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TMI Blog2023 (11) TMI 963X X X X Extracts X X X X X X X X Extracts X X X X ..... ght lakhs twelve thousand six hundred and sixty eight only) already paid by the said party. 2. I confirm the demand of interest on the above mentioned amount under the provisions of Section 11 AB of the Central Excise Act, 1944. 3. I impose a penalty of Rs. 1,43,34,224.00 (Rupees one crore forty three lakhs thirty four thousand two hundred and twenty four only) on the said party under the provisions of Section 11 AC of the said Act, read with Rule 25 of the Central Excise Rules, 2002." 1.2 The impugned order has been challenged by the appellant in this appeal. Appeal was earlier dismissed by the Tribunal vide Final Order No.71005/2018 dated 20.02.2018, holding as follows : "6 Having considered the rival contentions and on perusal of facts on record, we find that there is no allegation in the Show Cause Notice that the appellant have valued their goods, transferred to other units, at value lesser than the value as per CAS-4 standards. Accordingly, we hold that the Show Cause Notice is vague and is not maintainable. Accordingly we set aside the impugned order and allow the appeal. the appellant shall be entitled for consequential benefits, in accordance with law." 1.3 Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties before the Tribunal for consideration of the appeal afresh. All questions are kept open. The appeal is allowed in the above terms. No costs." 1.4 This matter has been taken up for consideration as per the directions contained in the order of the Hon'ble Supreme Court. 2.1 Appellant is engaged in manufacture of Ethyl alcohol Denatured Spirit (SDS) classifiable under 22072000 of the First Schedule to Central Excise Tariff Act, 1985. 2.2 Appellant was clearing the SDS produced by it to its sister concern at Barabanki on stock transfer basis after payment of duty at the transfer price determined by them. During course of audit a memorandum BBK/DW-112/4464 dated ½-03-04 issued by Shri S C Chajjar of appellant unit at Barabanki was recovered as per which the Cost Accountant R K Agarawal has certified the cost of SDS transferred to Barabanki unit during the period 2003-04 was Rs 15.34 per unit whereas the appellant has during the said period discharged the duty on the value of Rs 14.04 per unit. 2.3 The show cause notice dated 07.11.2007 was issued to the Appellant demanding duty of Rs.1,43,34,224/- for the period 2003-04 to 2005-06 disputing the transfer price deter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al and extended period of limitation could not have been invoked as have been held in the following submissions:- Nirma Ltd. [2006 (200) E.L.T. 213 (Tri.-Mum.)]. Affirmed as reported at [2015 (325) E.L.T. 232 (S.C.)]. Hindalco Industries Ltd. [2009 (248) E.L.T. 391 (Tri.-Del.)]. Affirmed as reported at [2010 (254) E.L.T. A42 (S.C.)]. Coca-Cola India Pvt. Ltd. 2007 (213) E.L.T. 490 (S.C.). Mafatlal Industries Ltd. [2009 (241) E.L.T. 153 (Tri.-Ahmd.)].Affirmed as reported at [2010 (255) E.L.T. A77 (S.C.)]. Anglo French Textiles [2018 (360) E.L.T. 1016 (Tri.-Chennai)]. Affirmed as reported at [2018 (360) E.L.T. A301 (S.C.)]. ➢ Allegations in show cause notice have been made on the basis of value as per the CAS-4. Appellant used to determine the transfer price for their own purpose as has been indicated in the said memo it was not the value as determined as per CAS-4. Hence sole reliance on the said memo for making this demand is totally uncalled for. ➢ Department was in full knowledge of the manner or method of clearance affected by the Appellant. Hence extended period of limitation could not be invoked in the present case as have been held by in the follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the transfer price to the sister concern which they have not done with the for intent to evade payment of duty hence the penalty imposed on them is justifiable. ➢ Appeal should be dismissed. 4.1 We have considered the impugned order along with the submissions made in the appeal and during the course of arguments. We have also taken note of the direction contained in the Hon'ble Supreme Court decision. 4.2 We observe that that demand in the show cause notice is has been made on the basis of the Memo dated 01/02-03-2004 which reads as follows: "Reg: Transfer Price of Alcohol Based on the finalized (Audited) Captainganj Accounts for the Financial Year 2002-03 cost of production of Alcohol produced by Captainganj has been worked out as Rs 13.26 per Ltr. As per the Central Excise Rules we have to add 15% on the cost of production being notional profit and also we have to add 10 Paise per Ltr towards Denaturation Fee. Accordingly the transfer price for the Financial Year 2003-04 worked out of Rs15.34 per Ltr for the purpose of charging Central Excise Duty on Alcohol being transferred to BBK. Certificate issued by Shri R K Agrawal a practicing Cost Accountant is enclos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Statement of Cost of production relied in SCN 2002-03 2004-05 2005-06 2002-03 2004-05 2005-06 Production 26350754. 8 6279484. 40 7387327. 8 S No Particulars Total Cost (Rs) Cost/Unit (Rs) 1 Raw Materials 7620697 9.82 9412563.9 9 12.74 2 Power & Fuel 3786442. 26 6914872.1 8 0.94 3 Acetaldehyde 755054.59 1165449.0 0 0.16 4 Stores & Chemical 2474523.5 6 1630014.1 7 0.22 5 Total 83223000. 23 103835970. 34 14.06 6 Repairs 2839225.0 5 836247.97 0.11 7 Salaries & Wages 11614956. 16 18266306. 34 2.47 8 Contribution to PF 1232664.0 0 2551136.5 7 0.35 9 Welfare Expenses 1187502.4 5 1575683.8 2 0.21 10 Tools Written Off 12093.40 11532.00 0.00 11 Effluent treatment 1730989.7 0 0.23 12 Depreciation 3991658.0 0 3970221.0 0.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock (WIP) 3056184.26 1185712.03 3198293.23 0.12 0.19 0.43 11 Total (8+9-10) 270298130.77 121165646.59 137372238.02 10.26 19.30 18.60 12 Less: Credit for recovery 0 0 5909524.00 0 0 0.80 13 Packin Cost 0 0 0 0 0 0 14 Cost of Production (11- 12+13) 270298130.77 121165646.59 131462714.02 10.26 19.30 17.80 15 Free Inputs Received 0 0 0 0 0 0 16 Amortized Costs 0 0 0 0 0 0 17 Cost of Production (14+15+16) 270298130.77 121165646.59 131462714.02 10.26 19.30 17.80 18 Add Opening Stock Finished Goods 0 0 0 0 0 0 19 Less Closing Stock Finished Goods 0 0 0 0 0 0 20 Cost of Production (17+18- 19) 270298130.77 121165646.59 131462714.02 10.26 19.30 17.80 From the perusal of the above certificates it is evident that both the charts are not made on the same basis. It is not the interest and finance charges which are making the difference but from the chart for year 2005-06 which is most comprehensive both as relied in SCN and as subsequently submitted by the appellant the cost of material consumed which in the chart relied in SCN is Rs 14.06 per unit is reduced to Rs 12.90 per unit. Nu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.6 The show cause notice and the adjudication order demand the duty from the appellant during the financial year 2003-04 by fixing the value at Rs 15.34 per year and for the year 2004-05 at Rs 23.03 per year. Appellant has admitted the duty liability and also paid the same for the year 2003-04. In the guidance notice referred by us earlier following has been stated in respect of interest and finance charges: "5.16 Interest and Financial Charges : Interest and financial charges being a financial charge shall not be considered to be a part of cost of production. Notes: Interest and financial charges are finance cost, hence shall not be considered as a part of cost of production. This will include interest on bank borrowings, amortisation of discounts or premium related to borrowings, amortisation of ancillary cost incurred in connection with the arrangements of borrowings, finance charges in respect of finance leases and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest costs." No information has been made available for the year 2003-04 in respect of any of the costing data. For the year 2004-05 ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- till 31.10.2007 in the process of discharging their duty liability. ..." Further as per the chart available on page 52, appellant have themselves indicated that they have paid the differential duty as demanded in the show cause notice. The said chart is reproduced below: Details of monthwise differential Duty from 2003-04 to 2005-06, Due to rate difference : Financial Year Month Arrear Amount Supplementary Invoice C Ex Duty Edu Cess No Date 2003-04 April 1108831.00 --- 393 30.09.2006 May June 386502.00 403 31.10.2006 211067.00 1 03.09.2007 July 545169.00 2 21.09.2007 August 561099.00 22 16.10.2007 September 491725.00 60 12.07.2007 October 271865.00 149 31.01.2008 November 0 december 352098.00 January 705530.00 February 551038.00 189 28.02.2008 March 470762.00 190 03.04.2008 Total 5655686.00 2004-05 April 1016920.00 192 25.03.2008 1781135.00 193 31.03.2008 May 1170739.00 Unpaid June 2549013.00 July 590862.00 7199.00 August 1064529.00 21280.00 September 362575.00 7249.00 October 0 0 November 0 0 december 0 0 January 0 0 February 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce is revised upward with retrospective effect and the excise duty on the same is paid immediately on a future date whether interest is payable under Section 11AB from the first day of the month succeeding the month in which the duty ought to have been paid under the Act. To keep the matter in focus, the exact question is which is the month in which the duty ought to have been paid. 49. Under the Rules, goods become exigible to duty on removal. Assessment is to be done by assessee itself by way of self-assessment. In a case where duty is payable on the basis of the value, the assessee is to apply the rate of duty to the value and pay the duty on or before the sixth day of the month succeeding the month in which removal of the goods takes place. Undoubtedly, if the removal takes place in March, the payment is to be made by 31st of March. 50. We have also noticed what happens if there is provisional assessment. In the case of provisional assessment, the assessee entertains a doubt regarding the actual value or the rate of duty. He applies and he is permitted under the order to remove goods on a provisional assessment. The assessment is thereafter finalized. When the provisional a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertinent to notice the finding in the order of the original authority that perusal of the Circular dated 1-7-2004 makes it unambiguously clear that the price was understood as provisional price. This belies quite clearly the case of the appellant that the price was final. Could the assessee in the light of the Circular even for a moment in the same breath contend that the assessee was unhesitatingly ready and able to determine the price and hence the value. We would think that it certainly presented a situation where the assessee should have resorted to Rule 7. 53. As we have already noted, SAIL has paid the differential duty of Rs. 142.78 crores even without waiting for any notice under Section 11A(1). The assessee volunteered and made payment in October 2006. We find merit in the finding by the authority that this is a case where therefore the payment made by the assessee is to be treated as one falling under Section 11A(2)(b). This meant also that there was no need for determination of the duty within the meaning of Section 11A(2)(a) or issuance of notice under Section 11A. 59. We are here concerned in these cases with one of the ingredients of assessment, namely, valuatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is attracted and the interest clock ticks from the date as we have found namely as provided in Rule 8 read with Section 11AB. If the concept of short payment is stretched to include all amounts which ought to have been paid, it may also be treated as a case of short payment though juridically it may be true that it may strictly fall under short-levy. 61. While it may be true that interest cannot be demanded by way of damages or compensation and it is also further true that unless there is a substantive provision providing for payment of interest in a fiscal statute, interest cannot be demanded, we would think in the context of the Act and the Rules in question, under Section 11AB, particularly, when there is no dispute relating to liability to pay the differential duty and we notice that absence of dispute is a fair acknowledgement of the fact that the facts of the present cases are unlike the situation in MRF decision where the price was fixed at the time of removal, interest is payable as provided in Section 11AB and from the point of time indicated therein. But in these cases, the price was variable under the escalation clause which was very much within the knowledge of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... object underlining the provisions. It may be true that the differential duty becomes crystallised only after the escalation is finalized under the escalation clause but it is not a case where escalation is to have only prospective operation. It is to have retrospective operation admittedly. This means the value of the goods which was only admittedly provisional at the time of clearing the goods is finally determined and it is on the said differential value that admittedly that differential duty is paid. We would think that while the principle that the value of the goods at the time of removal is to reign supreme, in a case where the price is provisional and subject to variation and when it is varied retrospectively it will be the price even at the time of removal. The fact that it is known, later cannot detract from the fact, that the later discovered price would not be value at the time of removal. Most significantly, Section 11A and Section 11AB as it stood at the relevant time did not provide read with the rules any other point of time when the amount of duty could be said to be payable and so equally the interest. We would concur with the views expressed in SKF case (supra) and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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