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TMI Blog2020 (1) TMI 894X X X X Extracts X X X X X X X X Extracts X X X X ..... Area, MIDC, Mahapa, Navi Mumbai under Section 11A(4) of the Central Excise Act, 1944. However I reduce the demand to the extent of Rs. 8,39,41,110/- (Rupees Eight Crore Thirty Nine Lakhs Forty One Thousand One Hundred and Ten Only) out of the total demand of Rs. 8,39,55,676/- (Rupees Eight Crore Thirty Nine Lakhs fifty Five Thousand Six Hundred and Seventy Six Only) only on the grounds of the duplication of demand as discussed in para 17 & 18 of the order. Hence, the balance confirmed amount is Rs. 14,500/- (Rs Fourteen Thousand Five Hundred Sixty Six Only) 24. I order for recovery of interest at appropriate rate under Section 11AA of the Central Excise Act, 9144 on the duty amount confirmed above from S P Fabricators Pvt Ltd., A-417, TTC Industrial Area, MIDC, Mahapa Navi Mumbai. 25. I impose a penalty equivalent to the amount of demand confirmed of Rs. 14,566/- (Rs Fourteen Thousand Five Hundred Sixty Six Only) upon M/s S P Fabricators Pvt Ltd., A-417, TTC Industrial Area, MIDC, Mahapa Navi Mumbai under Section 11AC(1) (c) of the Central Excise Act, 1944." 1.2 Appeal No E/85261/2016-DB arising out of order in original No Belapur/13/Belapur-IV/R-I/Commr/SFA/2015-16/ dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. The same is illustrated in the following table. Sr No Period Amt of demand involved in the SCNs confirmed vide OIO dated 30.10.2015 Amount of demand in the present SCN Remarks, whether overlapped or not 1 2008- 09 3,11,39,331/- - Not overlapped since the period is not covered in the present SCN 2 2009- 10 4,76,24,804/- 4,76,24,804/- Overlapped 3 2010- 11 1,58,11,649/- 1,58,11,649/- Overlapped 4 2011- 12 1,03,05,166/- 1,03,05,166/- Overlapped 5 212- 13 1,01,99,491/- 1,01,99,491/- Overlapped Total 11,50,80,441/- 8,39,41,110/- 2.1 Appellants are engaged in providing works contract service which includes supply of Aluminium door & window and installation of the same at the Customer premises. The goods used for providing the service are manufactured at the appellants factory at Mahapa, Navi Mumbai. 2.2 The goods are valued by the Appellants in terms of Rule 8 read with Rule 11 of Central Excise Valuation Rules, 2000 as these goods are not sold independently and the contract entered with the customers is composite contract having composite rate for supply of goods as well as installation of the said goods. 2.3 A show cause Notice dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Excise Act, 1944; * While the Show Cause Notice was issued demanding duty in respect of transportation charges from their premises to the customer premises in term of Section 4(1)(a) read with Rule 5 of Central Excise Valuation Rules, 2000, the demand has been confirmed by invoking the Rule 8 of Central Excise Rules, 2000 on the basis of Cost Audit report prepared by the J D Cost. Hence the order dated 03.10.2015 has travelled beyond the scope of show cause notice and is bad in law as per following decisions:- * Ballarpur Industries Ltd [2007 (215) ELT 489 (SC)] * Brindavan Beverages 9P) Ltd [2007 (213) ELT 487 (SC)] * Precision Rubber Industries 9P) Ltd [2016 (334) ELT 577 (SC)] * Reliance Ports and Terminals Ltd [2016 (334) ELT 630 (Guj)] * R K Construction [2016 (410 STR 879 (T-Mum)] * Drishty Communication Pvt Ltd [2018 (10) TMI 1326-CESTAT-AHMD] * Once Commissioner determines that Section 4(1) (a) will be applicable (Para 51) then the demand could not have been confirmed under Rule 8 of Central Excise Valuation Rules, 2000. * In case the demand is to be confirmed under Rule 8 then freight element cannot be included in the assessable value as has been held in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrect value. It was on the basis of the cost audit report that the demands have been made in against the appellants. 4.1 We have considered the impugned orders along with the submissions made in appeal and during the course of arguments. 4.2 By the Adjudication order dated 03.10.2015/ 04.11.2015 subject matter of the Appeal No E/85261/2016-DB, Commissioner was adjudicating the Show Cause Notice dated 27.11.2016. The para 5, 6 and 7 of the Show Cause Notice are reproduced below: "5. It therefore appears that the assessee have undervalued the said goods which resulted in short payment of Central Excise Duty in contravention of the provisions of Section 4(1)(a) of the Central Excise Act, 1944 read with Rule 5 of Central Excise Valuation (determination of Price of Excisable Goods) Rules, 2000 and Rule 4 read with Rule 8, Rue 6 of Central Excise Rules, 2002 in as much as a) They have failed to arrive at correct assessable value of the goods transported to their site as required under Section 4(1)(a) of the Central Excise Act, 1944 read with Rule 5 of Central Excise Valuation (determination of Price of Excisable Goods) Rules, 2000. b) They have failed to properly assess the dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 69,33,038/- (Rs Sixty Nine Lakhs Thirty Three Thousand and Thirty Eight only) ( Basic 67,21,395, Edu Cess 1,34,429/-, SHEC 67214/-) short paid by the assessee as shown in detail in Annexure A to the Show Cause Notice, for the period November 2008 to March 2013 should not be demanded and recovered from them under proviso to Section 11(A)(1) (Now Section 11A(5) w.e.f 08.04.2001) of the Central Excise Act, 1944. b) Interest under Section 11AB (Now Section 11AA) w.e.f 08.04.2001) of the Central Excise Act, 1944 should not be demanded and recovered from them. c) Penalty should not be imposed upon them under the provisions of Section 11AC (Now Section 11AC(1)(a) w.e.f 08.04.2001) of the Central Excise Act, 1944 and / or Rule 25 of Central excise Rules, 2002." 4.3 In para 46 of his Order, Adjudicating Commissioner records the issue involved in the Show Cause Notice correctly and as follows: "46 The issue involved in the present case is that whether the transportation cost of the goods transported from Mahapa factory to the site of installation is includable for payment of Central Excise duty in terms of Explanation 2 to Rule 5 of Central Excise Valuation (Determination of Price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instant case, initially issue of undervaluation was restricted to the non-inclusion of transportation cost from transportation of goods from factory to sites. The CAS 4, Trial Balances and various information/documents submitted by the assessee have been verified by the J.D. Cost and he has submitted his report after taking into consideration all the elements of cost of production and submitted his verification report regarding the differential duty liability. Accordingly, the duty liability in the matter has been enhanced from Rs. 69,23,038/- to Rs. 11,50,80,441/- for the period Nov.2008 to March-2013 in respect of SCN No. V/Adj(SCN)15-105/Commr/2013/Bel dated 27/09/2013. 57. I find that the assessee's senior representatives have participated in the whole process of preparation of report right from the beginning up to the end. The scope of the examination/verification was very well known to them right from the beginning. During the entire course of preparation of the verification report, they have not made any argument about addition of other elements of overheads into the cost of production and enhancement of scope of the Show Cause Notice in the matter. The verification o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uding, we may mention that, in the present case, the second and the third show cause notices are alone remitted. The first show cause notice dated 21-5-1999 is set aside as time-barred. However, it is made clear that Rule 7 of the Valuation Rules, 1975 will not be invoked and applied to the facts of this case as it has not been mentioned in the second and the third show cause notices. It is well settled that the show cause notice is the foundation in the matter of levy and recovery of duty, penalty and interest. If there is no invocation of Rule 7 of the Valuation Rules 1975 in the show cause notice, it would not be open to the Commissioner to invoke the said rule." In case of Gas Authority of India Ltd [2008 (232) ELT 7 (SC)], Hon'ble Supreme Court held as follows: "6. We are not required to examine the above issue for the simple reason that on the facts of the present case, as can be seen from the extract quoted from the show cause notice, which is the foundation of the Demand made by the Department, Lean Gas is a by-product which emerges when LPG is extracted from natural gas. If the case of the Department itself in the show cause notice was that Lean Gas is a by-product, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions laid down under Rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 read with Rule 4 and Rule 6 of Central Excise Rules, 2002 for the semi finished goods cleared to their sister units at Bangalore and Chennai which was further used for captive consumption by them in the manufacture of finished goods and has resulted in short payment of duty. The CAS-4 verification reports were received from the JD (Cost) Central Excise, Mumbai Zone-II vide his letter No.JDC/BELAPURISP Fab/CAS-4/2014/368 dated 19.12.2014 and on 05.05.2015. 7. In terms of the Section 3 of the Central Excise Act, 1944 read with Section 4 of the Central Excise Act, 1944 the duty of excise shall be chargeable on any excisable goods with reference to their value and in case where the goods are not sold, the value shall be determined in such manner as may be prescribed. 8. It further appears that the assessee was aware of the provisions under Section 3 of the Central Excise Act, 1944 read with Section 4 of the Central Excise Act, 1944. The assessee were undervaluing the goods cleared to the sister units at Bangalore and Chennai. The assessee was not at liberty to asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Divisional DC/AC was requested to verify this aspect of valuation by obtaining product-wise CAS 4 from the assessee for the Mahape unit and to take the necessary action to safeguard the Govt. revenue, if any discrepancies are noticed. 14. Therefore, CAS4 certificates and trail balance for the period Dec.2008 to March 2013, FOR Mahape unit submitted by the assessee were forwarded to J.D. (Cost) and made a request to verify the same and ascertain the correctness of the same in order to verify the genuineness of the practice of valuation adopted by the assessee in respect of clearances to their sister units as pointed out by the Audit Officers. After various correspondence by the assessee to J.D. (Cost) and verifying the information/documents submitted by the assessee, the J.D.(Cost) vide his letter dated 05.05.2015 has given his final verification report in this regard. In his report, he has arrived cost of production and Central Excise duty for the year 2010-11 to 2012-13. He has calculated the differential Excise duty on the basis of his verification which is as under- 1. 2009-10 : Rs. 4,76,24,804/- 2. 2010-11 : Rs. 1,58,11,649/- 3. 2011-12 : Rs. 1,03,05,166/- 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocess and handing over the communication, report originating from J. D. Cost. Therefore, I hold that the entire process constitutes the process akin to issuance of Show Cause cum Demand Notice for determination of duty liability. In view of my above discussion, I find that in respect of undervaluation arising out - of non-inclusion of various elements including transportation cost of the goods transported from factory to sites in the cost of production, based on the verification report given by the J.D. Cost, there is no need to issue separate Show Cause cum Demand notice to the assessee in the matter and the same requires consideration in the present Show Cause cum Demand Notice. Therefore, I am compelled to accept the J. O. Cost's verification report in totality, and hold that various elements of overheads including transportation charges from factory to sites (as per J. O. Cost verification report in the matter) have not been included in the cost of production 1 assessable value by the assessee during the period from 2008- 09 to March 2013 resulting into short payment to the tune of Rs. 11,50,80,4411- during the period from Nov-200B to March- 2013." 4.8 In para 17 (refe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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