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TMI Blog2021 (12) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... the consignment agents, the appellants had not determined the assessable value correctly in terms of Rule 7 of the Central Excise Valuation ( Determination of Price of Excisable Goods) Rules, 2000 ( hereafter, the Valuation Rules, 2000) and, accordingly, Show Cause Notice No 42/Commr/BOL/09 dated 16.10.2009 was issued to the appellants demanding differential duty of Rs. 4,57,03,268/- along with interest covering the period 1.4.2005 to 31.12.2008. Penalty was proposed under section 11AC of the Central Excise Act, 1944. 3. A second show cause notice No 57/Commr/BOL/09 dated 31.12.2009 was also issued covering the subsequent period January 2009 to August 2009 on the same issue, demanding a further amount of Rs. 57,22,992/-. 4. In the show cause notice there is also an allegation that the appellants had not included the transportation cost while determining the assessable value of goods sold from the premises of the consignment agents and there has been a consequent short levy. 5. In their replies to the show cause notices the appellants raised a number of issues both on facts and on law points. 6. The appellants submitted that they sell more than 50% of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in appeal against the said impugned Order. 10. Following submissions have been made by the appellants:- 10.1 The Annexures to the show cause notice dated 16.10.2009 do not provide any information as to from where they have got the details of the sale price at the consignment agents' end and the corresponding price at the factory gate on the same date and at or about the same time. Details which have been given in the 2nd show cause notice are not available in the first show cause notice. In other words, the demand raised and the charges made in respect of the first show cause notice are unsubstantiated. 10.2 Annexure C to the first Show Cause Notice is unwarranted as there is no separate demand of duty on account of freight charges. 10.3. In respect of the second Show Cause Notice covering the period from January 2009 to August 2009, it may be seen from the Annexures that only the invoices issued by the appellants have been taken into consideration and there is no mention of the corresponding sale invoices issued by the consignment agents in respect of the goods transferred to them by the appellants. As an illustration, invoice number 9874 dated 23.01.2009 rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as legally payable. 10.8 In any case, if Rule 7 is not applicable, Rule 4 cannot be invoked now since that was not invoked in the show cause notice. 10.9 Rule 7 of the Valuation Rules, 2000, was introduced in the year 2000 and has remained unchanged since then. Even though the definition of 'place of removal' was amended with effect from 14.05.2003, no amendment was done to Rule 7 thereby creating an anomaly. In any case, because of the said anomaly or otherwise, Rule 7 cannot be invoked in the instant case. 10.10 Bulk of the demand is time barred. There is no ground for invoking the extended time limit. The only ground for invoking the extended time limit is that the appellants did not inform the department of their marketing pattern (para 14 of the impugned order). It is submitted that no provision of Central Excise law requires an assessee to inform the department of their marketing pattern. [Gammon Far ChemsLtd.Versus Collector Of Central Excise, Bangalore 1994 (71) E.L.T. 59 (Tribunal) affirmed by the Supreme Court in 2003 (152) E.L.T. 28 (S.C.)]. This aspect is examined by the department at the time of Audit, which was done in this case. 10.11 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agents will be valued as per Rule 7 of the Valuation Rules, 2000. He relied on the decision of the Tribunal in the case of Spice Systems Ltd.Vs Commissioner of Cus. & C. Ex., Noida [2011(272)ELT82(Tri- Del)]. 12. Heard both sides through video conferencing and perused the appeal records. 13. At the time of hearing, a query was raised by the Bench to the learned counsel for the appellants as to how he proposes to reconcile his submissions on points of law viz-a-viz the provisions of section 4(1)(a) of the Central Excise Act, 1944, which states that value has to be determined "on each removal of the goods". 14. The learned counsel responded by referring to the decision of the Larger Bench of the Tribunalin the case of Ispat Industries Ltd vs Commissioner of Centra Excise, Raigad (supra) wherein it has been held that Rule 8 of the Valuation Rules, 2000, would apply only when all the goods of the assessee are captively consumed. While holding so the Larger Bench had overruled the decision of the Division Bench of the Tribunal in the case of BOC (I) Ltd. v. CCE 2004 (168) E.L.T. 478 wherein the Division Bench had relied on CBEC Circular No. 643/34/2002-CX dated 1-7- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that for each removal of goods to the consignment agent Rule 7 of the Valuation Rules, 2000, could only be invoked if the appellants did not have any sale of their goods to independent buyers at the factory gate. Since the appellants did have large sale/clearances of the goods to unrelated buyers at the factory gate, Rule 7 of the Valuation Rules, 2000, could not be invoked in respect of any removal of goods to the premises of the consignment agents. 18. Heard both sides through video conferencing and perused the appeal records. 19. Instead of getting into the pleadings of the appellant on the quantification part, we agree with the submission of the learned counsel that Rule 7 of the Valuation Rules, 2000, will apply only where an assessee does not sell any goods to unrelated buyers at the factory gate but transfers all their goods to their consignment agents. In this regard it will be useful to examine the provisions of Rules 7 and 8 of the Valuation Rules, 2000, during the relevant period, as they use the same starting expression. The provisions read as under:- Rule 7. Where the excisable goods are not sold by the assessee at the time and place of removalbut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsumption or for manufacture of other articles......."( emphasis supplied) 21. This decision of the Larger Bench was relied upon by the Tribunal in the case of Bharat Petroleum Corporation Ltd (supra) to hold that Rule 7 of the Valuation Rules, 2000, which uses the same expression " where excisable goods are not sold..", can be invoked only where there are no sales of the goods at the factory gate and all the goods of the assessee are transferred to consignment agents.If the assessee's excisable goods are also sold at the factory gate, Rule 7 will not apply. 22. This decision of the Tribunal in the case of Bharat Petroleum Corporation Ltd (supra) was subsequently relied upon by the Tribunal in the case of Steel and Metal Tubes(I) Ltd vs CCE, Meerut-II (supra) to hold the view that Rule 7 of the Valuation Rules, 2000, will not apply if the assessee has some sales of their excisable goods at the factory gate. Relevant portion is reproduced below:- "3. Heard learned counsel for the appellant Shri Rajesh Chhibber. He submits that in the impugned Order-in-Appeal, it has been observed that the appellant is selling their product partly at factory gate; and partly through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the expression "Where the excisable goods are not sold by the assessee" appearing in both Rule 7 and Rule 8 of the Valuation Rules, 2000, will have the same meaning and the ratio of the decision of the Larger Bench in the case of Ispat Industries (supra) in the context of Rule 8, will also apply to Rule 7 of the Valuation Rules, 2000, as rightly held by the Tribunal in the cases of (i) Bharat Petroleum Corporation Ltd ( supra) and (ii) Steel and Metal Tubes(I) Ltd vs CCE, Meerut-II ( supra). 25. The decision in the case of Spice System (supra) cited by the learned Authorised Representative is clearly distinguishable. The period involved in the case was July, 1999 to September, 2001. For the period wef 01.07.2000 ( i.e after the introduction of new section 4 and the new Valuation Rules, 2000) the Division Bench of Tribunal held that for goods transferred to consignment agents/depots valuation was required to be done under Rule 7 of the Valuation Rules, 2000, on the ground that the premises of the consignment agent was not considered as a " place of removal". However, it is a matter of record that in the present case the period involved is post 14.05.2003 when the definit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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