TMI Blog2023 (12) TMI 473X X X X Extracts X X X X X X X X Extracts X X X X ..... reproduced above only the lowest of such values of the identical goods shall be taken to determine the value of goods cleared to the related party. Therefore, since the appellant have cleared their bulk drugs to their related parties undisputedly at a lower price than the price adopted by department, clearly establish that there is no reason to disturb the value of goods to determine the value of the goods cleared by the appellant to their related person. In view of the decision in Autoline India Ltd. [ 2015 (4) TMI 772 - CESTAT NEW DELHI ], it is settled that even in case of clearance of identical goods by an EOU to a related party the value of imported identical goods has to be applied, in absence of the same the method adopted by the revenue by applying the same price of the goods sold in India by EOU is incorrect and illegal. Thus, in cases where the goods is cleared to related DTA parties which is identical to the goods sold to the unrelated party, the value adopted by the appellant is correct and legal and on the basis of price of goods cleared to unrelated DTA parties demand of differential duty is incorrect and illegal. The revenue was supposed to find out the val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er buyers in DTA. The clearance of bulk drugs was also made in DTA under Advance Release Order (ARO) in terms of para 4.1.11 of Foreign Trade Policy (FTP). The appellant have cleared the goods to their own DTA and its subsidiaries on payment of Excise duty at a value i.e. 110% of the cost of production in terms of Rule 8 of Central Excise Valuation Rules, 2000. 1.1 The case of the department is that the method opted by the appellant is not correct and legal and according to the department the valuation of the goods cleared in DTA should be done in terms of Rule 3 (3)(b),4 and Rule 8 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. By way of present impugned orders, the department has rejected the value adopted on the basis of 110% of cost of production and re-determined the valuation as under: a) In terms of Rule 4 of Customs Valuation Rules, wherever there was clearances of identical bulks drugs to unrelated party was available; or b) In terms of Rule 8 of Custom Valuation Rules, wherever there was clearances of identical bulk drugs to unrelated party was not available, in this method, the department has applied profit margin in range of 40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated person in DTA which is absent in this case. He submits that the margin of 10% is sufficient as far as the appellant s unit produces the excisable good is concerned. The appellant unit has adopted CAS-4 prescribed by the CBEC for determining the value for excise purpose under Rule 8 of Central Excise Rules for captive consumption. In the present case also the goods were cleared for captive consumption. Therefore, the Excise duty paid in terms of Proviso (2) to Section 3(1) is valid and acceptable. He placed reliance on the judgment reported in 2006 (205) ELT 773 given by this Tribunal in the case of Incowax, an EOU unit. 2.3 He submits that this Hon ble CESTAT in the similar instances, in case of import of goods from related party has held that 10% or even less profit margin is reasonable and sustainable profit margin. In support, he placed reliance on the following judgment: Rehau Polymers Ltd. V. Commissioner of Cus. (Import), Mumbai- 2014 (301) ELT 116 (Tri.- Mumbai) New Holland Tractors (India) Pvt. Ltd. V. Commr. Of Cus., New Delhi- 2002 (144) ELT 410 (Tri.-Del.) 2.4 Without prejudice to the above submission, he further submits that even the principle appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant were regularly intimating the Development Commissioner, with regards to domestic clearance of goods all the details of clearances were reflecting in ER-2 return filed by the appellant from time to time. The unit of appellant was subjected to EA-2000 Audit at regular intervals. Hence, any short payment of duty if any could be due to bonafide error and not due to willful mis-statement or suppression of fact. Therefore, the demand for the extended period is time barred. In support, he placed reliance on the decision of this Tribunal in the case of Fiberweb India Ltd. Vs. CCE ST- Daman vide final order No. A/11176-11177/2023 dated 11.05.2023. 2.8 He further submits that demand is revenue neutral, as the goods are cleared to their own unit and subsidiary and clearances to ARO holders are entitled for refund of terminal Excise duty in terms of Para 8.3 and 8.4 of FTP. Thus, the short payment of demand if any was a bonafide error and not due to any suppression of facts or willful mis-statement. In this regard he relied upon the following judgment: The Commissioner, Central Excise and Customs and another Vs. M/s Reliance Industries Ltd. and Commissioner of Central E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir under by taking the comparable price of the similar goods at which the goods were sold to unrelated buyers applying the Section 14 and Customs Valuation Rules issued there under. The revenue has adopted the valuation on the basis of highest value of the identical goods one particular stray case of Bulk drugs sold to unrelated parties. In a case where the similar goods were not sold to unrelated buyers the Revenue has adopted the value by taking the profit margin in the range of 40% to 80% based upon letter dated 04.07.2017 of the Assistant Director (Cost) Central Excise and Customs. 4.1 The contention of the Revenue is that in terms of Section 3 of Central Excise Act, 1944 the valuation of the goods cleared by 100% EOU to DTA is governed by Proviso to Section 3(1) of the Central Excise Act, 1944. The same is reproduced below: [ SECTION 3. Duty specified in the Fourth Schedule to be levied. (1) There shall be levied and collected in such manner as may be prescribed a duty of excise to be called the Central Value Added Tax (CENVAT) on all excisable goods (excluding goods produced or manufactured in special economic zones) which are produced or manufactured in India as, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place of importation, or as the case may be, for export from India for delivery at the time and place of exportation, where the buyer and seller of the goods are not related and price is the sole consideration for the sale subject to such other conditions as may be specified in the rules made in this behalf : Provided that such transaction value in the case of imported goods shall include, in addition to the price as aforesaid, any amount paid or payable for costs and services, including commissions and brokerage, engineering, design work, royalties and licence fees, costs of transportation to the place of importation, insurance, loading, unloading and handling charges to the extent and in the manner specified in the rules made in this behalf : Provided further that the rules made in this behalf may provide for,- (i) the circumstances in which the buyer and the seller shall be deemed to be related; (ii) the manner of determination of value in respect of goods when there is no sale, or the buyer and the seller are related, or price is not the sole consideration for the sale or in any other case; (iii) the manner of acceptance or rejection of val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue adjusted in accordance with provisions of rule 10; (2) Value of imported goods under sub-rule (1) shall be accepted : Provided that - (a) there are no restrictions as to the disposition or use of the goods by the buyer other than restrictions which - (i) are imposed or required by law or by the public authorities in India; or (ii) limit the geographical area in which the goods may be resold; or (iii) do not substantially affect the value of the goods; (b) the sale or price is not subject to some condition or consideration for which a value cannot be determined in respect of the goods being valued; (c) no part of the proceeds of any subsequent resale, disposal or use of the goods by the buyer will accrue directly or indirectly to the seller, unless an appropriate adjustment can be made in accordance with the provisions of rule 10 of these rules; and (d) the buyer and seller are not related, or where the buyer and seller are related, that transaction value is acceptable for customs purposes under the provisions of sub-rule (3) below. (3) (a) Where the buyer and seller are relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accuracy of the adjustments, whether such adjustment leads to an increase or decrease in the value. (2) Where the costs and charges referred to in sub-rule (2) of rule 10 of these rules are included in the transaction value of identical goods, an adjustment shall be made, if there are significant differences in such costs and charges between the goods being valued and the identical goods in question arising from differences in distances and means of transport. (3) In applying this rule, if more than one transaction value of identical goods is found, the lowest such value shall be used to determine the value of imported goods. 4.4 The Revenue in the present case applying Rule 3 and Rule 4 contended that in a case where value of the identical goods sold to unrelated DTA parties are available, the same should be adopted for valuation of the identical goods cleared to the related parties. In case of identical goods were not sold to unrelated buyers, the value should be determined on the computing value in terms of Rule 3(3) read with Rule 8 of customs valuation Rules. We find that in case of applying the price of comparable goods namely Paroxetine Hydrochloride Hemihydr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party in India. However, for applying Rule 4 of Customs Valuation Rules the price of actual import of identical goods in India must be taken. Since in the present case no value of actual import was applied the entire basis of invoking Rule 4 of Customs Valuation Rules is wrong and the valuation determined on that basis cannot be sustained, for this reason also the demand of differential duty will not survive. The issue that whether the price of indigenously manufactured identical goods sold is applicable or transaction value of contemporaneous import of identical goods shall apply, this Tribunal in the case of Shri Ahima Mine and Minerals Ltd (supra) decided as under: 3. The only point of dispute in this case is as to whether the value of the DTA clearances made by a 100% EOU should be the transaction value at which the goods have been sold to domestic buyers or it has to be the FOB value at which the same goods had been exported out of India. Though Shri M.S. Negi, the learned DR relying upon the Tribunal s judgments in the case of Tata Coffee Ltd. v. CCE, Hyderabad reported in 2004 (168) E.L.T. 460 (Tri.-Bang.) and CC, Bangalore v. Wipro GE Medical Systems Pvt. Ltd. reporte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unit-I had imported 200 to 500 halogen capsules as sample as the quantum of DTA sales being made by the 100% EOU was much larger and in this regard, the import price of gold coated halogen capsules was not relevant, as the 100% EOU (Unit-I) was not manufacturing such halogen capsules. Moreover, in terms of the information furnished by the appellant, contemporaneous import of similar goods in comparable quantity had been made at the prices which were comparable with the DTA sale price adopted by the appellant unit. However, we find that the Commissioner has not given any finding on this plea. We are, therefore, of the view that the impugned order rejecting the DTA sale price of the appellant unit is not correct and the same has to be set aside and the matter has to be remanded to the Commissioner for de novo adjudication after considering the appellant s plea that during the period of dispute, other importers had imported similar goods in comparable quantities at the prices which were comparable with the DTA prices adopted by them and if this is so, there would be no justification for rejecting the DTA sale price on which the duty had been paid by the appellant. In view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value in terms of Rule 4 to 7 of Customs Valuation Rules. Therefore, the valuation determined by the department under Rule 8 cannot be accepted. As discussed above, since the department has not brought the value of identical imported goods. in the present case also the value declared by the appellant cannot be disturbed. 4.13 Without prejudice, we further find that even if by any stretch of imagination Rule 8 is made applicable, as per Clause (b) of Rule 8, the profit of same class or kind of goods manufactured by producers in the country of exportation for export to India has to be taken for determining of value. In the present case goods are admittedly manufactured in the country and not outside India. Therefore, in a case where the goods are manufactured in India the profit of indigenously manufactured product as provided under Rule 8 (b), cannot be applied. By strictly interpreting Rule 8 the cost of manufacture and profit margin can be taken of the goods manufactured out of India, the same cannot be taken by the cost profit applying of the goods products in India. In the present case taking inference from Rule 4 even though the transaction value of the identical impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s payable by the appellant, the related person is entitled for the refund of the whole of the duty payable by the appellant as a refund of terminal excise duty in terms of para 8.3 and 8.4 of Foreign Trade Policy. In this regard we refer to relevant notification and exemption entry as under: Exemption to DTA Clearances of specified goods produced in EOU/EHTP/STP- In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) ( hereinafter referred to as the Central Excise Act), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts excisable goods of the description specified in column (3) of the Table below, and falling within the Chapter, heading No. or sub-heading No. of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as the Central Excise Tariff Act), specified in the corresponding entry in column (2) of the said Table, produced or manufactured in an export oriented undertaking or an Electronic Hardware Technology Park (EHTP) Unit or a Software Technology Park ( STP) Unit and brought to any other place in India in acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd for the extended period is hit by limitation as there is no mala fide on the part of the appellant. In this regard we find that this is not a case of clandestine removal of the goods without the knowledge of the department. However, the appellant was under bonafide belief that since the goods are manufactured in the country, the valuation of goods cleared to their related person is required to be determined as prescribed under Rule 8 of Central Excise Valuation Rules, 2000. We find that being a 100% Export Oriented Unit, there is a regular vigil of the department on the entire activity of the appellant. The fact that the appellant are clearing their goods in the DTA and to their related parties, the department was very well aware that in such case what should be the correct value of the goods and the department could have verified the correctness of the value on that basis. The appellant has adopted CAS-4 (Cost Accounting Standard- 4) prescribed by the CBEC for determining the value for excise purpose for a captive consumption. Moreover, there are judgments particularly in the case of the Incowax which is an EOU unit reported at 2006 (205) ELT 773 of this Tribunal, wherein it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces for exports under bond for which category of clearances alone requirement existed for separate disclosure in the ER-1/RT-12 returns. In the absence of any specific column or note similar to note 4, requiring separate disclosure of the value of deemed export clearances, we do find any merit in the findings of the adjudicating authority that there was suppression of facts as a consequence of assessee's failure to separately disclose the value of deemed export clearances. An accusation of non-disclosure can only be made if there is in the first instance a requirement to disclose. 21. We also find that Note 4 to Form ER-1 requires separate details of clearances to be mentioned for exports under Bond. There is no reference in the said notes to deemed exports or supplies made to holders of advance licenses. We therefore agree with the submissions of the counsel for the assessee that the assesse was never required to separately furnish details of clearances made to holders of advance licenses. We also find that neither the show cause notice nor the civil appeal filed by the Revenue before this Court contain any reference to the wrongful clubbing of deemed export clearances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to take a position exactly contrary to what it has taken in the Show Cause Notice on merits. We cannot allow the Revenue to blow hot and cold in the same breath by relying upon IL's case on merits while at the same time arguing that the same had no relevance for the purposes of examining the plea for a bonafide belief. 23. We are in full agreement with the finding of the Tribunal that during the period in dispute it was holding a bonafide belief that it was correctly discharging its duty liability. The mere fact that the belief was ultimately found to be wrong by the judgment of this Court does not render such belief of the assessee a malafide belief particularly when such a belief was emanating from the view taken by a division bench of Tribunal. We note that the issue of valuation involved in this particular matter is indeed one were two plausible views could co-exist. In such cases of cases of disputes of interpretation of legal provisions, it would be totally unjustified to invoke the extended period of limitation by considering the assessee's view to be lacking bonafides. In any scheme of self-assessment it becomes the responsibility of the assessee to determi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 26. Insofar as the appeal No. 5744/2011 is concerned, we find that the same pertains to a different plant of the Assessee-Respondent where clearances were affected during the period January 2001 to November 2003. The Show Cause Notice in this case was issued on 29.12.2005 and sought to invoke the extended period of limitation by making similar allegations as in Civil Appeal No. 6033 of 2009. The order impugned in this appeal, however is an order dated 4.4.2010 of the Gujarat High Court by which the Court had dismissed an appeal filed by the revenue against an order of CESTAT, by holding that no question of law could be stated to arise from the order of CESTAT. Our conclusions with regard to Civil Appeal 6033 of 2009 apply equally to this appeal. In the result both the appeals filed by the Revenue are dismissed on the ground that the demands are time barred. We make it clear that we express no opinion on the merits of the matter including the aspects of revenue neutrality. In the case of B. R. Steel Products Ltd. (Supra) Mumbai Tribunal has passed the following decision: 11. Coming to the issue of limitation, the appellant have submitted that they have obtaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... department. This is outlined by the Commissioner (A) also in the impugned order. Therefore, the department cannot say that the party suppressed the facts. Moreover, they are not required in law to declare the selling price of their service centre to the domestic units because that is not at all relevant in determining the correct assessable value. Therefore, the Commissioner (A) s finding that there is no suppression of facts and revenue appeal has no merit. In the case of STI Industries (Supra) this Tribunal has passed the following order: 11. As regard CVD we find from the annexure to the show cause notice that in show cause notice and the impugned order no allegation or reasoning of any nature in raising such a demand was indicated and the demand was confirmed merely by relying upon demand chart which is an annexure to the SCN. As we find no allegations for demand has been stated either in the show cause notice nor there are any reasoning in the impugned orders for confirmation of such demand, we are of the considered view that such demand cannot be confirmed as it is not in accordance with law. As regard plea of revenue neutrality raised by the ld. Counsel, we f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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