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2016 (4) TMI 233 - CESTAT CHENNAI

2016 (4) TMI 233 - CESTAT CHENNAI - TMI - Valuation of goods cleared to own sister units for captive consumption - Determination of the cost of production as per CAS-4 - differential duty demand and interest - Enhancement of value as per the cost audit submitted by Dy. Director (Cost) - Held that:- The adjudicating authority has correctly determined the cost of production of copper anodes manufactured by the appellants. We find that the adjudicating authority has not merely or plainly adopted th .....

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per MT.

We also find that during the proceedings the appellant's cost auditor was also represented and submitted cost certificate. Considering the period of dispute and taking into the original demands as proposed in the four SCNs the demand amount of ₹ 251 Crores has been scaled down on account of the directions by this Tribunalís Two Final orders, and the original demand reduced to ₹ 13.98 Crores. Therefore, we hold that the appellant's contention for remanding the case .....

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e uphold the impugned order in determining the cost of copper anodes for the period July 2001 to March 2002 as ₹ 94,446/- per MT and ₹ 94,594/- per MT for the period April 2002 to October 2002. Consequently, the demand of ₹ 13,98,95,514/- and interest thereof is liable to be upheld.

Disallowance of adjustment of excess duty paid - as contended that since the assessment is provisional while finalizing provisional assessment, the LA ought to have taken into account the .....

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they have already availed cenvat credit on the duty paid on copper anodes at their unit at Silvasa and they have also admitted before LA that they will not claim any refund on this account. Therefore the appellant's claim for adjustment and claiming automatic set off excess duty paid does not arise.

Determining the cost of copper anodes - Commissioner (Appeals) order to that extent allowing deductions on 5 items is liable to be set aside and the OIO passed by the adjudicating authori .....

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ng into consideration that the issue is being debated from 1997 onwards, and also considering the Tribunalís two remand orders, the penalty under Rule 25 is not imposable. Accordingly, we waive penalty of ₹ 25 lakhs imposed under Rule 25 of CER. - E/MISC/40439/15, E/MISC/40440/15 E/MISC/40441/2015, E/MISC/40811/13, E/MISC/40810/2013 in E/295/2009, E/MISC/40442/15, E/MISC/40443/15 in E/406/2010 & E/MISC/40436/15, E/MISC/40437/15 in E/412/2010 - Final Order No. 40192-40194 - Dated:- 4-2-2016 .....

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40437/15 in E/412/2010 requesting for change of cause title from M/s. Sterlite Industries (I) Ltd. to M/s. Sesa Sterlite Limited and from M/s. Sesa Sterlite Limited to M/s. Vedanta Limited. It is submitted that M/s. Sterlite Industries Ltd. has been merged with M/s. Sesa Sterlite Limited and it was approved by the Honble High Court of Goa and Madras and submitted the Certificate of incorporation dated 18.09.2013 issued by ROC, Goa. Subsequently, the name of the Company M/s. Sesa Sterlite Ltd. h .....

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and one revenue appeal and all the appeal up are taken up together for disposal as the issues involved are identical and related to valuation of copper anode manufactured and cleaned to their sister units. 3. Appeal No. E/295/2009 was filed by the appellant assessee against the Commissioners Order dated 15.04.2009. Appeal No. E/412/2010 was filed by the appellant against the Commissioner (Appeals) Order No. 89/2010 dated 24.03.2010. Appeal No. E/406/2010 was filed by the Revenue against the Ord .....

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ire rods. Since the goods were not sold but cleared to their own sister units for manufacture of copper cathodes/continuous copper wire rods, the assessees were filing price declarations to the Department regularly adopting cost construction method for determining the assessable value for payment of duty under the Central Excise valuation Rules. The accounts of the appellants unit was subjected to cost audit under Section 14A of the Central Excise Act, 1944 and the Cost Auditor was nominated for .....

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spectively. The said orders were appealed before the Tribunal and the Revenue was also in appeal before the Tribunal. the Tribunal had set aside the impugned order vide final order No. 285 to 288/09 dated 24.03.2009 with the direction to arrive the cost as per CAS-4. During pendency of appeal before Tribunal the Dy. Commissioner also confirmed the demand of differential duty by following for the period 01.07.2001 to 31.07.2001, the assesee challenged the Order in Original s and the Commissioner .....

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e issue to Dy. Director (Cost) who in turn after examining the records submitted his report and the same was given to the assesse. Assesse filed submission and contested Dy. Director (Cost) report after following the principle of natural justice and hearing the appellants. The Commissioner of central Excise in his order dated 15.04.2009 confirmed the demand of deferential of ₹ 13,98,95,414/- and imposed a penalty of ₹ 2 5,00,000/- under Rule 25 of CER, 2001 and dropped penalty under .....

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d demand reduced to ₹ 4,76,07,671/- and set aside the penalty. Against this OIA both the assessee and Revenue filed appeal in E/412/2010 and E/406/2010 respectively. 6. Heard both sides. Senior Advocate Shri C. Natarajan, appearing on behalf of the assesse advanced his submission based on 7 volumes of paper books as under:- Volume 1 Appeal papers in E/295/2009 Volume 2 documents in respect of E/295/09 Volume 3 Appeal and documents in respect of E/412/2010 Volume 4 CAS guide lines and CA in .....

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-1 at page-39, he submitted that their appeal contesting valuation on the foreign exchange fluctuation, power and fuel charges, analysis charges, Sale value of sulphuric acid in excess of P&L, duty drawback and LC charges etc. He further submits that out of 9 issues which are against the assesee they are contesting only on the eight issues as per this list appended is page 39 & 40 of the type set dated 10.01.14 and in respect of the eighth item ISO-TQM charges they are not contesting. Fr .....

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ment was initially ordered on 01.11.99. He drew attention to the bank guarantee dated on 04.12.2000 and bank guarantee submitted on 21.02.2001 and their letter dated 17.07.2002 requesting the Asst. Commissioner to continue the provisional assessment through their letter dated 16.10.2002. In response to DCs letter dated 12.08.2002 bank guarantee was reviewed for the period of one year. He relied n the letter dated 21.02.2012, 28.10.2012, 01.11.2012 and submitted that provisional assessment conti .....

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s. He drew the attention of the Bench by relying page 126 of volume I of their submission that they have clearly submitted before the Commissioner that the foreign exchange fluctuation which is not addable to the cost as the fluctuations are speculative in nature. To this he relied on the guidelines issued by the Institute of Cost Accountant annexed to volume-2 at page 102 & 105, wherein it has been clarified that the difference between the actual payment and the amount taken n material cost .....

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d he drew attention to annexure-5 illustration and the Commissioners findings at para 16 of volume-I at page 126, where he has relied on para 5.1 of CAS-IV and not para5.16. He also submits that for the year 02-03, there was no foreign exchange, no deductions made as per CAS-IV. He submits that entire issue of addition of value on the cost of the raw material as per CAS-IV was purely based on the notes of the Director cost. The appellants were not even given any chance to counter or to argue ag .....

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1 to 31.03.2002 and ₹ 94,594/- for the period 01.4.2002 to 31.10.2002. He relied on the Honble Supreme Court order in the case of Commissioner of Income Tax, Delhi Vs. Woodward Governor India Private Limited - 2009 (13) SCC 1. 8. The Ld. Advocate submitted additional evidence that as per CESTAT procedural rules and Regulations, 1982, 223 of the Rules the Tribunal is empowered to accept the additional evidence and he explained the individual additional evidence which they proposed to rely .....

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ied on the following case laws:- 1. Excel Rubber Ltd. Vs. CCE, Hyderabad 2011-TIOL-536 2. Toyota Kirloskar Auto Parts PVt. Ltd. Vs. CCE 2012 (276) ELT 332 (Kar.) 3. ITC Bhadrachalam Paperboards Ltd. Vs. CCE, HYD 2000 (115) ELT 527 (Tri.) 4. S.L. Kapoor Vs. Jagmohan & Others 1980 (4) SCC 379 9. Ld. Advocate submits that in view of their application filing for additional evidence they pleaded for allowing their additional grounds in the memorandum of appeal. The additional grounds were enclose .....

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g authority for the period from 01.07.2000 to 30.06.2001. He confirmed the demand of ₹ 6,19,52,364/-. They filed appeal before the Commissioner (appeals) and he partly allowed the appeal and held that they are entitled to adjustment of the excess duty paid by them in respect of analysis charges and sulphuric acid supplied to phosphoric acid plant, TQM charges, part of the professional fees are not to be included in the cost of production. The Commissioner (Appeals) has also allowed the exp .....

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pper anodes. 11. The Ld. Advocate submits that whatever duty paid at Silvassa unit they are entitled for credit and further submits that since the assessments are provisional, wherever excess payment should be adjusted to the short payments made. He relied on the Honble Supreme Court decision in the case of Toyota Kirloskar Auto Parts Pvt. Ltd. (supra). He submits that all his submissions are in the records submitted in Annexure-I to VII to be taken into consideration and submits that since it .....

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d how the adjudicating authority arrived his findings. He submitted a paper book containing brief submissions of balance sheets plus work sheets, control plans, copies of cash drawn statements and extracts of balance sheets. He submits that the adjudicating authority has dealt the issue in detail. Regarding the appellant s submission for remand, he submits that there is no ground for remanding the case to the adjudicating authority as the adjudication order was passed after 15 years. Regarding D .....

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llowing issues:- a. On the contentions of the appellants whether the assessment is provisional during the disputed period he submits that the entire period of assessment is not covered under the provisional assessment. Even though they have filed the letter dated 01.11.99 for the provisional assessment, they executed bond on 04.12.2000 and they requested again to withdraw the provisional assessment on 04.05.2002. Again they requested to continue provisional assessment and it was again resumed on .....

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e same was passed on to their Silvassa unit. There is no adjustment possible on provisional assessment under Rule 7. Further, he submits that the appellants in a letter submitted to the AC that they will not claim refund on excess payment. He referred to Volume 4 of the paper book and written submissions before the adjudicating authority. He relied on the Tribunals LB decisions in the case of Excel Rubber Ltd. Vs. CCE, Hyderabad - 2011 (268) ELT 419 (Tri.-LB), in the case of BSL Ltd. Vs. CCE, Ja .....

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can prove then only the Tribunal can accept the additional grounds. Further he strongly objected whether the additional evidence is required for the present appeals if is a strong evidence why they failed to submit before the Commissioner at the time of adjudication. As regards the additional evidence of the CA certificate, which was obtained later on after four years of OIO issued that cannot be taken as additional evidence now. Regarding PLA account pertaining to Silvassa to be taken as evide .....

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ese before the Commissioner particularly when they took sufficient time to reply to the SCN. When Mr. Kannan, Cost Accountant has already submitted that cash flow report which they enclosed at page 34A & C of paper book, there was no justification to produce clarification and this cannot be accepted as additional evidence or additional grounds. He also submitted that the case laws relied upon the following case law:- 1. K.R. Engg. Works Vs. CCE, Bangalore-2000 (125) ELT 1218 (T) 2. Kneader H .....

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final invoice cost difference indicates change and the LMA rate is taken at the time of final assessment. He submits that the price includes differential amount to be paid by the buyer at the current rate. He drew the attention of the Bench to the final invoice date 14.11.2000 to be compared with provisional commercial invoice dated 27.06.2000. He further submits that the appellant never submitted any contract before the adjudicating authority. He relied on the statement of facts included in th .....

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Enterprises Vs. CC, New Delhi - 2006 (202) ELT 7 (S.C.). d. He further submits that the guidelines note, of institute of cost accounting relied by the appellants relates to CAS-6, whereas for CAS-4 para 5.1 of guidelines note is applicable. CAS-6 is not relevant to arrive the cost CAS-4. Para 5.1 CAS-4 is rightly applied by the adjudicating authority. He explained para 5.1 of CAS-4 which is enclosed at page 52 of volume -IV of the appellants and also submits that para 5.16 is only exchange fore .....

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xport whereas the copper cathodes is exported from their unit at Silvassa. The adjudicating authority has correctly worked out as per the SION norms available for copper anodes. He referred to para 25 at page 128 of volume-I. he also submits that norms for blister copper is 1.04 is not relevant. f. He further submits that on the difference between PLA account and the trial balance, the Commissioner has correctly added the differential value of 4.92 crores (page 2 of the paper book). He also reli .....

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consumption of sulphuric acid. The amount of ₹ 14,58,07,640 which is shown as consumption of sulphuric acid as well as it was deducted twice. g. The professional fees and testing charges, which is correctly added to the cost of production. He refers to page 10, 11 of the paper book and submits that these charges are directly attributable to the procurement of raw materials and has been correctly added as per para 5.1 of cash flow sheet referred to page 122 & 129 of volume I of the app .....

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the tune of ₹ 5.10 crores, ₹ 3.85 crores, on customs duty and difference in premium paid on central excise, expenditure by the assessee which is straight away to be added. He also submits that the trial balance shows power is deducted, the same cannot be deducted to be added to the cost of raw material. He also submits that sale of scrape; an amount of ₹ 81,657 has been deducted wrongly at page26 as it pertains to scrape of PAPs. He drew the attention to the contract. h. He sub .....

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efore the Commissioner, and he has not addressed the issue in his findings. He submits that they have given a detailed written submission in reply to the SCN explaining all the issues including power charges, forex fluctuations and other charges which was not accepted by the adjudicating authority. He also submits that immediately after receiving the DD cost report they have submitted their written submission on 19.11.2009 particularly with reference to objections of DD cost figure, but the same .....

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pellants contended that these evidences are essential and therefore prayed to take them on record under Section 35C and under Rule 23 of Cestat Procedural Rules. The additional evidences are as follows: a) First evidence is the CA Certificate dated 6.5.2013 issued by M/s. Ramakrishna & Co., Chartered Accountants, along with details of Cenvat credit position and data of PLA payment ascertained from the statutory PLA & Cenvat register maintained under the Central Excise and CCR forte licen .....

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ed 28.5.13 issued by Shri.M. Kannan, Cost Accountant clarifying his CAS4 certificate dated 23.12.2005. e) Last evidence in annexure-V is proceedings of the Dy. Commissioner of CE, Tuticorin regarding dispatch of copper anodes from Tuticorin and received at Silvasa. 14. On careful examination, we find that all these evidences were neither submitted before the adjudicating authority nor before the LAA and most of these documents were in the form of certificates signed by the CA or Cost Accountant .....

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these appeals vide two of its Final orders No. 285 288/2009 dated 24.3.2009 and Final Order No. 1111 1115/2005 dated 9.8.2005, by way of remand with the direction to determine the cost as per CAS-4 formula. We also find subsequently that a series of SCNs were issued from 2002 -2003. We find that the adjudicating authority during personal hearing on 1.8.2008, given the working notes of the Dy. Director (Cost) report to the assesse and again the appellants appeared for the second hearing before t .....

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.2013 are in the nature of explanation on the scope of CAS-4 certificate dated 23.12.2005. The Cost Accountant issued CAS-4 certificate in the year 2005 and again in 28.05.2013 he had choose to issue clarification. We find when the same Cost Accountant who was also present during the personal hearing proceedings before the Commissioner of Central Excise and assisted the appellants through explanation in the form of certificates has no relevance at all and these cannot be considered as additional .....

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learly distinguishable and not applicable to the present case. We rely on the case of K.R. Engg. Works Vs. CCE, Bangalore - 2000 (125) ELT 1218 (Tri.) and Kneader House Vs. CCE, Delhi - 2013 (290) ELT 249 (Tri.-Del.), wherein the Principal Bench dismissed the additional evidences under Rule 23 of CESTAT (Procedure) Rules, 1982. The relevant portion of the said decision is reproduced as under:- 8. It is also submitted that the un-relied documents came in possession of the appellants on 13-9-2007 .....

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Prop. of M/s. New Vision had been penalized but no appeal has been filed against such order. 9. As rightly pointed out by the DR, the application did not disclose any justification for non-production of the said documents before the adjudicating authority or even before the Commissioner (Appeals). Apparently, the attempt is purely after thought. 10. There is no explanation forthcoming as to what prevented the appellants from seeking assistance of the adjudicating authority for issuance of a summ .....

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above Tribunal decision squarely applicable to the present case. Therefore, we hold all the five additional evidences does not merit consideration as these are of fresh reports or documents created after adjudication and issue of orders so as to cover their plea. Accordingly we reject both the miscellaneous applications seeking submission of additional evidence and submission of additional grounds. 15. Now we proceed to discuss the issues on merits. We find that the present appeals are the secon .....

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at ₹ 94,416.45 per MT for the period July 1997 to December 1997 and confirmed the differential duty. On appeal filed by both assesse and Revenue before the Tribunal, the Tribunal in its Final Order No. 285-288/2009 dated 24.03/2009 set aside the order and directed the authority to determine the value as per CAS-4 as per the Board s Circular. In other round of litigation arising out of AC s order, the adjudicating authority has confirmed the demand of differential duty for the period 0.07. .....

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SNCs demanding ₹ 46,211,751/- ₹ 38,62,71,007/- and ₹ 39,96,49,677/- for the period April, 2002 to October, 2002. We find from the records that as directed by the Tribunal in the above orders, the assesse submitted CAS-4 certificate dated 23.12.2005 issued by Cost Accountant for the period July 2001 to March 2002 and for the year 2002 - 2003. As per the Cost certificate, the cost arrived on copper anodes is ₹ 88,091.15 per MT for the period July 2001 to March 2002 and  .....

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ntion on each issue determined the value as ₹ 94,446/- per MT for the period July 2001 to March 2002 and ₹ 94,594/- per MT for the period April 2002 to October, 2002, confirmed the differential duty of ₹ 13,98,95,514/- as demand proposed in 4 SCNs of Rs. (1,28,38,41,203/-+4,62,11,751/- + 38,62,71,007/- + 39,96,49,677/-) and also imposed penalty under Rule 25 of CER. 16. On perusal of findings of adjudicating authority we also find that out of 16 issues wherein the DY. Director .....

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nd testing charges 7. Duty drawback 8. LC Charges 8. Excess sale value of sulphuric acid shown in P & L 10. Difference 1n RM consumption Out of the above, the appellants are not contesting ISO-TQM charges, Professional fee and testing charges and Excess sale value of sulphuric acid shown in P & L account. 17. On the second appeal No. E/412/2010, the appellant before this Tribunal against the Commissioner (Appeals) order only on the limited ground of not allowing the adjustment of excess .....

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ction and for determining the value under Rule 8 of CVR is correct or otherwise; 2. Whether the value determined by the adjudicating authority of ₹ 94,446/- per MT for the period Jul 2001 - March, 2002 and ₹ 94,594/- per MT for the period April 2002 to October, 2002 is correct or otherwise, 3. Whether the penalty imposed by the adjudicating authority is sustainable or otherwise. 18. In appeal E/412/2010 and E/406/2010, the issue before the Tribunal is Whether LAA disallowing the adju .....

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2. The assesse contended that the provisional assessment was w.e.f. 01.11.1999. On perusal of the findings of the adjudicating authority and various correspondences relied by the assesse, we find that since the valuation dispute is on copper anodes started in the year 1997 and went through series of litigations from that period resulting Tribunal two Final orders wherein the Tribunals set aside the orders and remand the matter to the original authority to determine the cost as per CAS-4 formula, .....

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d under Section 11A is not justified as SCN notices were issued rightly invoking Section 11A of CEA of the assessment order. Even in the past cases, we find that after issue of SCN, the adjudicating authority in his orders decided the exclusion and inclusion of various cost elements for determining the cost of production of copper anodes and confirmed the consequent demands. Therefore, we hold that the commissioners findings on this issue is justified and there is no provisional assessment duri .....

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nternational price of copper is based on LME price and also at the time of shipment the price was provisional and at the time of final settlement, the exchange fluctuation on the date of payment varies and this resulted in difference in price. It is pertinent to see that as per para-4 of CAS-4 the cost of production shall constitute cost of material consumed and all other expenses. The appellant relied guidance note on cost accounting CAS-6 para-5.17 and illustration thereof. In the present case .....

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ty shipped was 8738.069 DMT and as per the LME price of copper and based on the % content of copper in copper concentrate and after allowing deductions the provisional value per DMT has been shown as US$ 31.51, the percentage of copper content is 27.000%, moisture 8.9500 based on this workings, the provisional value for the shipment at 100% on the total quantity of 8738.069 DMT has been shownat US$ 2,71,995.72. On perusal of the final commercial invoices dated 19.10.2001 issued by the supplier f .....

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s against US$ 311.51 and the final price for the total quantity is US$ 2,864536.06 as against US$ 2721995.72. The above factual figures clearly shows that the difference in amounts is not purely on account of foreign exchange fluctuation. The price indicated in the final invoices is the amount which is to be paid by the appellant for supply of the said goods. Therefore, it is fully within the guidelines of CAS-4 (para 5.1) of CAS-4. Appellants relying on para 5.16 and other paras of the guidelin .....

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the findings of the adjudicating authority on this issue. II. Difference between P&L and TB and power and fuel charges:The adjudicating authority added the amount of ₹ 4,92,42, 218/- which is the cost of fuel, power and water charges incurred. Based on the figures available from the TB, the appellants contented that the figures could be as per P & L account. The appellant failed to give any justification for the amount shown in the TB. TB is prepared for each unit where the cost of .....

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otion of DEPB and deduction of sale value of sulphuric acid as shown in P & L account (sl.No. 9 & 15) and 14 & 15 of the list above, the adjudicating authority s findings has clearly brought out and as per DD (Cost) report and as per CAS-4 all these charges are liable to be included for determining the cost of the raw materials. The appellants contention that these charges were already included in the cost of raw materials is not justified for the reason that if it is already includ .....

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ately worked out to each unit of smelter plant and other plants. Once the cost arrived separately, the question of deducting the sale value of sulphuic acid transfer to phosphoric acid plant is not justified. Therefore, we uphold the adjudicating authority s addition of the amount to the cost of these heads to the cost of copper anodes. IV. To the exclusion of duty drawback amount claimed by the assesse on copper anodes and continuous wire rods manufactured out of copper anodes and exported from .....

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orted. He has allowed the deduction of ₹ 69,89,47,034/- and only included an amount of ₹ 79,67,940/- to the cost as per CAS-4. The appellants main contention is that the SION norms for copper cathode is 1.06 MT, the same norm is not applicable to the appellant for the very reason that the appellant themselves made an application to the DGFT and the DGFT has fixed the norms as 1.02 MT for copper anode, as per the DGFT letter dated 9.8.2007. Since, the norms for copper anodes manufact .....

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re, we do not find any merit in the appellants contention. Accordingly, we uphold the addition of cost as per CAS-4. 21. Having discussed all the issues of addition of cost as per CAS-4 formula, we hold that the adjudicating authority has correctly determined the cost of production of copper anodes manufactured by the appellants. We find that the adjudicating authority has not merely or plainly adopted the DD (Cost) report for addition of the cost elements under CAS-4 and the very fact that the .....

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esented and submitted cost certificate. Considering the period of dispute and taking into the original demands as proposed in the four SCNs the demand amount of ₹ 251 Crores has been scaled down on account of the directions by this Tribunal s Two Final orders, and the original demand reduced to ₹ 13.98 Crores. Therefore, we hold that the appellants contention for remanding the case to the adjudicating authority is not justifiable except to delay the proceedings without any valid gro .....

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2002 as ₹ 94,446/- per MT and ₹ 94,594/- per MT for the period April 2002 to October 2002. Consequently, the demand of ₹ 13,98,95,514/- and interest thereof is liable to be upheld. 22. As regards the assessee s second appeal in E/412/2010, the appellants only prayer is to set aside that portion of the impugned order in appeal dated 24.03.2010 disallowing the adjustment of excess duty paid. It is contended that since the assessment is provisional while finalizing provisional ass .....

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(supra). In this regard, we find that the above case law is not applicable to the present case, as already discussed in the preceding paragraphs, the assessment and determination of value of cost of production of copper anodes and consequent demand of differential duty were confirmed under Section 11A of CEA and this is not the case of finalization of provisional assessment under Rule 7 of CER, 2002. This case relates to issue of SCNs on the determination of cost of production of copper anodes s .....

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and claiming automatic set off excess duty paid does not arise. Accordingly, we uphold the order of the Commissioner Appeals) to that extent. 23. As regards the Revenue appeal No. E/406/2010 is concerned, the adjudicating authority in his OIO dated 14.05.2009 while determining the cost of copper anodes, he has added various cost elements as per DD (Cost) Report and the Cost certificate produced by the appellants as per CAS-4 and determined the value as ₹ 99742 per MT andconfirmed the diffe .....

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