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M/s. ITC LTD. Versus Commr. of Central Excise, Patna

2016 (5) TMI 991 - CESTAT KOLKATA

Valuation with respect to deductions/additions of Bank charges, Interest in Excess of CSD, Advertisement & Sales Promotion, Below the line expenses (BTL) & interest on Trading and quantification of duty - Cigarettes and smoking mixture - assessments were kept provisional due to pending post manufacturing expenses (PME) - excess recovery of amounts by wholesale Dealers a part of which was also reaching the appellant.

Held that:- it is observed from the case records that issues of valua .....

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method of quantification. This fact can be verified by Adjudicating authority of Munger factory and if what is stated by the Learned Advocate of the appellant is found to be true then the same ratio laid by other jurisdictional adjudicating authorities has to be followed by AC/DC in charge of Munger factory, including the method of quantification of differential duty. This bench has not made any observations on the merits of the case. The same has to be decided by the Adjudicating authority on .....

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THAKUR Appeal No. E/190/2005 has been filed by the appellant against Order-in-Appeal No. 354/PAT/CEX/APPEAL/2004 dated-December 22, 2004 and appeal No. E/191/2005 has been filed against Order-in-Appeal No. 355/PAT/CEX/APPEAL/2004 also dated 22/12/2004. Appeal No. C/190/2005 pertains to valuation dispute regarding cigarettes manufactured by the appellant and Appeal No. E/191/2005 pertain to identical valuation dispute of smoking mixture.The period of dispute in both the appeals is 1/31973 to 28/2 .....

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81 filed by the department under which the matter was remanded for finalization of claims of the appellants in the light of MRF Ltd.s case [ 1995 (77) ELT 433 (S.C.) . That both the disputes were resolved by the Apex Court before which Show Cause notices were issued to the appellants, with respect to Munger factory manufacturing cigarettes and smoking mixture for disallowing various expenses/extra consideration recovered by whole sale dealers (WD). Secondary whole sale dealers under Section 4 ( .....

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eeding Paragraphs- (a) the company and its WDs are not related persons within the meaning of Section 4 (4) (c) of the Central Excise & Salt Act, 1944; [para 11.6] (b) the price(s) at which the Company sold the cigarettes to its WDs was not the sole consideration for the sale; [para 12,13] (c) the assessable value (s) of the cigarettes has to be determined in accordance with the provisions of Rule 5 of the Central Excise (Valuation) Rules, 1975;[para 13.1] (d) for the purpose of determining t .....

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rom the advertisement and sales promotion expenses and interest, while adding these to the price; [para 15.2] 2.2 That various jurisdictional officers in-charge of the factories were directed to finalise the pending provisional assessments in view of the Order-in-Original dated 10/4/1986 passed by the Director General. That for this purpose of finalization of provisional assessment and quantification of duty CBEC directed Principal Collector, Calcutta in terms of D.G.s order to get the matter e .....

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is provisional & would be finalized only after the decision of PME case pending in Supreme Court (SLP No. 2901/1981). That this dispute was settled by Apex Court by an order dated 29/3/1996 confirming the decision of Tribunal, given under order No. 61-65/94-A dated 18/3/1994, with respect to Freight Administration Charges. 2.3 That after the issue was decided by D.G. under Order-in-Original No. 1/1986 dated 10/4/1981, two show cause notices dated 2.7/1987 and 3/7/1981 were issued to the app .....

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ate evasion of duty and the suppressed potion of the price which was kept in the hands of the WB by creating an artificially high gross profit margin termed as Generation was retained in the hands of the WDs, directly and indirectly monitored and controlled by ITC, and utilized for ITCs own purpose and part of such additional margins was received back by ITC and a part of such margin spent by WDs as per ITCs instruction. (b) ITC fixed the trade prices and margins beyond the of WDs, i.e. for .....

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l cover for flow back of interest margin generated (part of variable margins) ITC devised a scheme and implemented from July 1, 1980; known as Cash Security Deposit Scheme, which was compulsory and made a provision for the WDs for payment of interest under the CSD Scheme by providing additional margin called interest margin. This scheme enabled to give a cover for the flow back of large amounts out of the WDs margin generated by ITC at their hands as interest on debit balances/overruns . That on .....

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by including the Wholesale Dealers margin apportioned towards bank charges, ITC collected interest on CSD, advertisement and sales promotion, administrative charges and BTL margins claimed for assessment from time to time in the value of cigarettes for the purpose of assessment of duty. 2.4 That similar show cause notices were also issued to other four factories of ITC by the respective jurisdictional Collectors of Central Excise. All the show cause notices were , however, assigned by CBEC to th .....

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erty to utilize any material collected by the Department and such material can be used as independent material to support final assessment. (iii) The Assistant Commissioner is further directed to intimate the Collector of Central Excise, Delhi, as soon as he completes finalization of the said provisional assessment and subject to the fulfilment of the other directions given in his Order. After that, Show Cause Notice dated July 2, 1987 and July 3, 1987 will be taken up for adjudication by the Co .....

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inalisation of assessments. 2.6 That a show cause notice dated 18/3/1997 was issued to the appellant by ACCE, Bhagalpur for the period March 1973 to February, 1987 and finalization of provisional assessments was done by an ex- parte order dated 13/10/1997. This order of the ACCE, Bhagalpur was set aside by CCE (A) by Order-in-Appeal dated 11/11/1998 and matter remanded to ACCE, Bhagalpur, interalia, to decide the issue by following the ratio laid by Supreme Court in MRF case. That after issue of .....

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were the following:- (i) PME Charges (ii)Freight Administration Charges (FAC) (iii)Bank Charges (iv)Interest on Cash Security Deposit (CSD) (v) Interest on excess of CSD (vi)Advertisement & Sales Promotion (vii)Below the line expenses (viii)Interest on Investments (WD) (IX)Interest on Trading 2.8 That provisional assessments of all other units have been finalized by jurisdictional AC/DCs at Parel, Bangalore & Kidderpore also and the issues of PME charges, FAC, CSD & Interest on Inv .....

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tter may be remanded to the Adjudicating authority to decide the issues; of Bank Charges, Interest in excess of CSD. Advertisement of Sales Promotion, Below the line Expenses (BTL) and interest on trading; on the basis of orders passed by other jurisdictional AC s /DC s and the ratio of cases decided by Supreme Court. It was also the case of the appellant that method of calculation of duty should also be the same what other jurisdictional AC s/DC s have followed and not the methodology adopted b .....

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