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2016 (5) TMI 306 - SUPREME COURT

2016 (5) TMI 306 - SUPREME COURT - 2016 (335) E.L.T. 577 (SC) - Includability - Whether amounts recovered by IIL in the form of debit notes towards bank charges, interest, etc. were includible in the assessable value of inputs iron ore pellets - Transfer of iron ore pellets by IIL to IMIL, sister concern is a sale or transfer - Held that:- as per circular dated 1.7.2002, a distinction is made between inputs on which credit has been taken which are removed on sale, and those which are removed on .....

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he Tribunalís judgment, which only follows the circular dated 1.7.2001. In addition, the Tribunal was also correct in holding that post manufacturing expenses cannot be loaded on to the amount equal to the duty of excise leviable on such goods as this amount would, then, cease to be an amount equal to the duty of excise but would be something more. Therefore, on both these counts it is found that the Tribunal is justified in its finding on law, which is based on its finding of fact that the pres .....

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ESTAT dated 11.10.2005, whereby the Tribunal has upset the order of the Commissioner, confirming various duty demands, penalty and interest. 2. The brief facts necessary in order to appreciate the controversy at hand, taken from C.A. No.2562 of 2008, are as follows. 3. M/s. Ispat Industries Limited (hereinafter referred to as the IIL ) is engaged in the manufacture of HR coils, sheets, plates, etc., which are cleared on payment of duty of excise. In the manufacture of such goods, it avails credi .....

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ntire quantity so procured. As and when required by the sister company IMIL, pellets were transferred through a conveyor from IIL s plant to IMIL s premises under cover of an invoice and on reversing an amount equal to the Cenvat credit availed on inputs that were so transferred. In addition to such invoices, IIL also raised debit notes on IMIL for recovering actual expenditure incurred by it in relation to the procuring of such iron ore pellets, such as bank commission, interest, etc. 4. The af .....

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ed Commissioner upheld the show cause notices stating that the transaction between IIL and IMIL was one of sale and not transfer. Since the goods were reassessed to duty in terms of Rule 57AB(1C) of the Central Excise Rules, 1944 and Rule 3(4) of the Cenvat Credit Rules, 2001, the assessable value in terms of Section 4(1)(a) of the Central Excise Act i.e., the transaction value at the time of clearance plus any additional consideration paid by the buyer at a later stage is to be added and, there .....

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sister companies and this becomes clear on a reading of the tripartite agreement between the supplier of the pellets, IIL, and IMIL. This being so, the Tribunal applied a circular dated 1.7.2002 by which, where no sale is involved but only a transfer by one sister unit to another, the value shown in the invoice on the basis of which Cenvat credit was taken by the assessee would be the value for the purpose of Rule 57AB and Rule 3(4). It was further held that additional consideration could not b .....

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was set aside, not only on merits, but also on limitation, following the judgments of the Tribunal itself and of this Court. 7. Shri Radhakrishnan has read to us in detail the show cause notices and the Commissioner s judgment dated 24.12.2004, which is strongly relied upon by him in support of his case. It is his case that a proper reading of the relevant rules would make it clear that what has to be seen is transaction value under Section 4(1)(a) of the Central Excise Act and not invoice value .....

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which would be the invoice value of the iron ore pellets cleared by the supplier of those pellets. He relied strongly on the circular dated 1.7.2002, which was also relied upon by the Tribunal, and further went on to argue that there was no suppression of facts in this case and, hence, the extended period of limitation could not possibly have been applied to the facts of this case. 9. Having heard the learned counsel for the parties, it is important to first set out the relevant rules. Rule 57AB .....

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Central Excise Act, and such removal shall be made under the cover of an invoice referred to in rule 52A. Rule 3(4) When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, the manufacturer of the final products shall pay an amount equal to the duty of excise which is leviable on such goods at the rate applicable to such goods on the date of such removal and on the value determined for such goods under Section 4 or Section 4A of the Act, as the .....

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g the case, the application of the circular of 1.7.2002 becomes important. Paragraph 14 of the said circular reads as under:- 14. How will valuation be done when inputs or capital goods, on which CENVAT credit has been taken are removed as such from the factory, under the erstwhile sub rule (1C) of rule 57AB of the Central Excise Rules, 1944, or under rule 3(4) of the Cenvat Credit Rules, 2001 or 2002 ? Where inputs or capital goods, on which credit has been taken, are removed as such on sale, t .....

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e Rules, 1944 and Rule 3(4) of the Cenvat Credit Rules 2001 (now 2002, talk of determination of value for such goods and not the said goods . Thus, if the assessee partly sells the inputs to independent buyers and partly transfers to its sister units, the transaction value of such goods would be available in the form of the transaction value of inputs sold to an unrelated buyer (if the sale price to the unrelated buyer varies over a period of time, the value nearest to the time of 8 Page 9 remov .....

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d inputs/ capital goods have been received by the assessee from outside and have not been produced or manufactured in his factory. Recourse will, therefore, have to be taken to the residuary rule 11 of the valuation rules and the value determined using reasonable means consistent with the principles and general provisions of the valuation rules and sub-section (1) of sec. 4 of the Act. In that case it would be reasonable to adopt the value shown in the invoice on the basis of which CENVAT credit .....

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