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Commissioner of Central Excise Versus M/s Nestle India Limited

2015 (11) TMI 1171 - SUPREME COURT

100% EOU - Valuation - clearances of product to two sister units on payment of duty in terms of Notification No.8/97 CE dated 1.3.1997 and Notification No.23/2003 CE dated 31.3.2003 - Captive consumption - Department contended that appellant an EOU determine the assessable value of manufactured good was not correct and accordingly demand were made along with penalty - Held that:- There is specific provision for exemption of certain goods produced in a 100% EOU wholly from raw materials produced .....

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able in excess of an amount equal to the duty of excise leviable on like goods produced or manufactured in India produced in an undertaking other than in a 100% Export Oriented Undertaking, if sold in India. - notification states that duty calculated on the said basis would only be payable to the extent of like goods manufactured in India by persons other than 100% EOUs. This being the case, it is clear that in the absence of actual sales in the wholesale market, when goods are captively consume .....

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eriod under question the duty arrived at under Section 3(1) proviso (ii) is in excess of the duty arrived at on like goods manufactured in India by non 100% EOUs, it is clear that the whole basis of the show cause notice is indeed flawed. Further, the show cause notice is based on one solitary circumstance – the fact that goods captively consumed by the two sister units of the unit in question are not “sold”. - notification has been framed by the Central Government, in its wisdom, to levy only w .....

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ect and requires no interference - Decided against Revenue. - Civil Appeal No. 951 of 2008 - Dated:- 24-11-2015 - A. K. Sikri And R. F. Nariman, JJ. For the Petitioner : Mr. B. Krishna Prasad For the Respondent : Mr. M. P. Devanath JUDGMENT R. F. Nariman, J. 1. The respondent herein is a 100% EOU engaged in the manufacture of instant tea falling under Chapter 2101.20 of schedule to the Central Excise Tariff Act, 1985. The present appeal is concerned with clearances of their product to two sister .....

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t in dispute that the said notifications applied in the facts of the instant case. 2. A show cause notice dated 23.9.2005 was issued by the Department stating that ordinarily Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 would apply and that the tea being captively consumed and not sold should be valued at 115% of the cost of production or manufacture of such goods. However, the show cause notice then goes on to say that as the said tea is transfe .....

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eighty six thousand and seventy nine only) (Centvat: ₹ 42,62,545/- and Education Cess ₹ 23,534/-) under Section 11A (1) of the Central Excise Act, 1944. (2) I demand appropriate interest on the above amount confirmed under Section 11AB(1) of the Central Excise Act, 1944. (3) I impose a penalty of ₹ 42,86,079/- (Rupees Forty two lakhs, eighty six thousand and seventy nine only) under Section 11A (1) of the Central Excise Act, 1944. (4) As I have imposed penalty on them under Sec .....

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ct would apply to the facts of the case and that being so, it is clear that the basis for valuation had to be on the FOB value of export of similar goods and not on the basis of cost of production under Rule 8 of the Central Excise Rules. 5. By the impugned judgment dated 16.5.2007, CESTAT set aside the judgment of the Commissioner (Appeals) by reasoning that since the exemption notifications would apply and since what has to be determined under the said notifications is excise duty payable in I .....

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test as to value of goods would be the test of similar goods of a like value that are exported. Hence, according to him, the original authority and the appellate authority were correct in applying the said Section and the Tribunal was wrong in ignoring the said Section and applying exemption notifications to the facts of the case instead. 7. Ms. L. Charnaya, learned counsel appearing on behalf of the assessee on the other hand, supported the decision of the tribunal and read to us in some detai .....

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ar that the very basis of the show cause notice being incorrect would lead to incorrect orders that were passed by the original and first appellate authority. 8. Having heard learned counsel for the parties we think it is necessary to first extract the relevant statutory provisions and the notifications insofar as they have a bearing on the facts of the present case. 9. Section 3(1) proviso as it stood at the relevant time is extracted hereinbelow:- SECTION 3. Duties specified in First Schedule .....

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e Customs Act, 1962 (52 of 1962) or any other law for the time being in force, 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 anything contained in any other provision of this Act, be determined in accordance with the provisions of the Customs Act, 1963 (52 of 1962) and the Customs Tariff Act, 1975 (51 of 1975). 10. Section 5A bei .....

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f any specified description from the whole or any part of the duty of excise leviable thereon : Provided that, unless specifically provided in such notification, no exemption therein shall apply to excisable goods which are produced or manufactured- (i) In a free trade zone or a special economic zone and brought to any other place in India; or (ii) By a hundred per cent export-oriented undertakings and brought to any place in India. 11. Rule 8 of the Central Excise Rules, 2000 as it stood at the .....

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Notification: 8/97-CE dated 01-Mar-1997 Exemption to finished products, rejects and waste or scrap produced in a 100% EOU or FTZ In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the finished products, rejects and waste or scrap specified in the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) and produced or manuf .....

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id section 3 of the Central Excise Act, on like goods, produced or manufactured in India other than in a hundred per cent export-oriented undertaking or a free trade zone, if sold in India. 13. To similar effect for the subsequent period is the notification No.23 of 2003 dated 31.3.2003. 14. The first thing to be noticed is that Section 5A under which the exemption notifications are issued states in the proviso that no exemption shall apply to excisable goods which are produced or manufactured b .....

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ntral Excise Tariff Act. Further, the notification goes on to state that the said tea should be allowed to be sold in India in accordance with the relevant EXIM policy. It further goes on to state that the exemption from payment of the duty of excise that is leviable thereunder under Section 3 is what is payable in excess of an amount equal to the duty of excise leviable on like goods produced or manufactured in India produced in an undertaking other than in a 100% Export Oriented Undertaking, i .....

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on 3 would be on the basis of the value of like goods produced or manufactured outside India as determinable in accordance with the provisions of the Customs Act, 1962 and the Customs Tariff act, 1975. However, the notification states that duty calculated on the said basis would only be payable to the extent of like goods manufactured in India by persons other than 100% EOUs. This being the case, it is clear that in the absence of actual sales in the wholesale market, when goods are captively co .....

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t then goes on to state that: It is settled law that the value shall be determined keeping in view the following factors: a. sale price of goods under assessment b. sale price of other consignments of identical/ similar goods c. export price of identical/similar goods d. nature of sale transactions etc. The settled law spoken of would refer to a CBEC circular No.268/85-CX.8 dated 29.9.1994 which deals with valuation of goods manufactured by units working under the 100% EOU scheme. The said circu .....

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cise Act on like goods produced or manufactured in India by undertakings other than 100% EOUs. The application of this circular and consequently any FOB export price would be wholly irrelevant for the purpose of this case and as has been held above, is only for arriving at the duty of excise leviable under Section 3(1) Proviso (ii) of the Central Excise Act. On the facts of the present case, it is clear that the said duty of excise arrived at based on Section 3(1) Proviso (ii) is more than the d .....

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