Captive consumption - computation of value as per Rule 6(b)(ii) of old Rules or Rule 8 of the new Rules - non inclusion of certain expenses - Cenvat Credit - Supplementary invoices - Invocation of extended period of limitation - suppression of facts and willful mis-statement - Held that:- for the period upto 30/06/2000 the value has to be determined as per the Board s circular 1996 and thereafter as per CAS-4. We also note that value as per CA .....

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also note that respondent-assessee has not produced any such costing details/CAS-4 certificate during adjudication or before this Tribunal. In fact, from May, 2001 onwards, respondent-assessee has accepted 1996 circular, paid differential duty and took credit of same in other plant. However, it is not clear whether entire differential duty was paid or only part of it was paid. If entire duty was paid and credit thereof taken in other plant, those assessment need not be disturbed. However, if no .....

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cular of 1996 and were not disputing any part of the circular, it was their boundan duty to compute the value strictly as per the circular. In the present facts and circumstances of the case, we find that though the respondent-assessee was purportedly following the circular but were including only few components in the category of overheads and were excluding other components, some of which were specifically listed in the circular and were to be included as per the circular of 1996 and these fac .....

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o the department they were only indicating in terms of percentage overheads i.e., overheads constitute 3.34% as against the actual computation of 33.7%. For purpose of computation of value, the details provided by any assessee are normally accepted until and unless there is intelligence to the contrary.

This is a clear-cut case of suppression of facts with willful intention to evade payment of duty and hence extended period of limitation is correctly invokable and for the same reason .....

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ng with details which will be examined by the Commissioner as per our directions in earlier part of this order. The quantum of short-levy (from July 2000 to March, 2001) will there after be arrived. Respondent-assessee will be liable to penalty equal to the amount of short-levy so determined under Section 11AC/173Q. In case, respondent-assessee fails to produce details as per CAS-4 short-levy as proposed in the show cause notice along with penalty will stand confirmed.

As far as secon .....

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ided substantially against the assessee. - APPEAL NOS: E/3209/2004 & E/3308/2005 & Cross-Objection No: E/CO-663/2004 - A/2397-2399/15/EB - Dated:- 4-8-2015 - Shri P.K. Jain, Member (Technical) And Shri S. S. Garg, Member (Judicial) For the Petitioner : Shri Hitesh Shah, Commissioner (AR) For the Respondent : Shri V. Sridharan, Sr. Advocate with Shri Prakash Shah, Advocate ORDER Per: P.K. Jain: These two appeals are filed by the Revenue against Order Nos. 11/KKS/2003-04 dated 30/09/2003 & 07/ .....

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/2003 and appeal No. E/3308/2005 is against order-in-original dated 17/08/2004. In the order dated 30/09/2003 the Commissioner has upheld the demand on merits but dropped the demand for the extended period of limitation i.e., beyond one year, in this case from February, 1997 to March, 2001 and confirmed the demand for the normal period of limitation which is April, 2001 to May, 2002. Penalty under Section 11AC was also dropped. Revenue is in appeal against dropping of demand for extended period .....

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Commissioner has dropped the proceedings initiated under Rule 7(1)(b) of the CENVAT Credit Rules, 2002 to deny the CENVAT credit taken by the manufacturing unit I of the respondent-assessee. The Commissioner has dropped the demand on the ground that, as held by him in his order dated 30/09/2003 the demands were confirmed within the normal period of limitation and it was held that there is no suppression of fact or willful mis-statement, etc. and hence taking CENVAT credit is not irregular. Reve .....

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in and around Mumbai. The activities in the three plants are different. For excise purpose, three units have separate registration and pay duty independently. In the second manufacturing unit or Plant No.2, they manufacture CRSS strips, machinery, tools, and parts. After the manufacture of said item, these are cleared on payment of duty. A part of the goods so manufactured are cleared to the first manufacturing unit or Plant 1 located nearby and the remaining goods are cleared to two independen .....

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t on payment of duty and as in the case of the second manufacturing unit, part of the goods are cleared to first manufacturing unit which is located nearby and the remaining goods are cleared to two job-workers located in Hyderabad. Manufacturing unit or plant 1 and two independent job-workers avail CENVAT credit on various inputs including the goods received from Plant II and III and also pay the duty on the finished goods. 4.2. Since the goods produced in second and third manufacturing units a .....

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However, the dispute is relating to the details in the computation of value as per Rule 6(b)(ii) of old Rules or Rule 8 of the new Rules. 4.3. Case was initiated based upon information collected by Central Excise Intelligence that the respondent-assessee were declaring the said values or the cost of production or manufacture on lower side. Respondent-assessee was filing price declaration under erstwhile Rule 173C of the Central Excise Rules, 1944 on the basis of Chartered Accountants certificat .....

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tly, 9 other show cause notices for the subsequent periods on the similar basis were issued. In the show cause notices differential duty was demanded. It was proposed to impose penalty under Section 11AC, Rule 173Q/Rule 25 as also interest. 4.4. All the ten show cause notices were adjudicated by the Commissioner vide order dated 30/09/2003 wherein he agreed on the merits of the case i.e. that the value has been suppressed and therefore has not been correctly taken by the respondent-assessee and .....

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dent-assessee has filed cross-objection on merits of the issue. 4.6. The respondent-assessee paid certain amounts in respect of second and third manufacturing units during investigations and before adjudication and issued supplementary invoices. These payments were for normal period of limitation. Based upon these supplementary invoices, first manufacturing unit took the credit of the duty so paid. 4.7. Show cause notices dated 01/05/2003 and 24/07/2003 were issued to the first manufacturing uni .....

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that there was no suppression of facts or willful mis-statement so as to invoke the extended period of limitation and hence taking the credit is in order. 4.8. Revenue is in appeal against the said order, for the reason that there is suppression of facts and willful mis-statement. 5. The case was heard extensively on 27th May, 28th May, 1st June and 2nd June, 2015. 6. Learned Commissioner (AR), in respect of appeal No. E/3209/2004 submitted that the Commissioner in the impugned order has agreed .....

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ree of doubt and Circular dated 30/10/1996 30.10.96 was not clear. Hence, it could be an issue of interpretation. (d) Plant I would be eligible for MODVAT/CENVAT credit and the situation is revenue neutral, hence, intention to evade duty cannot be alleged. 7. It was further submitted that the findings and absolution given by the Commissioner at para 125 of the impugned order are contradictory to his findings at para 111 to 124 & 126 thereof. The Commissioner agrees with the allegations in th .....

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96 and the facts as to the method of calculation therein and was reiterating the same to the Department. The Commissioner at para 124 holds that, the assessee decided which overheads to include and prepared the basic certificate which was given to the hired CA to certify without informing him of the requirements of Central Excise law. The Commissioner at para 126 holds that the assessee has not maintained /produced plantwise/productwise details of indirect overheads/ costs. Hence, the same are c .....

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of overheads were given uptil March 2001. It was only when AD (Cost) verified the records of the assessee that the suppression was detected. No productwise/plant wise details of expenditure /cost has been submitted till date and also to the Commissioner during adjudication as recorded by him. Although claim has been made that the valuation and quantification in the SCN is bad because the cost of CRSS( inclusive of Gross Profit and Overheads) as per Price List of 1993, is taken as the base for ca .....

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r CESTAT orders and now assessee wants the matter should be remanded for re-determination of the amount in show cause notices. The learned Commissioner (AR) relied upon the following case-laws to support his various contentions: (i) Bombay Tyre International Ltd. 1983(14) ELT 1896 (SC) (ii) Otis elevator Co. 2012 (280) ELT 531(T) (iii) Greaves Ltd. 2006(205) ELT 407(T) (iv) Mahindra & Mahindra 2005(179) ELT 21 (SC-LB) (v) Dharampal Satyapal 2005 (183) ELT 241 (SC) (vi) Piya Pharmaceutical Wo .....

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f MODVAT/ CENVAT credit to Plant No. I of duties paid by Plant Nos. II and III cannot be lead to a situation of revenue neutrality and hence absence of intent to evade payment of duty. It was also submitted that a portion of the goods were also sent to two job-workers located in Hyderabad and, therefore, it cannot be considered as a case of revenue neutral. In support of this contention, learned AR relied upon the following case laws: (a) Hero Honda Motors India Ltd 2012 (273) ELT 89(T); (b) Bay .....

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005 (179) ELT 21 (SC-LB) and a 3-Judge bench of he Supreme Court in the case of Dharampal Satyapal 2005 (183) ELT 241 (SC). In addition to the above it was submitted that the cost of production of manufacture as prescribed in Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975 or Rule 8 of Rules, 2000 is the actual cost of production or manufacture and it includes all costs as prescribed by the circular dated 30/10/1996. It was further submitted that the honble Supreme Court in the case o .....

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rt held that interest paid for borrowing capital for both the initial setting up of a plant before production as well as for borrowing funds during the course of manufacture/ production are actual cost incurred. It was also submitted that Guidance Notes to CAS 4 clearly states that interest paid for borrowed funds is not considered as includable in CAS4 because the prescribed norm of 115% or 110% of cost of production/manufacture includes such cost of borrowings. 11. Learned Commissioner (AR) fu .....

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cribed in Circular dated 30/10/1996, including interest, depreciation etc. are includible. 12. It was also submitted that decisions of the honble Supreme Court in the case of Cadbury India 2006 (200) ELT 353 (SC) which considered the decision of this Tribunal in the case of ITC 2005 (190) ELT 119 (T) does not bind either the department or the Tribunal on applicability of CAS4 for any period prior to the Circular of 2003. It was also submitted that the department had appealed against the Tribuna .....

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ubmitted The ratio of the decision of Karnataka Soaps and Detergents Ltd 2005 (192) ELT 892 (T) and decisions following it, relied upon by the assessee, if applied would disentitle, all instances of stock transfer not involving sale, from credit of differential duty paid by way of supplementary invoice, whether paid on account of demands within the normal period of limitation or on account of demands involving suppression, willful misstatement, fraud etc. Learned AR further submitted that the ra .....

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the CER 44 was amended by Notification No. 28/95 CE (NT) to introduce a time limit of 6 months for taking credit. This was assailed on the ground that it placed fetters on the inherent right to take MODVAT credit under Rule 57A. The Honble Supreme Court in Osram Surya Ltd. 2002 (142) ELT 5 (SC) upheld a 5 Member Bench decision of CESTAT in Kusum Ingots & Alloys Ltd 2000(120) ELT 214 (T-LB) that right to credit under Rule 57A is controlled by the procedure under Rule 57G; (iii) Similarly fr .....

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HP); (vi) Rule 7 & 9 of CCR, 2002 control Rule 3 Sheela Dyeing and Printing Mills Pvt. Ltd. 2008 (232)ELT 408 (Guj); (vii) The Honble Supreme Court has in UOI Vs Ind Swift Laboratories Ltd. 2011 (265) ELT 3 (SC) specifically held with respect to the CENVAT Rules that Rule 3 & 4 are subject to Rule 14 and that there can be no dilution or reading down or ignoring of any word or condition expressly provided in any of the CENVAT Rules. 14. It was also submitted that the decision in CCE Vs. .....

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ssessee, submitted that the Supreme Court s decision in the case of Bombay Tyre International is not relevant for interpretation of Rule 6(b)(ii). In support of his contention, learned sr. counsel relied upon this Tribunals observation in para 8 of the judgment in the case of Aaram Plastics (P) Ltd. vs. Commissioner 2014 (307) ELT 904. The observation of this Tribunal in the case of Cadbury India Ltd. vs. Commissioner of Central Excise 2001 (135) ELT 510, in paras 3,5, 6, 9 and 10 were quoted. .....

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e Supreme Courts observation in para 4, 5 and 6 in the case of Union Carbide India Ltd. vs. Commissioner of Central Excise 2003 (158) ELT 15 (SC). It was submitted that the honble Supreme Court has approved the judgment of the Tribunal by writing a detailed judgment. It was further submitted that, meaning of the term cost of production or manufacture as per well settled principles of cost accountancy has to be taken. It was submitted that CAS-4 clearly specifies in heading 5.7 administrative .....

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f sales and not forming part of cost of production. It was submitted that these proformas would clarify that interest and financial charges are not considered as the cost of production. Similar position emerges from the Standard text book titled Cost Accounting by M.Y. Khan and P.K. Jain. It was further submitted that following judicial decisions have laid down meaning of cost of production for Rule 6(b)(ii): (a) Mafatlal Industries Limited vs. Commissioner of Central Excise 2001 (134) E.L.T. 7 .....

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se 2012 (284) E.L.T. 689 (Tri.Del) 16. Further, the honble Supreme Courts decision in the case of Cadbury India Ltd. 2001 (200) ELT 353 (SC), (para 12 to 14) was quoted. It was further submitted that the contention of the learned Commissioner (AR) that the judgment in the case of Cadbury India is not binding precedent in view of the decision of the bench of three learned judges in the case of ITC Ltd. 2006 (204) ELT 363 (SC) is not correct in view of the subsequent judgment of the bench of thr .....

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in the case of Sterlite Industries Ltd. vs. CEGAT 2009 (246) ELT 109 (Mad.). It was also submitted that this Tribunal in the case of Nrima Ltd. vs. Commissioner of Central Excise (supra) has held that the circular being clarificatory in nature is retrospective and all the pending proceedings shall be covered by it. It was also submitted that following judgments have held that even period prior to 13/02/2003 the cost of production must be determined on the basis of the method prescribed under CA .....

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erroneous. It was further submitted that the expenses incurred for the company as a whole cannot be considered for determination of cost of production of goods in question. In support of this contention learned sr. counsel relied upon the judgment of the honble Supreme Court in the case of Cadbury India (supra) and in the case of Commissioner of Central Excise vs. Raymond Ltd. 2006 (204) ELT 3 (SC). It was further submitted that the only case in the show cause notice is that all the expenses ap .....

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r were already available with the department hence there cannot be any suppression of facts. 19. It was further submitted that if all the overheads were to be considered the same were available from the profit and loss account of the respondent-assessee and the profit and loss account were submitted to the department and therefore, there cannot be any suppression. It was further submitted that the Assistant Director (Cost) has based his report upon the balance sheet and profit and loss account w .....

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10 (260) ELT A84 (SC). 20. It was also submitted that Director General, Central Excise Anti Evasion had issued a show cause notice No. DGAE/BZU/202/ 12(4)24/97/2507 dated 25/05/1998 to Plant II seeking to recover the duty on SS Strips for the period December 1994 to January 1997. Annexure III to the show cause notice adopted the Overheads and Gross profit as per the working of the Respondents. Thus, even DGCEI did not consider the entire expenses of the Respondent Company to calculate the costs .....

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99 on the ground that the respondent has submitted the revised price-lists for the year 1997-98 and did not impose any penalty. It is thus submitted that, the department was in the possession of the price declaration for the year 1997-98 during the disputed period for the first show cause notice and thus no suppression can be alleged either for prior or post period of dispute. 22. It was also submitted that the statements of Shri A.K. Jain, Chartered Accountant, if read together totally support .....

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is revenue neutral as the duty-paid in Plant II and III are available to Plant I and to the job-workers as CENVAT credit. It was submitted that Plant I has paid duty in cash far in excess of the duty now sought to be demanded. Learned sr. counsel also rely upon para 7 and 8 of the honble Supreme Courts decision in the case of Nirlon Ltd. vs. Commissioner of Central Excise 2015-TIOL-96-SC-CX. It was also submitted that the case of Dharampal Satyapal (supra) has no application in the facts of t .....

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i 2014 (311) ELT 71 (Tri.-Ahmd.) (d) Siddeshwar Textile Mills Pvt. Ltd. vs. Commissioner of Central Excise, Pune-III 2009 (248) ELT 290 (Tri.-Mumbai) (e) Hydraulics Pvt. Ltd. vs. Commissioner of Central Excise, Chennai 2008 (228) ELT 598 (Tri.-Chennai) (f) P.R. Rolling Mills Pvt. Ltd. vs. Commissioner of Central Excise, Tirupathi reported in 2010 (249) E.L.T. 232 (Tri.-Bang). [upheld by Honble Apex Court as reported in 2010 (260) E.L.T. A84 (S.C.)]. (g) The Commissioner of Central Excise, Ahmed .....

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irst show cause notice. Para 18 and 19 of the honble Supreme Courts decision in the case of Modipon Fiber Company 2007 (218) ELT 8 (SC) was quoted in support of the contention. Similarly para 10 of this Tribunals decision in the case of Andhra Pradesh Electricity Board 1988 (35) ELT 1999 was quoted to support the contention. Para 4 of the honble Supreme Courts decision in the case of ECE Industries Ltd. vs. Commissioner of Central Excise 2004 (164) ELT 236 (SC) was also quoted. Further, par .....

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al duty paid by the supplier factory subsequently which became recoverable from the supplier factory due to suppression will not be available to the recipient factory. It was submitted that the said rule was amended vide Notification 6/97-CE dated 01/03/1997. It was submitted that even after the amendment, on reading clause (2) with clause (3) the bar contained in clause (3) of amended Rule 57E shall apply only in case of sale and no inter unit transfer. It was submitted that vide Notification 2 .....

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allowed. Thus, the bar contained in Rule 57AE did not apply to inter-unit transfer. It was submitted that CENVAT Credit Rules, 2001 were introduced w.e.f. 01/07/2001 and CENVAT Credit Rules, 2002 came into force w.e.f. 01/03/2002. In both the rules, the prohibition is applicable only if the goods are sold and not inter unit transfer, as in the present case. 28. The decision of the honble High Court of Karnataka in the case of Karnataka Soaps & Detergents Ltd. vs. Commissioner of Central Ex .....

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bmitted that, in any case suppression cannot be alleged in the subsequent 9 show cause notice issued for the period April 2001 to May 2002. 29. We have considered the submissions made by both the sides. In order to appreciate the issue involved, we reproduce below the relevant section, rules and the Board s circular: Section 4:- Valuation of excisable goods for purposes of charging of duty of excise. - (1) Where under this Act, the duty of excise is chargeable on any excisable goods with referen .....

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, that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof determined in such manner as may be prescribed. (2) 30. As per the above Section 4(1)(b), which is the relevant clause for the present situation, one has to compute the nearest ascertainable equivalent thereof, determined in such manner as may be prescribed. We note that nearest ascertainable equivalent thereof implies nearest to normal value as per Section 4(1)(a).In pursuance of the said sectio .....

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nufactured by the assessee or by any other assessee; Provided that in determining the value under this sub-clause, the proper officer shall make such adjustments as appear to him reasonable, taking into consideration all relevant factors and, in particular, the difference, if any, in the material characteristics of the goods to be assessed and of the comparable goods; (ii) If the value cannot be determined under sub-clause (i), on the cost of production or manufacture including profits, if any, .....

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that the determination has to be done in the prescribed manner and the prescribed manner is to be in accordance with the earlier portion nearest ascertainable equivalent thereof. If in the prescribed manner, there is any doubt about what to include or what not to include, one will have to interpret after taking into account the former portion i.e. nearest ascertainable equivalent thereof. As per Rule 6(b)(i), if the goods are not sold by the assessee but are used or consumed by him or on his .....

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provides that even if the assessee is not selling such goods but some other assessee is selling comparable goods, then the value of other assessee is required to be taken for the purpose of assessment. Rule 6(b)(ii) provides that if the value cannot be determined as per the above clause then it has to be based on the cost of production or manufacture including profits, if any, which the assessee would have normally earned on the sale of such goods. A combined reading of Section 4(1)(b) and Rule .....

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of India Ministry of Finance Department of Revenue Central Board of Excise and Customs, New Delhi Subject: Assessable Value in the case of Goods captively consumed-Addition of Profit- Reg. I am directed to refer to instructions contained in Board's letter F.No. 6/64/80-CX.1 dated 6.12.80, Circular F.No. 6/72/85-CX.1 dated 11.3.86 and Issue 'A' of Section 37B order No. 24/14/93 dated 31.12.93 regarding the method to be followed for determining assessable value of goods captively cons .....

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ideration for determination of assessable value of the goods captively consumed. Another doubt has also been raised whether the present method of determining profit margin as a percentage with reference to sales turnover and loading the profit margin of the preceding year to the cost of production of the present year to arrive at the assessable value are to be continued. 3. The matter has been further examined in consultation with the Cost Accounts Branch of Department of Expenditure. Board has .....

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) the following steps are to be followed:- (i) The cost of production of the goods has to be determined so as to include inter alia, the cost of material, labour cost and overheads including administrative cost, advertising expenses, depreciation, interest etc. (ii) Profit before tax has to be taken from audited balance sheet of the previous year and the profit margin has to be calculated as a percentage of cost of production in the previous year as per the formula prescribed by the Cost Account .....

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4. Board's earlier circular/ instructions as mentioned above stand modified to this extent. 33. It is important to note that the respondent-assessee has never disputed the applicability of the said circular and was arriving at the assessable value as per Rule 6(b)(ii) read with circular dated 30/10/1996. In fact there has been no dispute whatsoever even during the investigation about the validity or the fact that computation of the value is required to be as per the said circular. Even at t .....

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-assessee made certain payments in relation to the clearance made between May, 2001 onwards following the said circular but as per Departments interpretation. It also appears that May 2002 onwards, they themselves paid the duty as per the said circular and Departments interpretation as there is no demand notice after that. We note that it is only at the time of final arguments that learned sr. counsel has raised the question of includability of various components under the Circular of 1996 vs. .....

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excise. - (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall - (a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value; (b) in any other case, including the case where the goods are not sold, be the .....

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e regime, in such a situation, manufacturer is required to pay duty on ₹ 98/- only. This is a major departure viz. to take transactional values rather than deemed value. Thus where goods are not sold but consumed otherwise, the issue turns to what value will be transaction value for assessment purpose. 36. Pursuant to the new section, Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 were introduced and the relevant rule for goods manufactured for captive con .....

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similar goods. 37. After introduction of the new rules, the Board vide Circular No. 354/81/2000-TRU dated 30/06/2000 in para 21 clarified that for valuing goods which are captively consumed, the general principles of costing would be adopted for applying Rule 8. However, no detailed circular of how to determine the value following the general principles of costing or what exactly are these general principles of accounting was issued. It was only vide Circular No. 692/8/2003 dated 13/02/2003 tha .....

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not there in the Section 4 of the Act and the Rule 8 also states that the value will be 115/110% of the cost of production or manufacture of such goods without specifying how the cost of production or manufacture would be determined. All that was stated was cost of production will be as per generally accepted principles of accountancy. Keeping in view the changes in legal position at different points of time, there can be no doubt that for determining the value up to 30/06/2000 one has to follo .....

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to the period after 01/07/2000 can be dealt in accordance with the new circular. Cases pertaining to earlier period i.e. before 01/07/2000 will have to be dealt in accordance with old Section 4(1)(b), Rule 6(b)(ii) and Circular dated 30/10/1996. 39. Computation of value in the old Section 4 read with Rule 6(b)(ii) and hence Circular of 1996 has been matter of dispute in certain aspects. One of the dispute that has arisen in many case is that the goods for which the value is being ascertained as .....

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dvertised at all. Similarly, there may be other administrative expenses which are exclusively relatable to the final product and not to the intermediate products being valued under Rule 6(b)(ii). In our view there can not be two opinions that various costs (except the profit margin) in the circular of 1996 have to relate to the goods being valued under Rule 6(b)(ii) and not to any other goods being produced or manufactured by the same assessee. Thus various costs should be for intermediate produ .....

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xpenses of the factory which produces the final product namely the chocolate e.g. advertising, insurance and other expenses in their valuation as was sought to be added by the Commissioner (Appeals) and the Assistant Commissioner. 40. We may add here that, at times, it may not be practically possible for the manufacturer assessee to segregate and provide the details of a particular component of cost of production in respect of the intermediate goods being valued under Rule 6(b)(ii) but are avail .....

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erever, it can be demonstrated that a particular component of expenditure is not at all relating to the goods being valued under Rule 6(b)(ii), there is no question of adding cost/expenditure corresponding to that component of expenditure. 41. In the present case, the respondent-assesssee were following Rule 6(b)(ii) procedure. They were also following the Boards circular of 1996. They have never questioned the correctness or anything relating to the said Boards Circular. As required in the cir .....

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gathered that the respondent-assessee is declaring the prices on the lower side by under declaring certain components in the cost of production. Investigation was taken up. Statements of various persons including Factory Managers, Accounts Manager, Manager (Excise) and Shri A.K. Jain, Practicing Chartered Accountant, whose certificate was enclosed with the declaration, were recorded. Help of cost accounts expert in the department viz. Assistant Director (Cost) was taken up to decipher the correc .....

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ciation; (ix) R&D expenses. 42. The fact that the above mentioned expenses were not being included has been admitted by Shri A.K. Jain, Chartered Accountant, who has signed one of such certificates. Commissioner in his findings in the impugned order has analysed each of these expenses and has come to the conclusion that the expenditure incurred in respect of the above mentioned items needs to be included. It also appears to us, during investigation and before adjudication of the case, respon .....

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ransferred to two job workers in Hyderabad. Be that as it may be, we find that the respondent-assessee did not file any appeal against the Commissioners order. We find, in the cross-objection filed by the respondent-assessee, it is stated that with a view to avoid litigation with the department and since the entire amount was available as credit to the respondent-assessee in Plant 1 they debited total amount of ₹ 96,71,259/- from time-to-time during the months of May, 2002 and June, 2002 .....

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e Tribunal in the cases of Cadbury India Ltd. vs. Commissioner of Central Excise, Pune reported in 2001 (135) ELT 510, Hindustan Tyres Pvt. Ltd. vs. Collector of Central Excise, reported in 1998 (34) ELT 324 and GEC Alsthom India Ltd. vs. Commissioner of Central Excise reported in 1997 (96) ELT 473; (iii) the appellant-Commissioner erred in including the entire overheads of the Company as a whole including the expenses of other factories and unrelated and unconnected to the manufacture of the go .....

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hat the appellant-Commissioner has added expenses other than cost of manufacture, cost of raw material and profits. The respondent-assessee has not specified which component of cost of manufacture (out of the 9 listed in para 41 above) which the Commissioner has added is not required to be added. Without these specific details the contention needs to be rejected. As held earlier, for the period upto 30/06/2000 the value has to be determined as per the Boards circular 1996 and thereafter as per .....

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and unrelated to the manufacture of the goods under assessment. We have already indicated that the overheads relating to other manufacturing units cannot be added for arriving at the assessable value. Similarly, if there is any overhead which is unrelated and totally unconnected to the manufacture of the goods in dispute the same needs to be excluded. We find from the report of the Asstt. Director (Cost) in the impugned order that assessee was not able to give the details plant-wise or the inte .....

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but to take the overall figures. We note that respondent-assessee has not provided any such details either during investigation or adjudication by the original authority or before this Tribunal and in these facts and circumstances the contention needs to be rejected. We also note that number of items in the present case are marketable like wax paper, lanolin wax, CRSS, CRSS (P&H), etc. which was not so in the case of Cadbury India Ltd. (supra). 45. Appellant has also submitted about the cos .....

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ion. 46. In view of the above analysis, in our view, for the period prior to 01/07/2000 the value determined by the Commissioner is correct and we uphold the same. As far as computation of value after 01/07/2000 is concerned the same can be computed as per CAS-4. We also note that respondent-assessee has not produced any such costing details/CAS-4 certificate during adjudication or before this Tribunal. In fact, from May, 2001 onwards, respondent-assessee has accepted 1996 circular, paid differe .....

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if considered necessary. If the monthwise duty paid (and credit taken) is more than computed as per CAS-4, same need not be disturbed at this stage. 47. Another ground raised in the Revenues appeal is that the extended period of limitation is applicable while the learned Sr. Counsel for the respondent-assessee has opposed it and submitted that the balance sheet and profit and loss account, etc. were all available with the department and under the circumstances, it cannot be said that there was .....

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. In the present facts and circumstances of the case, we find that though the respondent-assessee was purportedly following the circular but were including only few components in the category of overheads and were excluding other components, some of which were specifically listed in the circular and were to be included as per the circular of 1996 and these facts were in the exclusive knowledge of the respondent-assessee. In fact, it also appears that after computing the overheads in percentage i .....

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tion of 33.7%. For purpose of computation of value, the details provided by any assessee are normally accepted until and unless there is intelligence to the contrary. In this case also similar thing has happened. Revenue was accepting the percentage figure as given by the respondent-assessee viz. 3.34%. It was only when intelligence was collected that the matter was taken up for investigation and the help of Assistant Director (Cost) was sought and taken, and only thereafter details came out in .....

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e facts of that case was entirely different. M/s. Nirlon Limited were manufacturing a product which they were selling and also captivelly consuming. They had filed a price-list indicating the sale-price to others as that also for captive consumption. Later on, it was found that there is some difference in the specification of the goods captivelly consumed and in those circumstances, the honble Supreme Court has come to the conclusion that the extended period of limitation is not applicable as t .....

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hey are eligible for CENVAT credit, would be true in case of all captive consumption cases and therefore one can take a view there is no need even to compute the cost of production, etc. However, this is not permitted under law. We, therefore, hold that extended period of limitation and consequently penalty under Section 11AC is invokable. We accordingly, set aside the order of the Commissioner as far as invocation of the extended period of limitation and penalty under Section 11AC are concerned .....

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cannot be invoked in respect of the show cause notices issued subsequent to the show cause notice dated 28/02/2002. No penalty under Section 11AC would be therefore imposable in respect of the demand of duty that will arise in the subsequent show cause notice. 51. The learned sr. counsel for the respondent-assessee has also submitted that they could have availed benefit of Notification 67/1995 and in that situation they were not required to pay any duty. In our view, this contention is required .....

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goods. Moreover, part of the goods were being sent to the job-worker, who for excise purpose is independent manufacturer, for whom the said Notification will not be applicable. 52. The learned sr. counsel also submitted that DGCEI has also issued a show cause notice in which they have approved the overheads indicated by them. We are not impressed with this argument. As mentioned in that case, the DGCEI on the basis of intelligence was investigating that the cost of material has not been increase .....

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E/3308/2005 against the order dated 17/08/2004. Learned sr. counsel has submitted that the issue is squarely covered by the decision of the honble High Court of Karnataka in the case of Karnataka Soaps & Detergents Ltd. vs. Commissioner of Central Excise, Mysore 2010 (258) ELT 62 (Kar.) wherein the honble High Court has upheld the order of the Tribunal. Learned Commissioner (AR), on the other hand, has submitted that, if the reasoning adopted by the Karnataka High Court is to be followed .....

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High Court of Karnataka. We find that the judgment of the hon ble High Court of Karnataka is squarely on the point under consideration. In fact, the hon ble High Court has upheld the decision of this Tribunal. The hon ble High Court of Karnataka in para 40 of the said judgment has observed as under: 40. We are of the considered opinion that Rule 7 is illustrative in nature and it cannot place any fetters on Rule 3. The additional duty has been paid under re-assessment or on being detected by the .....

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e in the defence plea that there was no loss of revenue to the department since whatever duty paid by their Mysore unit is admissible as cenvat credit, but for the reason discussed in the earlier paragraph. It is also relevant to note that there is no allegation of any suppression of any facts, made against the assessee and the credit taken on the supplementary invoices is clearly indicated by the assessee in their monthly returns. Since the credit taken on the said supplementary invoices is hel .....

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on the issue before us, we respectfully following the judgment of the honble High Court of Karnataka, dismiss the second appeal of the Revenue. 55. We also note that both the sides have quoted very large number of judgments in respect of both the appeals. We have gone through the judgments and in view of our analysis relating to the law, we do not find that any of these judgments is contradictory. Facts in all these judgments are different. Many of these are based upon the facts in those cases .....

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