TMI Blog2019 (8) TMI 382X X X X Extracts X X X X X X X X Extracts X X X X ..... not described as wafer biscuits by the assessee themselves either to the department or in any of the documents or to the ultimate consumers on their wrappers. Thus, we find nobody in the chain of trade from the manufacturer to the ultimate consumer know the products as wafer biscuits but know them only called as coated wafers - It is not for this Tribunal to enlarge the scope of an exemption notification meant for wafer biscuits to cover coated wafers as well - Even if it is held that wafers could possibly be broadly considered as wafer biscuits, the matter is definitely not free from doubt/ambiguity - the assessee is not entitled to the benefit of exemption notification No. 03/2006. What value should be adopted for reckoning the Central Excise duty? - inclusion of Dealer s margin, RD Markup and Post Manufacturing expenses in assessable value - HELD THAT:- It is not in dispute that the assessee is manufacturing the goods on job work basis and are therefore covered by Rule 10A of Central Excise Valuation (Determination of price of Excisable Goods) Rules, 2000 - As far as the dealer s margin is concerned, in a commodity which costs ₹ 2/- per piece, it is inconceiva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... violation of act of Rules with an intent to evade payment of duty, have not been established - penalty do not sustain. Appeal filed by Little Star are partly allowed as above by way of remand for the limited purpose of verification of nature of post manufacturing expenses and re-determining the duty and interest excluding any demand for extended period of limitation. - Appeals Nos. E/1768/2012, E/1781/2012, E/20234/2014, E/20235/2014, E/21160/2015, E/21173/2015 - A/30714-30719/2019 - Dated:- 6-8-2019 - Mr. S.S. Garg, Member (Judicial) And Mr. P.V. Subba Rao, Member (Technical) Shri V. Lakshmi Kumaran, Sr. Advocate And Sh. Vipin Verma, Advocate for the appellant Shri V.R. Pawan Kumar And Sh. C. Mallikharjun Reddy, Supdts./AR for the Respondent. ORDER Per: Mr. P. Venkata Subba Rao 1. These six appeals pertain to the same issue and hence are being disposed of together. Appeal No. E/1768/2012 is filed by M/s Little Star Foods Pvt. Ltd. (hereinafter referred to Little Star) while appeal No. E/1781/2012 is filed by Mondelez India Foods Pvt. Ltd. (hereinafter referred to Mondelez) (prev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with glucose energy and supplies them to Mondelez on job work basis. The products are, thereafter, sold by Mondelez from their depots through their marketing chain. Mondelez is the brand owner of the products. The entire manufacture by Little Star is as per the specifications and directions of Mondelez in their agreement. Being the manufacturers of the products, Little Star discharges Central Excise duty. Little Star claimed the classification of their products under 1905 3290 of Central Excise tariff. The relevant entry is as follows: 1905 BREAD, PASTRY, CAKES, BISCUITS AND OTHER BAKERS WARES, WHETHER OR NOT CONTAINING COCOA; COMMUNION WAFERS, EMPTY CACHETS OF A KIND SUITABLE FOR PHARMACEUTICAL USE, SEALING WAFERS, RICE PAPER AND SIMILAR PRODUCTS Kg Nil 1905 10 00 Crispbread Kg Nil 1905 20 00 -Gingerbread and the like -Sweet biscuits; waffles and wafers: Kg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the department did not contest either classification by the appellant or the fact that they are not covered by Section 4A but are covered by Section 4 for the purpose of valuation. The second show cause notice only sought to deny the exemption notification claimed by the appellant and also sought to value the goods under section 4 of Central Excise Act, 1944 as per the price list denying some exclusions claimed by the appellant. Both the show cause notices were decided by Ld. Adjudicating authority vide O-I-O No. 09/2012-Adjn. (Commr.) CE, dt. 26.03.2012. He dropped the proceedings in pursuance of the first show cause notice. Therefore, the dispute with regard to the classification and valuation under section 4A instead of under Section 4 have reached finality. The adjudicating authority has also held that their products are classifiable under chapter heading 1905 3290 and that their products are not covered under section 4A and therefore are chargeable as per valuation under section 4. The subsequent show cause notices are periodical demands which have been confirmed by the Adjudicating authority and are in challenge in these appeals. 5. Accordingly, the differenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be levied based on the value, the value shall be determined as per Section 4 of Central Excise Act and the Central Excise Valuation Rules. (f) Where any duty of excise has not been levied or paid or short levied or short paid or erroneously refunded, the same can be recovered by raising a demand under Section 11A of the Act. Further, if such non-levy, short-levy, non-payment, short-payment or erroneous refund is by reason of fraud or collusion or any wilful misstatement or suppression of facts or contravention of any provision of the Act or Rules made thereunder with intent to evade payment of duty, the demand can be raised within an extended period of limitation of five years from the relevant date. 7. In these appeals, it is not in dispute that the excisable goods have been manufactured and they are leviable to Central Excise duty at the rates set forth in the Central Excise Tariff and that the valuation of these goods is covered by Section 4 read with Central Excise Valuation Rules. The initial contention of the Revenue in the first show cause notice that these goods are notified under Section 4A and hence chargeable to duty based on retail sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Table aforesaid. Explanation. for the purposes of this notification, the rates specified in column 4 of the said Table are ad valorem rates, unless otherwise specified. TABLE S.No. Chapter or heading or sub heading or tariff item of the First Schedule Description of excisable goods Rate Condition No. (1) (2) (3) (4) (5) 19 1905 32 19 or 1905 32 90 Wafer biscuits 4% -- 9. Ld. Counsel submits that the classification of their product is not in dispute and the department has accepted the classification under chapter heading 1905 32 90 and there is no condition for availing the benefit of this exemption notification. The description of the product for which the exemption is available is wafer biscuits whereas they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng papers together. VERB [WITH OBJECT] archaic Fasten or seal (a letter or document) with a wafer. Derivatives wafery adjective. Origin Late Middle English from an Anglo-Norman French variant of Old French gaufre (see goffer), from Middle Low German wāfel waffle ; compare with waffle. Compare with WAFFLE. He further cited description of waffles and wafers in the HSN as under: Waffles and wafers, which are light fine bakers wares baked between patterned metal plates. This category also includes thin waffle products, which may be rolled, waffles consisting of a tasty filling sandwiched between two or more layers of thin waffle pastry, and products made by extruding waffle dough through a special machine (ice cream cornets, for example). Waffles may also be chocolatecovered. Wafers are products similar to waffles. 10. On the question of valuation, he would take us through the impugned Order-in-Original No. 09/2012-Adjn. (Commr.) CE, dt. 26.03.2012 and explain that in their case there is no transaction value because they do not sel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her. Explanation.-In this clause- (i) inter-connected undertakings shall have the meaning assigned to it in clause (g) of section 2 of the Monopolies and Restrictive Trade Practices Act, 1969 (64 of 1969); and (ii) relative shall have the meaning assigned to it in clause (41) of section 2 of the Companies Act, 1956 (1 of 1956); (c) place of removal means - (i) a factory or any other place or premises of production or manufacture of the excisable goods; (ii) a warehouse or any other place on premises wherein the excisable goods have been permitted to be deposited without payment of duty; (iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory;] from where such goods are removed; 4[(cc) time of removal , in respect of the excisable goods removed from the place of removal referred to in sub-clause (iii) of clause (c), shall be deemed to be the time at which such goods are cleared from the factory; (d) transaction value means the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause (i) or (ii), the provisions of foregoing rules, wherever applicable, shall mutatis mutandis apply for determination of the value of the excisable goods : Provided that the cost of transportation, if any, from the premises, wherefrom the goods are sold, to the place of delivery shall not be included in the value of excisable goods. Explanation. - For the purposes of this rule, job-worker means a person engaged in the manufacture or production of goods on behalf of a principal manufacturer, from any inputs or goods supplied by the said principal manufacturer or by any other person authorised by him. 12. Little Star have, indeed, paid the duty on the value at which the principal manufacturer Mondelez has sold the goods to their buyers. Since Mondelez gets such goods manufactured by a large number of firms across the country, they have a uniform method of pricing the goods which is set out in the price list prepared by them. This price list has been re-produced in the impugned Order-in-Original No. 09/2012-Adjn. (Commr.) CE, dt. 26.03.2012 at para 20.13, which is as follows: 13. The entire demand has been raised based on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in their own case (Cadbury India Limited) to be admissible deduction as reported at [2015(323) ELT 606 (Tri.-Del.)]. He also produces copies of agreements which they had with their re-distributors in support of his contention that they indeed had re-distributors who were given a margin. 14. As far as the first period covering October 2009 to September 2010 is concerned, he would submit that the first show cause notice issued by the Department on 08.11.2010 and the second one on 08.11.2011 invoking the extended period of limitation under section 11A. Section 11A of Central Excise Act permits invocation of extended period only if the elements necessary for invoking the extended period namely fraud, collusion, wilful misstatement, suppression of facts or violation of the provisions of the Act or Rules with an intent to evade payment of duty are present. It is on record that all facts are presented before the department. The returns were filed periodically and honestly by them. The first show cause notice dated 08.11.2010 was issued within the normal period of limitation proposing to classify the products under different tariff heading and valued them as per Section 4A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [Provided that where any proceeding for the person liable to pay duty have been concluded under clause (a) or clause (d) of sub-section (1) of section 11AC of the Act in respect of duty, interest and penalty, all proceedings in respect of penalty against other persons, if any, in the said proceedings shall also be deemed to be concluded.] [(2) Any person, who issues- (i) an excise duty invoice without delivery of the goods specified therein or abets in making such invoice; or (ii) any other document or abetsin making such document, on the basis of which the user of said invoice or document is likely to take or has taken any ineligible benefit under the Act or the rules made there under like claiming of CENVAT credit under the CENVAT Credit Rules, 2004 or refund, shall be liable to a penalty not exceeding the amount of such benefit or five thousand rupees, whichever is greater.] 16. Ld. Counsel would submit that none of the elements necessary for invocation of Rule 26 as above have been proved or established in their case, therefore the penalty imposed on Mondelez under Rule 26 needs t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not being done for want of seizure of the goods) and consequently, CIL would be liable for penalty as provided under the said Rule. 17. He would assert that the only dispute is regarding the interpretation by the department as opposed to the interpretation of the appellants and therefore no penalty can be imposed under Rule 26 of Central Excise Rules, 2002. 18. Ld. DR reiterates the statements and arguments made in the impugned order. He agrees that the only two points of dispute on merit are (a) whether the appellants are entitled to the benefit of exemption notification 3/2006 (Sl.No. 19) for Cadbury perk with glucose energy manufactured by them and (b) whether the dealer s margin, re-distributors margin, post manufacturing expenses have to be included in the assessable value or otherwise. There is no dispute regarding the classification of the product or that it deserves to be asserted under section 4 and Rule 10A of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. On the first point of availability of exemption notification, he asserts that a plain reading of the exemption notification shows that it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. The judgments were not in the context of the new Central Excise tariff which is a detailed and elaborate one nor is it in the context of interpreting the exemption notification. He further argues that exemption notifications were interpreted in a number of ways, some strictly and some liberally by various judicial fora including by the Hon ble Apex Court. In view of the conflicting decisions, the matters were referred to the Constitutional Bench of Hon ble Apex Court in the case of Commissioner of Customs (Import) Mumbai vs. Dilip Kumar Company others as reported in [2018-TIOL-302-SC-CUS-CB)] in which the Hon ble Apex Court held as follows: To sum up, we answer the reference holding as under: (1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. (2) When there is ambiguity in exemption which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ariff or on how to interpret the exemption notification. The interpretation of exemption notification has to be done strictly giving the benefit of any ambiguity in the exemption notification to the Revenue and against the assessee as has now been laid down by the Constitutional Bench of Hon ble Apex Court in the case of Dilip Kumar Company and others (supra). A plain reading of the exemption notification does not show that it is intended to cover all products covered by the tariff heading 1905 3290 or wafers (coated or uncoated) falling under tariff heading. It specifically includes only wafer biscuits falling under tariff heading. If the intention of the notification was to exempt wafers also, it would have said so. The assessees products are not described as wafer biscuits by the assessee themselves either to the department or in any of the documents or to the ultimate consumers on their wrappers. Thus, we find nobody in the chain of trade from the manufacturer to the ultimate consumer know the products as wafer biscuits but know them only called as coated wafers. It is not for this Tribunal to enlarge the scope of an exemption notification meant for wafer biscuits to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcisable goods. Explanation. - For the purposes of this rule, job-worker means a person engaged in the manufacture or production of goods on behalf of a principal manufacturer, from any inputs or goods supplied by the said principal manufacturer or by any other person authorised by him. 23. It is also not in dispute that the Little Star paid duty based on the values declared by Mondelez. These values are reflected in the price list discussed above. The only point of dispute are the three elements which the Ld. Adjudicating Authority sought to include in the assessable value i.e. the Dealer s margin, RD Markup and Post Manufacturing expenses. As far as the dealer s margin is concerned, the Ld. Adjudicating authroity felt that there is no dealer and the dealer s premises are the assessee s own premises. From the sample contract with the dealer produced by the Ld. Counsel for the appellant before us, we are convinced that there are indeed dealers. Therefore the dealer s margin cannot be included in the assessable value. We further find that in a commodity which costs ₹ 2/- per piece, it is inconceivable that M/s Mondelez was selling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts or contravention of any provisions of the Act or the rules made there under with an intent to evade payment of duty. In the present case, we have already held with respect to the invocation of the extended period on limitation that these factors have not been established. Clearly, this is only a question of interpretation regarding the exemption notification and value. Therefore, the penalties imposed under Section 11AC need to be set aside and we do so. 28. As far as penalty under Rule 26 upon Mondelez is concerned, on a plain reading of this Rule (supra), we do not find any grounds to uphold the penalties imposed upon them (Mondelez), as we have already held that the elements of fraud, collusion, wilful misstatement, suppression of facts or violation of act of Rules with an intent to evade payment of duty, have not been established. In view of the above, the appeals are disposed of as under: ORDER (I) The benefit of Exemption Notification No. 3/2006 (Sl.No. 19) meant for wafer biscuits is not available to the appellant (Little Star) as their products are not wafer biscuits. (II) The dealer s margin and RD Mark ..... X X X X Extracts X X X X X X X X Extracts X X X X
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