TMI Blog2019 (3) TMI 855X X X X Extracts X X X X X X X X Extracts X X X X ..... half of raw material supplier, the assessable value has to be determined taking into account all the expenses including the manufacturing/ processing profits incurred upto the point of clearance from the premises of job worker. Further the value of the goods cleared by a job worker/ processor will be intrinsic value of the same/ similar or like goods cleared from the premises of the job worker. Whether extended period of limitation as proviso to Section 11A(1) of Central Excise Act, 1944 can be invoked in the facts and circumstances of this case? - Held that:- In the present case there is misdeclaration of value by the appellant - In case of M/s NTPC, Commissioner has not recorded any finding for invoking or not invoking the extended period of limitation - the matter remanded back to Commissioner for recording a specific finding in this respect after considering all the evidences as available on record. Whether penalty under Section 11AC justifiable in the facts of the present case? - Held that:- It is now settled principle in law that penalty under Section 11AC is justified in case where the provision of extended period of limitation as per proviso to section 11A(1) is held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1944. 3) I order recovery of interest at appropriate rate on the confirmed demand of ₹ 9,14,925/- (Rupees Nine Lakhs Fourteen Thousand Nine Hundred and Twenty Five only) from the assessee under the provisions of Section 11AB of the Central excise Act, 1944. 4) I impose a penalty of ₹ 9,14,925/- (Rupees Nine Lakhs Fourteen Thousand Nine Hundred and Twenty Five only) from the assessee under the provisions of Section 11AC of the Central Excise Act, 1944. 5) I impose a penalty of ₹ 3,00,000/- (Rupees Three Lakhs only) on Shri T U Shenava, Managing Director of M/s ITMPL under Rule 26 of the Central Excise Rules, 2002. 6) I impose a penalty of ₹ 1,00,000/- (Rupees One Lakh only) on Shri T V Shetty, Marketing Manager of M/s ITMPL under Rule 26 of the Central Excise Rules, 2002. 7) I impose a penalty of ₹ 20,000/- (Rupees Twenty Thousand only) on Shri Vasant Nadar, Authorized signatory and Factory Incharge of M/s ITMPL under Rule 26 of the Central Excise Rules, 2002. 8) If M/s Industrial Tubes Manufacturing P Ltd pay the Central Excise duty as confirmed against Sr No (2) above along with the interest as ordered at Sr No (3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod of limitation as provided for as per proviso to Section 11A(1), interest on duty short paid under section 11AB and for imposition of penalty under Section 11AC of the Central Excise Act, 1944. 2.4 Show Cause Notice was also issued to Appellant 2, 3 4 for imposition of penalty under Rule 26 of the Central Excise Rules, 2002. 2.5 After considering the submissions made by the Appellants 1 to 4, Commissioner adjudicated the show cause notices as per his order referred in para 1, supra. 2.6 Aggrieved by order of Commissioner Appellants 1 to 4 have filed this appeal before tribunal. 2.7 Aggrieved by the order of Commissioner to the effect of dropping demand of ₹ 66,42,033/- revenue has also filed the appeal. 3.1 Appellant 1, has in the appeal filed assailed the order of Commissioner, stating that i. They have cleared the finished goods after undertaking the job work on the material supplied by the M/s NTPC or M/s GIPCL. They have valued the goods as per the decision of Apex Court in case of Ujjagar Prints [1989 (39) ELT 493 (SC)]. ii. The value of the material supplied by the said client was taken as declared by the said customers. They added the job cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the account of the correctness of the said prices declared by them could not be made by them. Hence there was no reason for invoking extended period of limitation. xiii. No penalty could have been imposed on them unless it is proved that they have acted in deliberate defiance of law. xiv. Commissioner has failed to appreciate that they had been following this practice and the practice was subjected to scrutiny also. They had acted under bonafide belief that what was being done is in consonance with the law laid down. In such a case no penalty could have been imposed on them in view of the decisions in case of a. Cement Marketing [1980 (6) ELT 295 (SC)] b. Grasim [2005 (183) ELT 123 (SC)] c. Hero Cycles Ltd [2005 (191) ELT 938 (T)] d. G T Auto Industry [2005 (190) ELT 203 (T)] e. Krishna Mohan Beverage [2004 (167) ELT 460 (T)] 3.2 Appellant 2, 3 4 have more or less adopted the arguments made by the Appellant 1. They have stated the proceedings for imposition of personal penalties on the individuals are in nature of quasi criminal in nature and the burden to prove the alleged offence against the individual is on revenue. If such a burden is not discharge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds and not for job work. Price variation clauses in the said PO were inserted in direct purchase PO so that they received the price for goods as per the prevailing market rates of raw material. Price variation clause is only in respect of manufactured goods and not job work. vi. Minutes of meeting with GIPCL can at best be considered as exploring possibility of billing testing charges directly to GIPCL. Inspection charges and cost of transportation charges of scrap were added to the assessable value for calculation of duty liability. vii. Penal recovery in case of short receipt kept on higher side so that the vendors refrain from defaulting. Hence this price does not have any bearing on the assessable value of job work material. viii. Prices in MCX Index are only an indicative price and not actual price obtained in a transaction. ix. The contemporaneous prices from MCX Commodity Index obtained is of Heavy Scrap of Copper, Nickel Plates and Brass Sheet Cuttings and not of ordinary copper, nickel and brass scrap received in the form of used and worn condenser tubes of NTPC and GIPCL. x. Inward transportation charges have been included in the conversion cost in case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner should have determined the correct value of raw material on the basis of the evidences collected during the investigation and determined the assessable value both in respect of the job work done for M/s NTPC and M/s GIPCL. He also stated that the prices on MCX Index fairly represent the price of metals on the particular day of transaction and they provide a reasonable basis for determination of the correct value of metal/ metal scrap at any period of time. By mis-declaring the price of raw material Appellants have deliberately suppressed the assessable value of the finished goods cleared by them with intention to evade/ short pay the duty, thus extended period of limitation as per proviso to Section 11A(1) has been rightly invoked. For the same reason he submits that penalty under section 11AC on Appellant 1 is justified and also the penalties under Rule 26 on Appellants 2, 3 4. 5.1 We have considered the submissions made in the appeals and during the course of arguments. 5.2 Following issues are framed for our consideration in this case. i. What would be principles of valuation of the goods under consideration? ii. What should be the value of raw material in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n job-work were earlier assessed under the residuary Rule 7 of the erstwhile valuation Rules of 1975 read with rule 6(b) read with the Apex Court decisions referred to above. 3. Under the new valuation provisions, introduced with effect from 1.7.2000, there is no departure from the principles laid down by the Apex Court in the above two decisions, in respect of goods manufactured on job-work basis. In other words goods manufactured on job-work basis after 1.7.2000 will continue to be valued in the same manner as they were being valued before 1.7.2000. In other words, after 1.7.2000, in respect of goods manufactured on job-work basis, valuation would be governed by Rule 11 of the new valuation Rules of 2000 read with rule 6 read with the above two decisions of the Apex Court. Since the facts are not in dispute we are of the view that in the present case the valuation of the finished goods has to be determined in manner as clarified by the Board in terms of the above circular. 5.4 What should be the value of raw material in the case? In case of Ujagar Prints and Others v. Union of India and Others [1988 (38) E.L.T. 535 (S.C.)], Hon ble Supreme Court has held as fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the processes like bleaching, dyeing and printing etc. by independent processes, whether on their own account or on job charges basis, the value of the purposes of assessment under Section 4 of the Central Excise Act will not be the processing charges alone but the intrinsic value of the processed fabrics which is the price at which such fabrics are sold for the first time in the wholesale market. That is the effect of Section 4 of the Act. The value would naturally include the value of grey fabrics supplied to the independent processors for the processing. However, excise duty, if any, paid on the grey fabrics will be given proforma credit to the independent processors to be utilised for the payment on the processed fabrics in accordance with the Rules 56A or 96 D of the Central Excise Rules, as the case may be. Even the Referring Bench did not doubt the correctness of the inclusion in the assessable-value the cost of the Grey fabric and the processing charges. The Referring Bench held: We cannot accept the contention of the learned counsel on behalf of the petitioners and the appellants that the value of the grey cloth which is processed by the processor should no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis Supplied) The principles for the determination of assessable-value are laid down under Section 4 of the Act. Section 4 of the Central Excise Act envisages that the value of an article for the purposes of duty shall be deemed to be; (a) The wholesale cash price for which an article of the like kind and quality was sold or was capable of being sold at the time of removal of the article from the factory or premises of manufacture for delivery at the place of manufacture or; (b) Where such price was not ascertainable, the price at which an article of the like kind and quality was sold or capable of being sold at the time of removal of the article chargeable with duty. The nature of the excise duty is not to be confused with, or tested with reference to, the measure by which the tax is assessed. The standard adopted as the measure of assessment may throw light on the nature of the levy but is not determinative of it. When a statutory measure for assessment of the tax is contemplated, it need not contour along the lines which spell out the levy itself. , and a broader based standard of reference may be adopted for the purposes of determining the measure of the levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of value of the said goods under Section 4 of the said Act, to furnish information relating to the price at which the said manufacturer is selling the said goods and the person so authorised agrees to discharge all liabilities under the said Act and the rules made thereunder. A subsequent clarification was issued by the Apex Court, to the above referred decision as reported in [1989 (39) ELT 493 (SC)] stating as follows: In respect of the civil miscellaneous petition for clarification of this Court s judgment dated 4th November, 1988, it is made clear that the assessable value of the processed fabric would be the value of the grey-cloth in the hands of the processor plus the value of the job work done plus manufacturing profit and manufacturing expenses whatever these may be, which will either be included in the price at the factory gate or deemed to be the price at the factory gate for the processed fabric. The factory gate here means the deemed factory gate as if the processed fabric was sold by the processor. In order to explain the position it is made clear by the following illustration: if the value of the grey-cloth in the hands of the processor is ₹ 20/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssues raised by the appellant. The appellant was a processing house which inter alia processed the grey fabrics. Amongst other issues which were raised, one of the contentions urged on behalf of the appellant there in was that the grey fabric which was given for processing continued to belong to the customer and the processing house was only entitled to charge the processing charges. It was the case of the appellant therein that the price of the grey cloth, of which the processing house had never become the owner, could never be taken into consideration in arriving at the assessable value. 10. Repelling this contentions, this Court noticed that according to Section 4 of the Central Excise Act, the value of an article for the purposes of duty shall be deemed to be the wholesale cash price for which an article of the like kind and quality was sold or was capable of being sold at the time of removal of the article from the factory or premises of manufacture. It was then observed that in the case of processing houses they became liable to pay excise duty not because they were the owners of the goods but because they caused the manufacture of the goods. 11. It was he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cisions it is quite evident that in case of job work, done on the behalf of raw material supplier, the assessable value has to be determined taking into account all the expenses including the manufacturing/ processing profits incurred upto the point of clearance from the premises of job worker. Further the said decisions make it clear that value of the goods cleared by a job worker/ processor will be intrinsic value of the same/ similar or like goods cleared from the premises of the job worker. It was following the said principle that Apex Court has rejected the contention of the petitioner/ appellants therein to the effect that assessable value should be the processing charges only. The said decision of the Apex Court do not allow the supplier of raw material or the processor (job worker) to declare imaginary or unsustainable values of the raw material supplied specifically in a case where the supplier of raw material or the person getting the job work done is not entitled to CENVAT Credit of duty paid on finished/ processed goods. Examining from the above premises, we examine the facts of present case. In case of the goods processed on the behalf of a. M/s NTPC, the landed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them that the price of fresh tubes at that time i.e. in the year 1990-91 was ₹ 1,60,000/- per MT. They had thus declared the same as the price of the raw material being supplied by them for job work. The price declared on the basis of purchase price of the brass tubes in the year 1990-91 cannot be the price of the same brass tubes in the year 2006-07. Even M/s GICPL has admitted that the price of the raw material supplied by them as per the offer documents was ₹ 388/- per kg. The actual price of the same goods if determined on the basis of average prices of the said goods prevailing as per MCX Index was much higher. Appellants in the case of goods manufactured by them on their own account paid duty on assessable value arrived at on the basis of the rate published declared by MCX. Appellant 1 was retaining the excess raw material supplied by the said customers free of cost and the value of the excess raw material retained by them was an additional consideration flowing to the appellant 1, hence the monetary value of such additional consideration was to be included in the value of finished goods. The same goods being cleared by the Appellant-1 when manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determining the value of the same goods when supplied for job work. Hence we do not find any merits in the findings of Commissioner in para 46 of his order referred above. f. Commissioner has in para 47, 48 and 49 of his order recorded as follows: 47. As regards the job work for M/s. GIPCL, the issue is regarding value of ₹ 225/- per kg as claimed by ITMPL for ₹ 349.02 per kg as alleged in the SCN. M/s. ITMPL vide their technical bid dated 20.07.06 had quoted rate of ₹ 386.02 per kg for conversion of scrap brass tubes into brass tubes. Shri T.V. Shetty, Marketing Manager of M/s. ITMPL vide his statement dated 21.07.08 stated that on the basis of prevailing market price at that time, they arrived at the material cost @ ₹ 388/- per kg of Central Excise purpose. However, M/s. GIPCL has declared the landed cost of old brass tubes at ₹ 160/- per kg. 48. On being asked by the investigation for the basis for arriving at ₹ 160/- per kg. M/s. GIPCL had replied that the said rate has been arrived at the on the basis of the value of tubes purchased by them M/s. BHEL in 1990-91 and they did not ascertain the cost of raw material at the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facture or mechanical working of metals, and metal goods definitely not usable as such because of breakage, cutting-up, wear or other reasons. Hon ble Supreme Court has in case of LML Ltd [1997 (94) ELT 273 (SC)] held 10 . It is quite evident that those portions of cut sheets which are used in the manufacture of ancillary items cannot be regarded as waste and scrap. As per the aforesaid definition it is only that `waste and scrap of iron or steel which is fit only for the recovery of metal or for use in manufacture of chemicals which could fall under that category. From the above it is quite evident that the value of the raw material which was supplied should have been determined on the basis of the metal recovery from the said scrapped tubes. The metal content read with the available price of the metal as per MCX would have been the best proxy for determination of the value of the scarp supplied. h. In our view Commissioner should have rejected the declared value of raw material supplied by M/s NTPC and M/s GICPL and determined the value of same by applying the principles consistent with the norm of metal recovery from the waste tubes supplied for reprocessing. In our v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section 11A. That is what Dharamendra Textile decides. Hence we hold that penalty under Section 11AC is imposable in the present case. Since for determination of value and limitation issues in respect of supplies made to M/s NTPC is being remanded to the Commissioner, we are of the view that Commissioner should determine this aspect after rendering a finding on the other two issues. Thus matter in this respect is remanded back to the Commissioner for redetermination of quantum of penalty under Section 11AC. 5.7 Whether penalty under Rule 26 of Central Excise Rules, 1944 justifiable on the officers of the Company in the present case? Commissioner has in para 50 and 51 of his order recorded his findings in this regard and has held that the officers working in the company are liable to penalty under Rule 26 of the Central Excise Rules, 2002. Tribunal has in case of Goyal Ispat [2017 (6) GSTL 210 (T-Chennai)] held as follows: 15. Appeal No. E/790/2007 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... landestine removals of their job-worked goods. This being the case, his acts and omissions surely fall within the ambit of Rule 26 and will get exposed to penalty therein. Considering that the appellant was the fulcrum of the Actio illicita in causa by GIL, resulting in short payment of differential duty of ₹ 1,81,76,436/-, the penalty of ₹ 10,00,000/- (Rupees Ten lakhs only) under the said Rule 26 on this appellant is very much proportionate to his acts and role and justified, hence there shall be no interference in the matter. Appeal filed by the appellant Shri Ghisulal Kothari will therefore have to be dismissed. We order accordingly. 16 .In Appeal No. E/791/2007, filed by Shri J. Balaji, Excise Manager of GIL, the same contentions with regard to non-imposability of penalty under Rule 26 ibid raised by the other appellant Shri Ghisulal Kothari (Appeal E/790/2007) has been reiterated which, as already discussed supra, is a misconceived argument. On the other hand, the appellant as Excise Manager, cannot claim that he was unaware of the modus operandi and affairs of GIL which resulted in such large scale evasion of duty. This being so, relatively low penalty o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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