TMI Blog2023 (11) TMI 963X X X X Extracts X X X X X X X X Extracts X X X X ..... :- As per the procedure followed by the appellant they were paying the differential duty on the basis of the Cost Accountant Certificate issued on the basis of finalized/ audited financial/ cost records, the relevant date for computation of period of limitation under section 11A of the Central excise Act, 1944 should be as per clause (iv) of Explanation 1 (b) of the said section which reads in case where duty of excise is provisionally assessed under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof. Accordingly the show cause notice has to be treated as one being issued within the normal period of limitation for making the demand. Levy of penalty - HELD THAT:- It is observed that the appellant was following the procedure as laid down by making the payment of duty on the basis of the cost of production determined on the basis of the finalized accounting records of the previous year and subsequently paying the differential duty on the basis Cost Accountant certificate issued on the basis of the finalized accounting records of current year. When this is prescribed and also is an accepted procedure for payment of duty on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned 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 challenged this order before the Hon ble Supreme Court. Hon ble Supreme Court as vide order dated 15.02.2019 in Civil Appeal No.1783/2019 remanded the order back to the Tribunal for doing as follows:- This appeal takes exception to the final order No.71005 of 2018 dated 20.02.2019 in the Appeal No.E/1686/2008-EX (DB) passed by the CESTAT, Regional Bench, Allahabad, whereby the show cause notice issued by the Central Excise Commissionerate dated 08.11.2017 came to be quashed on the solitary g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 -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 determined by the appellant on the basis of the correspondences recovered from the premises of the appellant. It was alleged that the appellant had determined the transfer price, which is much lower than value that should have been determined as per Rule 8 9 of Central Excise (Determination of Price of Excisable Goods) Valuation Rules, 2000 and CAS-4. Extended period of limitation as per proviso to Section 11A(1) of the Central Excise Act was also invoked. Show cause notice also dema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d.)].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 following decisions: Hindalco Industries Ltd. [2023 (5) TMI 720- CESTAT Kolkata]. Anand Nishikawa Co. Ltd. [2005 (188) E.L.T. 149 (S.C.)] Accurate Chemicals Industries [2014 (300) E.L.T. 451 (Tri.-Del.)]. ➢ The demand as such is not sustainable and so is the penalty imposed. ➢ Appeal be allowed in favour of the Appellant. 3.3 Arguing for the Revenue learned A.R. submits that: ➢ Undisputedly no document or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 enclosed in original along with work sheet in original. additional sets of Xerox Copies of the same are also enclosed. As per the Cost Accountant Certificate, the cost of production is Rs13.26 per Ltr. While advising the Central Excise teh transfer price to be considered is Rs 15.34 per Ltr. The text of the enclosed Cost Accountant Certificate is as follows: We hereby certify that teh figures and information g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.03 18 Misc Expenses 6444340.2 8 5734935.6 6 0.78 19 Insurance Premium 824641.00 512986.00 0.07 20 Directors Remuneration 0 0 0 21 Director Traveling 0 0 0 22 Increase decrease in WIP 9696857.6 6 - 2012581.2 0 -0.27 23 Total 25683254. 30 20474882. 01 2.77 24 Closing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4035122.61 22393126.73 1.78 2.24 3.03 3 Direct Expenses 13784.643.02 3786442.26 6914872.18 0.52 0.60 0.94 4 Works Overhead 16704094.97 10147264.01 8691990.84 0.63 1.62 1.18 5 Quality Control Cost 0 0 0 0.0 0 0 6 R D Cost 0 0 0 0.0 0 0 7 Administrative Overheads 22023795.38 6537925.64 6093745.48 0.84 1.04 0.82 8 Total (1 to 7) 2670306199.2 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Number of other heads which were earlier added while determining the cost of production do not figure separately in the subsequent chart or are merged in some other head. Hence we are not in position to give much weightage to the charts submitted subsequently. We had asked for the documents on which these charts had been prepared but the same could not be produced as the unit had closed down. 4.5 The value in this case was to be determined as per CAS 4. and the assessable value as per Rule 8 of the Central Excise Valuation Rules, 2000 the cost of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 taking the information available as in the cost sheet for that year which has been relied on by the revenue we are inclined to give the benefit by reducing the interest and finance charges from the cost of production so determined. Thus for the Financial Year the cost of production and the assessable value as per Rule 8 is determined below: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... December 8047.00 159.00 January 15117.00 292.00 February 16623.00 323.00 March 18564.00 363.00 Total 70802.00 1375.00 Tribunal while staying this order has noted that Appellant have already paid an amount of Rs.85,25,918/- towards central excise duty and Rs.37,843/- towards education cess. From this chart it is quite evident that appellant has admitted and paid the entire differential duty liability for the year 2003-04 and 2005-06. There is a short payment only in the year 2004-05. It is also noted that the appellant sister concern was taking the CENVAT Credit of the differential duty paid by them on the basis of the supplementary invoice and the certificate issued by the range Superintendent in respect of the differential payment of duty. 4.8 Thus year wise we compute the differential duty demanded and paid by the appellant as per chart available in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 assessment is finalized, the assessee becomes liable however to pay interest from the first date of the month succeeding the month for which the amount is determined. We have no doubt in our mind that under Rule 7(4), the expression succeeding the month for which such amount is determined refer to the month of removal of the goods. When the provisional assessment has such consequences, it would occasion an invidious discrimination to place an interpretation on Section 11AB by which those assesses who go in for provisional assessment under Rule 7 are called upon to pay interest upon finalization of the assessment with reference to the date of removal in a case where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut 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, valuation. There is no dispute regarding the quantity removed. There is no issue relating to rate of duty. The dispute is relating to the correct value. To appreciate it better, let us take an example of an assessee who deliberately undervalues the goods which he removed. This results in assessee arriving at an amount which would not be the correct amount. He pays this incorrectly assessed amount. Would it be a case of short-levy or short payment? If short-levy is to be understood as confined to cases where the assessment is not the full assessment, taking into account the parameters involved correctly, namely, rate of duty, valuation and quantity it could be classi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 assessee and the demand for interest is sustainable. 62. As far as the scope of the second explanation of Section 11A(2)(b) is concerned, it contemplates payment voluntarily by the assessee. It is without any notice being issued under Section 11A. There is also reference to liability on the part of the assessee to pay interest under Section 11A(2)(b), not only on the amount which is paid within the meaning of Section 11A(2)(b) but on any short payment as may be determined by the excise officer. This only means that payment can by an assessee of any of the four amounts with which we are more concerned namely, non-levy, non-payment, short-levy or shor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isional 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 International Auto (supra). We find no merit in the appeals. The appeals will stand dismissed. The demand of interest in terms of section 11AB is upheld. 4.10 No substantial reason has been stated in the show cause notice or the adjudication order, for invoking the extended period and for imposition of penalty under Section 11AC. Show cause notice alleges as follows: From the foregoing facts, it appear s that M/s J R Organics Ltd. Unit Captainganj distillery district - Kushinagar have suppressed the vital facts regarding value of denatured ethyl alcohol with the department and undervalued it with the intention to defraud the gov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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