TMI Blog2022 (11) TMI 1444X X X X Extracts X X X X X X X X Extracts X X X X ..... ecifications of the Customer. In the present case after analyzing the Contracts impugned order adopts the value as determined by the cost auditor, for the demanding the duty. It is settled preposition in law that in case of the supplies made under the contractual agreement the contract price is the basis for determination of the assessable value as per section 4 of the Central Excise Act, 1944. During the course of arguments revenue has relied upon the decision of the Hon ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE, MUMBAI VERSUS M/S FIAT INDIA PVT LTD ANR [ 2012 (8) TMI 791 - SUPREME COURT] . It is not the case that the appellant was selling the goods at price lower than the cost of production and incurring loss. Even the cost auditor has not concluded that the appellant was selling the goods and earning loss. Hence the ratio of this decision cannot be directly applied to the present case. Demand on the basis of presumptions - HELD THAT:- Commissioner has in the impugned order nowhere concluded that appellants had in case of any contract received any amount over and above the agreed contractual value. That being so there cannot be any reason for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the manufactured goods by overvaluing the brought out items, it also alleges that appellant has removed the clandestinely removed the bought out items as per the cost auditor report from their premises clandestinely - HELD THAT:- The difference between the selling price and purchase price is claimed to be trading profit by the appellant. The total value of the bought out items as per the show cause notice which have been purchased by the appellant from their sister concern as percentage of the total purchase value of bought out items is in range of 17% to 28% for the three years where the data is free from defect. In the year 2003-04 and 2004-05 the purchases from sister concern exceed the total purchase value of bought out item hence left out from the analysis. Further from the figures as above it is observed that constantly from the year 2000-01 to 2003-04 the purchase value of bought out items have declined - Further as per the terms of contract, appellant were required to produce the invoices/ gate passes of the sub vendor to the purchaser to claim the duty paid against the said supplies and the goods/ the sub vendor facilities were open for inspection by the purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SK for an amount of Rs 1,77,83,308/- having duty component of Rs. 28,45,330/- as per the letter dated 03.03.2008, the escalation amount allowed is Rs. 29,88,940/- having the component of duty and taxes of Rs 7,08,565/-. This clearly establishes that the escalation amount as claimed by the appellant in the escalation bills is not the amount received by them but is the amount which is subsequently determined and agreed to by the purchaser - Undisputedly the appellant is required to pay the duty on the escalation amount received by them along with the interest from the date when the goods against which these escalation bills are raised were cleared by them from the place of clearance as have been held by the Hon ble Supreme Court in M/S. STEEL AUTHORITY OF INDIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, RAIPUR [ 2019 (5) TMI 657 - SUPREME COURT] - the demand made in respect of undetermined escalation amount is pre-matured and needs to be set aside. Demand on the issue of limitation and penalties on the two appellant - HELD THAT:- The demand made cannot be upheld on the merits of the case except for adjustment which is indicated with regard to escalation price, the issue of limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Niraj Chandra, Chief Executive of M/s. KBEPL, Satara in terms of Rule 209A / Rule 26 of the Central Excise Rules, 1944/2002. 2.1 Appellant 1 is registered with Central Excise and engaged in manufacture of excisable goods namely Sugar machineries and Special Products falling under Chapter 84 of the Schedule to Central Excise Tariff Act, 1985. Appellant 2 is Chief Executive of the Appellant 1. 2.2 During the course of visit to the premises of Appellant 1, it was observed that CENVAT Credit utilization, was excessively high and disproportionate to the quantum of raw material consumption production removal of excisable goods. Investigation undertaken revealed that: Appellant 1 was receiving orders for supply of sugar machineries and similar products on turnkey basis. They used to manufacture certain goods in their premises and would procure the other goods and supply them directly at the site of their customers. Appellant 1 was suppressing the value of the goods manufactured and cleared by them on payment of duty. They were overvaluing the price of the brought out items so that the total value of turnkey project would match with the value of the goods supplied togeth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cess). Appellant 1 raised escalation bills including the duty, on customers for the manufactured goods and bought out goods supplied to their Customers but have not deposited this duty on escalation charges. The duty not paid on such escalation charges worked out to be Rs 36,09,438/-. Therefore, a show cause notice alleging contravention the provisions of Central Excise Act, 1944 and rules made thereunder viz. erstwhile Central Excise Rules, 1944, erstwhile Central Excise Rules, 2001, erstwhile Central Excise (No. 2) Rules, 2001 and Central Excise Rules, 2002 [CER 2002] read with Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 was issued to the appellant. Show Cause Notice dated 31.10.2005 asked them to show cause as to why- CENVAT duty amounting to Rs. 3,73,29,200/= [Rupees Three Crores Seventy Three Lakhs Twenty Nine Thousand Two Hundred Only], as detailed in Annexure A-VI' and short-paid on account of under- valuation of excisable goods manufactured and removed by them during the period from 01/10/2000 to 31/03/2004 should not be demanded recovered from them under the provisions of proviso to sub-section (1) of Section 11A o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 72473911 86.83 2001-02 68680284 25860648 77372987 153984994 76612007 99.01 2002-03 62555293 37243767 46749452 102564193 55814741 119.39 2003-04 92112457 92232510 5224300 16991918 1167718 225.24 Total 323866837 209114154 212804393 429472670 206068377 101.81 Show cause notice also asked the appellant 2 to show cause as to why penalty should not be imposed on him under the provisions of Rule 209A of erstwhile Central Excise Rule 1944, Rule 26 of erstwhile Central Excise Rule 2001, Rule 26 of erstwhile Central Excise Rule (No 2) 2001, Rule 26 of erstwhile Central Excise Rule 2002 as the case may be. Show cause notice was adjudicated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to take Cenvat Credit. In view thereof, there was no incentive for the Appellant to undervalue the manufactured items. Respondent erred in comparing the price variations in the manufactured items with the bought out items, without appreciating that in the case of manufactured items, key inputs (such as steel) are vastly different from those used in bought out items (which are not custom made and are made in large volumes) in which the manufacturer enjoys economies of scale. Respondent ought to have appreciated that valuation had to be the Transaction Value in terms of Section 4 of the Act as invoice price at which the Appellant sold the goods manufactured by them constituted the transaction value. Respondent ought to have appreciated that cost of production had no relevance to assessable value as held by the Hon'ble Supreme Court in Commr. V/s Guru Nanak Refrigeration-2003 (153) ELT 249 . In any event, she ought to have appreciated that the reasons as to why cost exceeded selling price was on account of genuine and bonafide commercial considerations, primarily on account of time gap between estimation of prices and actual supply of the goods. Respondent ought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oa Commissionerate. Respondent has erred in concluding that there was no requirement to pay such duty and therefore she was not inclined to give any benefit of duty paid at Goa for the actual excisable goods manufactured and it is submitted that excise duty, in any event, cannot be collected twice on the same goods, on the premise that the Appellant's factory at Satara have cleared without payment of duty. There is an inherent contradiction in the Departments case inasmuch as while the Cost Auditor treats the items obtained from KCIE as bought out items (See Pages 236-241 of the Cost Audit Report - items at Serial Nos. 31 to 44, 62 to 68, 102 to 104 etc.), the Respondent has concluded that the said goods were manufactured by the Appellant. As the demand confirmed on this count is Rs. 1,02,67,856/- and KCIE has admittedly paid duty amounting to Rs. 95,01,741/-, the balance duty payable, if any, would amount to Rs. 7,66,115/- only. Respondent erred in confirming a demand in respect of the Escalation Bills raised by the Appellant without appreciating that until and unless the said bills were duly accepted by the Customers, the same could not be included in the transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted at Om Prakash Bhatia v. Commissioner - 2003 (158) E.L.T. A177 (S.C.) Hence, there is no 'sale' of the impugned goods and there is no 'transaction value' of such goods. The provisions of Section 4(1)(a) of the CEA, 1944 shall not apply and the goods have to be valued in accordance with the CEVR, 2000. Rules 3 to 7, 9 10 are not applicable to this case, because they apply only in case the goods are sold. The manufactured goods removed are not captively consumed by the Appellant or on his behalf, for the manufacture or production of other articles. Hence, Rule 8 will not directly apply. Reliance is placed on the following decisions wherein it has been held that goods need to be assessed on the basis of best judgement. UTC Fire and Security India Ltd. [2015 (319) ELT 591 (SC)] Mahindra Ugine Steel Co. Ltd [2015 (318) ELT 592 (SC)] Coromandel Paints Ltd. [2016 (343) ELT 846 (T)] Indian Hume Pipe Co. Ltd. [2015 (321) ELT 460 (T)] Black's Law Dictionary defines 'turnkey' as 'I. (Of a product) provided in a state of readiness for immediate use...2. Of, relating to, or involving a product prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts by the Purchaser to the Appellant. In any case, it is not shown that, such Price Break up was to be submitted for all the 37 Contracts during the impugned period. Clandestine Removal of goods: Evidence on records show that the goods claimed to have been bought from KC, Goa by the Appellant, were not so bought, but were manufactured in the Appellant's premises at Satara. This clever subterfuge by the Appellant helped them in evading C.E. Duty to the tune of Rs. 1,02,67,856/-. They utilised raw material on which CENVAT Credit was availed in their factory at Satara to manufacture such goods. However, they paid no duty on such goods which would by applicable @ 16% ad valorem. On the other hand, KC, Goa availed CENVAT Credit on raw material which it diverted, but issued bogus invoices showing clearance of goods at concessional rate of duty, by availing SSI Exemption. The plea taken by the Appellant that, KC, Goa, paid C.E. Duty of Rs. 40,14,559/- in PLA and Rs. 54,87,182/- through CENVAT Credit Account and hence, the clearances are genuine, is an eyewash. They over valued these goods by 189% to 278% as bought out goods and hence, undervalued the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A plea was also raised that the cost of manufacture at the time of placing of bid on an estimated basis is more than the cost of manufacture at that time and it is on account of delay in execution of the order that there is an escalation in the price as a result of which the cost of manufacture exceeds the selling price in some cases. A demand cannot be raised totally on the cost audit report and the finding on the contracts should have been given. The mechanism of entering into bid and providing piece meal price should have been looked into to see whether approval of price break up was just a formality or individual prices were required to be negotiated. The appellants plea that the cost of manufacture by them at the time of placing the order undergoes a change due to escalation in price and was less than the selling price at the time of accepting the bid should have been looked into. The contract should have been studied to know the duration in which the same was required to be executed and whether the estimation of prices takes into account the escalation in cost of raw material between the date of manufacture and date of supply and if not why, if there are escalation clause in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Copy not furnished 5 M/s. T.K. Warana SSK Ltd., Warananagar Supply Order 6 M/s. T.K. Warana SSK Ltd., Warananagar Supply Order 7 M/s. T.K. Warana SSK Ltd., Warananagar Supply Order 8 M/s. BHW Kessels International Corporation, New Delhi Supply Order 9 M/s. Kay Pulp and Paper Mills Ltd., Borgaon Contract 10 M/s. Shri Dhanalaxmi SSK Niyamit, Ramdurg Contract 11 M/s. Shetkari Sakhar Karkhana, Chandpuri Contract 12 M/s. Akkubai Mahila Sahakari Audyogik Utpadak C Sanstha Ltd., Asurle-Porle Contract 13 M/s. The Thandava Co-op Sugars Ltd., Payakarao P Peta [A.P.] Price Bid 14 M/s. Sahakar Maharsh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Services Pvt. Ltd., Pune Purchase Order 31 M/s. Sagar Sugars and Allied Products Ltd., Chittor [A.P.] Purchase Order 32 M/s. Ispat Industries Ltd., Penn Purchase Order 33 M/s. KSB Pumps, Pune Purchase Order 34 M/s. Sahakar Maharshi Shankarrao Mohite SSK Ltd., Akluj Purchase Order 35 M/s. Sahakar Maharshi Shankarrao Mohite SSK Ltd., Akluj Purchase Order 36 M/s. Sahakar Maharshi Shankarrao Mohite SSK Ltd., Akluj Purchase Order 37 M/s. Sahakar Maharshi Shankarrao Mohite SSK Ltd., Akluj Purchase Order 38 M/s. Kay Iron Works Pvt. Ltd., Satara Purchase Order 39 M/s. Kay Nitroxygen Pvt. Ltd., Satara Purchase Order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of commissioning of plant or till the performance trial is completed, whichever is later, shall be replaced or satisfactorily rectified by the seller [KBEPL] free of charge [Para 9.0.b] g. Seller [KBEPL] shall indicate within 45 days of signing of the contract, the equipment-wise breakup prices for major items of equipments [Para 12.0.a] h. Seller [KBEPL] shall not charge any escalation in any bill for value of materials (ex work) contract base price and to be supplied against each item as per Proforma A [Para 15.3.1] i. The Sellers [KBEPL] shall not be entitled to claim any price escalation on any consignment without furnishing the detailed price break up of plant and machinery showing month wise value of materials {ex work] contract base price and to be supplied against each items as per Proforma A [Para 15.3.1] j. Seller KBEPL] shall be liable to pay back all escalation amount drawn by him together with interest if break up of base contract price in Proforma A is not furnished. [Para 15.3.1] k. If the Purchaser [Dhanlaxmi] orders expressly in writing for the supply and/or execution of work to be suspended for a substantial period of time for no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is allowed by the Purchaser [Markandeya] [Para 3.4] f. Any part found defective within two crushing seasons from the date of commissioning of plant or till the performance trial is completed whichever is later shall be replaced or satisfactorily rectified by the seller [KBEPL] free of charge [Para 9.0 b] g. Seller [KBEPL] shall indicate within 45 days of signing of the contract, the equipment-wise breakup prices for major items of equipments [Para 12.0 a] h. Seller [KBEPL) shall not charge any escalation in any bill for the base prices of any consignment. [Para 15.1.4] i. The Sellers [KBEPL] shall not be entitled to claim any price escalation on any consignment without furnishing the detailed price break up of plant and machinery showing monthwise value of materials (ex work) contract base price and to be supplied against each item as per Proforma A [Para 15.3.1] j. Seller (KBEPL) shall be liable to pay back all escalation amount drawn by him together with interest if break up of base contract price in Proforma A is not furnished. [Para 15.3.1] k. If the Purchaser [Markandeya] orders expressly in writing for the supply and/or execution of work to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Spray Water Cooling System -17.00 Electrical Starters for Motors -01.50 Total Revised Contract Price d. The price is inclusive of Packing Forwarding charges, Transportation charges, cost of all other necessary items, all tax, duties Octroi paid, supervision of erection and commissioning, foundation bolts packing plates [Para 3 1] e. Any part found defective within two crushing seasons from the date of commissioning of plant shall be replaced or satisfactorily rectified by the seller [KBEPL) free of charge [Para 9.b] f. Seller [KBEPL] shall indicate within 45 days of signing of the contract, the equipment-wise breakup prices for major items of equipments.[Para 12.a] DURATION OF CONTRACT I find that the contract is entered into on 25th November 1995 and further amended vide Supplementary Contract entered into on 09th October 2000. The contract was to be executed by 15th December 2000. I find that some of the pages of contract are missing and the cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Plant consisting of Sectional Plants inclusive of 100 TCD Cane Milling Plant, 100 m3 Juice Sulphitation Clarification Plant, Subtle Juice Concentration [65% brix] Plant and Steam Generation Power Generation Plant [Para 1.2 1.3] c. Contract price is Rs. 218.75 lakhs and shall be FIRM and FIXED till execution and completion of the entire project and shall not be entitled or eligible for the escalation of the contract price or any part thereof for any reason whatsoever. The contract price is inclusive of sales tax, excise duty, insurance, packing forwarding, transportation to site and erection, supervision of erection commissioning. However, no break up is provided in the contract. [Article VIII] d. Any part found defective, within a period of 12 months from the date of takeover of the plant for commercial production or 18 months from the date of last supply, whichever is earlier, shall be replaced or satisfactorily rectified by the seller [KBEPL] free of charge [Article IV Para 4.8.1] DURATION OF CONTRACT I find that the contract is entered into on 10th October 2000 and was to be executed within 12 months from the date of agreement. However, I fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proof that the prices of individual items have been negotiated. 9. I have gone through the contract in respect of M/s. Kay Pulp and Paper Mills Ltd., Borgaon-Satara and find that - a. Contract is entered into on 05th day of March 1999 and the Contract is to be executed by the end of March 2000. [Page 1 and 2] b. KBEPL have to design, manufacture, procure and supply the machinery and equipments for the proposed Co- Generation Power Project [page 2]. c. Contract price is Rs. 1225.00 lakhs and inclusive of design, procure, manufacture, supply and supervision of erection commissioning, packing forwarding charges, transportation charges to site, cost of all necessary items, taxes, duties octroi. [Page 6 7] d. KBEPL shall submit price variation calculation as per standard variation formula for payment of price escalation. [Page 10] e. Any part found defective, within a period of 12 months from the date of commissioning of the Plant, shall be replaced or satisfactorily rectified by the seller [KBEPL] free of charge [Page 12] f. KBEPL shall submit within 20 days of signing of the Contract, the equipment-wise price break up for major items of equipme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive equipment/component free of charge. e) Packing and Forwarding Charges are to be paid extra by the customers in some cases and packing/forwarding charges are included in the price in other cases. f) Price break up is not sought for by the customers but KBEPL have supplied such price break up to the customers. However, M/s. Kirloskar Bros. Ltd., M/s. Nuclear Power Corporation of India, M/s Larsen and Toubro Ltd., have fixed the prices for the individual items. However, these orders are of small amounts considering the turnover of KBEPL. CONTRACT PRICE BREAK-UP I find that Purchase Orders/Supply Orders/Price Bid have specified lump sum price for supply of equipments. In a few small orders, price break up is supplied by the customers and in rest of the cases KBEPL have prepared price break up. I find that Purchase Orders, Supply Orders etc. or price break up have not mentioned as to which goods are to be bought out and which goods are to be manufactured. I find that KBEPL have clearly arrived at the price only after negotiations and price breakup was submitted later on. I, therefore, find that the price breakup was a formality and there is no correspondence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dervaluation made against the appellant on the basis of the cost auditor report can be sustained. Commissioner has noted the terms of conditions of the contracts/ purchase order etc., but has in not indicated as to what is undervaluation in respect of the any of individual contract/ purchase order. It is not the case that goods were supplied to a single entity but were supplied to various buyer, most of them being co-operative sugar mills. But supplies were made to public sector organizations like Nuclear Power Corporation and other public limited companies. It is not even the case of the department either in the show cause notice or in the impugned order that appellant have received any amount in the excess of agreed contract price. For the execution of the contract for the supply of the various items on turnkey basis the contracts itself provide that the contractor could either provide the goods manufactured by them or through their sub contractors. The contracts also provide for the manner of monitoring and dispatch of the goods and manner of payment of the duties and taxes on the goods supplied through sub contractors. The contractual obligations in respect of the goods procure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be actual amount as paid by the Sellers. The sellers shall furnish to the purchasers with their bills, excise duty gate passes in support of excise duty and special excise duty paid both for base price and price escalation bills. Provided, always that the purchasers or their authorized representatives shall be shown all original documents and accounting records in support of excise duties, custom duties on imported components and items and boiler quality plates charged and original bills of sub contractors for satisfying that single point sales tax, Excise Duties and Special Excise Duties, as aforesaid has actually been paid to the sub contractors, including taxes and duties charged in all escalation bills. II. In the Agreement (Supply Contract) dated 10th June 2000, between the appellant 1 and Shri Dhanlakshmi Sahakari Sakkare Karkhane Niyamit following has been provided: 3.4) The total price offered at 3.1 (v) above is inclusive of the total amount in respect of Central / State Sales Tax, Excise Duty, Customs duty on imported components, items and boiler quality plates / MMS plates, local taxes and any other taxes or duties and octroi at the destination point onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy of their choice to visit the place of manufacturer, assembly of the machinery and also PURCHASERS plant site and in respect of the same. The SELLLER and their sub-contractors for bought-out items shall offer the plant and machinery for inspection during the course of manufacture as well as before dispatch. Scheduled visits may be fixed by the Inspection Agency in case of major suppliers. The Suppliers shall give at least 15 days clear notice to the PURCHASERS or their nominees before the dispatch of machinery to the site in case of inspection before dispatch. In case the Inspection Agency feels that inspection will be delayed before dispatch, they will accordingly send a Certificate to the SELLER with an instruction to dispatch the material attaching the certificate itself. Such materials will be inspected at site. The SELLER shall supply necessary details of design with calculation and drawing wherever required by the inspection agency for the verification of the details of specification and for the purpose of inspection as incorporated in the Agreement. The PURCHASER or inspection agency shall send the SELLER within two months of signing the Agreement, the list of items of pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive Sugar Mills Ltd and Appellant 1 dated 25th May 2001 for Supply of Equipments Machinery of 2500 TCD suitable for expansion to 4000 TCD Sugar Plant. 4.5 From the plain reading of the above conditions it is evident that seller appellant 1 was under contractual obligation to provide to the purchaser the original copies of the invoices/ gate passes and other duty paying documents to the purchaser in respect of the brought out items, that the seller received from the sub contractor. Further the contract also provided that the purchaser could have at any time visited and inspected the manufacturing facilities during the course of the manufacture not only at the place of seller but also those all the sub-contractors providing who are supplying the bought item. The items supplied were to be inspected and cleared by the inspection agencies of the purchaser before the same were dispatched from the site of manufacture. It is not even the case of the revenue at any time that the said condition of the contract has not been satisfied. While recording the above conditions which are the part of contractual agreement, impugned order has failed to record any findings in respect of these c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Central Excise Act, 1944. In case of Guru Nanak Refrigeration [2003 (153) E.L.T. 249 (S.C.)], Hon ble Supreme Court has observed as follows: 4. From a perusal of clause (a) of sub-section (1), quoted above, it is clear that the duty of excise is chargeable on any excisable goods with reference to value which shall, subject to the provisions of that section, be deemed to be normal price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal provided that the buyer is not a related person and the price is the sole consideration for the sale. It is not in dispute that the buyer is not a related person and the price is the sole consideration for sale. It is also the common case that the respondent-assessee sold the refrigeration machinery parts in wholesale trade at the price which was approved by the Excise authorities. Where normal price within the meaning of clause (a) of sub-section (1) is ascertainable. The provisions of clause (b) cannot be resorted to. The show cause notice was issued to the assessee on the ground that the cost of production of the goods was more than the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lted in evasion of payment of appropriate excise duty on the excisable goods manufactured in the factory of KBEPL at Satara. I find that the Cost Audit Report certified by the Assistant Director [Cost] is based on Audited Annual Accounts of M/s KEBPL, and that, Assistant Director (cost) has followed the principles of costing as follows: (a) Cost of material: Cost of material is taken as actual as per figures available in the Audited Annual Accounts and General Ledger. (b) Overheads: Manufacturing Expenses: Manufacturing expenses are taken from Audited Annual Accounts and allocated to manufacturing items, as no such expenditure is related to bought out items. Depreciation: Depreciation is taken from Audited Annual Accounts and allocated to manufacturing items, as no such expenditure is related to bought out items. Employee Cost: Employee cost is taken from Audited Annual Accounts and out of this 90 per cent amount is allocated to manufacturing items and 10 per cent amount is allocated to bought out items. Interest: Interest is taken from Audited Annual Accounts and allocated between manufactured items and bought out items on the basis of material con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Accounts. Accordingly, the Cost Auditor has arrived at reasonable Assessable value of the excisable goods manufactured by KEBPL. I also find that the Cost Auditor has similarly taken into consideration the purchase cost of bought out goods from General Ledger of KBEPL. The Cost Auditor has added to it Employee Cost, interest, administration, selling and distribution and other expenses as also profit margin. The Cost Auditor has taken all these expense figures from Audited Annual Accounts. The Cost Auditor has distributed the common expenses for manufactured items and bought out items following the principles of costing as mentioned above. Accordingly, the Cost Auditor has arrived at Reasonable Sale Price of bought out goods. On comparison of Reasonable Sale Price of Bought Out Goods and Reasonable Assessable Value of Excisable Goods manufactured by KBEPL, it emerges that M/s. KBEPL have shifted the price of Manufactured Goods to Bought Out Goods with intention to evade payment of proper Central Excise duty on manufactured excisable goods. 17. In view of findings dictat of Honourable CESTAT, the contracts entered into with various customers and as submitted by KBEPL have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacture at the time of contract or bidding was more than the cost of manufacture at the time of execution or delivery of goods. From the Balance Sheets of the relevant years, the Cost Auditor has pointed out that the manufacturing costs are considerably more than what KBEPL have earned. As the costs have been worked on the purchase invoices of M/s. KBEPL, it has to be concluded that the costs as worked out by the Cost Auditor are correct. Moreover, its authenticity cannot be doubted as it is supported by the company's own Balance Sheet. M/s. KBEPL have sought to explain this by stating that the cost of manufacture worked out at the time of contract or bidding was on estimation basis. It is not understood as to how cost of manufacture has reduced due to delay in execution of contract when it should have gone up considerably. On one hand KBEPL say that there is steep rise in the prices of inputs and on the other hand they say that cost of manufacture was more at the time of bidding and has reduced at the time of delivery of goods due to delay in execution of the contract. This is contradictory. It is noticed that KBEPL have made various contradictory arguments in the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es as required under Rule 52A or 11 of the Central Excise Rules 1944 or Central Excise Rules, 2002, as the case may be, for excisable goods manufactured by them. However, KBEPL have not issued such Central Excise Invoices under Rule 52A or Rule 11 of the Central Excise Rules in the case of bought out goods to any customer. 20. KBEPL has contended that it is not uncommon in turnkey industry to place a composite order but later billing break up is approved by the customer. Further, the customers are entitled for CENVAT credit of the duty paid by KBEPL and so there is no inducement to keep the prices deliberately low. However I find that M/s.KBEPL have raised their commercial bills against supply of bought out items and in such commercial bills no details are forthcoming in respect of Central Excise duty for the purpose of availment of CENVAT Credit by the customer. Therefore M/s.KBEPL's above plea is not correct. In this context, 1 had that the Department has not made any allegation that KBEPL have recovered any amount over above the contracted price. The Department's case is that KBEPL have manipulated price break up in such a way that the prices of bought out goods h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of Section 4(1)(b) of the Central Excise Act, 1944 read with Rule 11 of the Central Excise Valuation [Determination of price of excisable goods] Rules 2000 to determine proper assessable value of the excisable goods. Accordingly, the Cost Audit Report based on the Audited Annual Accounts of KBEPL has given correct assessable value of the excisable goods manufactured in the factory of KBEPL Satara. 22. KBEPL Satara have pleaded that the exercise undertaken to fix the assessable value for a sale transaction by considering the overall cost involved from the balance sheet is incorrect and lacks authority. KBEPL have further pleaded that the selling price of product in terms of bought out goods and workshop supplies are determined and fixed at the beginning of the supplies and the same are approved by the customers as well as submitted to the statutory authorities, and therefore, cannot be altered even if there is increase in the price of raw materials. KEBPL have further pleaded that the pricing of bought items cannot be the matter of reference as profit element to be loaded cannot be dictated by the Department: I find that what the KBEPL are pleading to be a price break up is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... para on Escalation Clause in the Contracts/Purchase Orders/Supply Orders/Price Beds etc., even where Escalation was allowed by the customers, M/s KBEPL: have no raised Escalation Bills when they say that there was steep rise in the prices of raw materials. I also find that it is not known as to why KBEPL have not taken into consideration expected price rise in the raw materials till the completion of contract order. Therefore, KBEPL cannot say that at the time of contract/bidding, they quoted less price and subsequently the same went up. I also find that the Balance Sheets of KBEPL for the concerned period are not showing losses to the company though the profit may be lower than the expectations of company. Further, an exercise to ascertain contract-wise pricing of excisable goods and bought our goods was made and a worksheet of such computation is enclosed as 'Exhibit A' to this OIO. The working shows results similar to those revealed by Cost Audit Report which is based on their own Balance Sheet which reflects the financial performance done by the company during a particular year. It is felt that all the variations in raw material/finished goods market and their impact o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... composite price, within which the assessee has on his own undertaken a break up of price between manufactured and bought out items; which is not supported by the expenditure incurred as reflected in the Company's books of account, and which also does not have any relation to the actual cost of the bought out items as seen from the invoices of the manufacturers of the bought out items. I find that the price mentioned on Central Excise Invoice by itself cannot be treated as 'transaction value' for the purpose of valuation in the present case when the customers have not quoted any transaction value or price for each of the excisable goods manufactured by KBEPL. Thus, what KBEPL are pleading to be a price break up is the break up done by KBEPL in a manner convenient to themselves without following any costing or valuation standards prescribed by Institute of Cost and Works Accountants of India which in fact are legally accepted in India and which is not backed by their own figures in the Balance Sheets. Since the contract has not even specified what items are to be bought out and what items are to be manufactured by KBEPL, the assessee was well aware of the items to be man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rious other similar submissions made by KBEPL. The case of KBEPL cannot be considered beyond the provisions of Section 4 read with Valuation Rules 2000. The fact remains that customers of KBEPL have not quoted 'transaction value' of each of the excisable goods manufactured by KBEPL. The customers do not know or even do not specify as to which goods are to be manufactured by KBEPL and which goods are to be bought out from the open market. The customers are concerned with the only fact that the billing of the KBEPL does not exceed the lump sum contract amount prescribed. The price break up prepared by KBEPL without support of any cost or valuation standards prescribed in this regard cannot be accepted. The valuation method adopted by the Department is consistent with the provisions of Section 4 of the Central Excise Act, 1944 and Central Excise Valuation [Determination of Price of Excisable Goods] Rules 2000. The reasonable assessable value of excisable goods is arrived at and certified by the competent authority viz. Assistant Director (Cost] of the Department. Further, the duty demand is not merely based on the Balance Sheet but is based on a plethora of evidence and the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s loaded exorbitant Admn, Selling and Distribution expenses on bought out goods to the extent of Rs. 71.79 lakhs. Therefore, I find that these Cost Computation Sheets which are not signed or certified by Cost Accountant and which bear fundamental grave errors as mentioned above, cannot be accepted. In contrast to these Cost Computation Sheets, the Department has relied upon Cost Audit Report, which is based on KBEPL's Balance Sheets/Audited Annual Accounts, duly certified by competent authority. In view of this, I conclude that it is proper and correct to rely upon the Cost Audit Report of the Department to arrive at reasonable assessable value of the excisable goods. : 26. It is stated by KBEPL that there is no reference in the impugned Show Cause Notice to individual excise invoice, description of individual goods and quantum of inputs used. It is not correct to say that Cost Audit Report has not considered invoices issued, excisable goods manufactured and inputs consumed to arrive at assessable value of goods manufactured. On going through Cost Audit Report it will be seen that the Report has very well considered every single excise invoice issued during the period of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involved was Valuation(Central Excise)- Normal Price-Refrigeration machinery parts sold by assessee in wholesale trade at the price which was approved by the Excise Authorities-Show cause notice issued on the ground that the cost of production of the goods was more than the cost of wholesale price, so differential duty be paid on the basis of costs of production of goods- No allegation that the wholesale price to the buyers was for consideration other than the one at which it purported to be sold or that it was not at arms length-No flow back of money from the buyer to the assessee- In absence of these factors it cannot be contended that normal price was not ascertainable- Where normal price within the meaning of clause(a) of sub- section (1) of Section 4 of C.Excise Act, 1944 is ascertainable, the provisions of clause (b) ibid cannot be resorted to determine the nearest ascertainable equivalent of the normal price of the goods-Tribunal's Order upheld. The present case is for valuation of excisable goods under the provisions of Section 4(1)(b) of the Central Excise Act, 1944 and there is no allegation made for receipt of additional consideration by the assessee except for escal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed was Notional interest on advances shown in balance sheet alleging gain from advances, having been made without considering relevant factors, and ignoring the much bigger debit balance entries in same balance sheet is not sustainable. It was also alleged that the report of Assistant Director was introduced into the issue at a later stage and violative of principles of natural justice. Also, extended period could not be invoked on the basis of the information appearing in balance sheet which was a public document and hence not sustainable. The facts of the present case are totally different and ruling of this case law is not relevant here. vi. In the case of Kirloskar Oil Engines Ltd. Vs CCE, Nasik 2004(178) ELT 998 (Tri-Mumbai); extended period is not invocable as information appearing in the balance sheet is document which is openly available to public and hence suppression cannot be charged. The more specific issue was credit not deniable on inputs lying in the factory though components were written off in the books of account on the presumption that input cannot be used, when there was no time for consumption. No such situation is arising in our case and hence this ruli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence the ratio of this decision cannot be directly applied to the present case. However the para s which enunciate the principles in law are being reproduced below: 51. Excise is a tax on the production and manufacture of goods and Section 4 of the Act provides for arriving at the real value of such goods. When there is fair and reasonable price stipulated between the manufacturer and the wholesale dealer in respect of the goods purely on commercial basis that should necessarily reflect a dealing in the usual course of business, and it is not possible to characterise it as not arising out of agreement made at arms length. In contrast, if there is an extra-ordinary or unusual price, specially low price, charged because of extra- commercial considerations, the price charged could not be taken to be fair and reasonable, arrived at on purely commercial basis, as to be counted as the wholesale cash price for levying excise duty under Section 4(1)(a) of the Act. 58. From a conspectus of decisions and dictionary meaning, the inescapable conclusion that follows is that consideration means a reasonable equivalent or other valuable benefit passed on by the promisor to the promisee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be ascertained. Since, Section 4(1)(b) of the Act applies, the valuation requires to be done on the basis of the 1975 Valuation Rules. 61. After amendment of Section 4 :- Section 4 lays down that the valuation of excisable goods chargeable to duty of excises on ad-valorem would be based upon the concept of transaction value for levy of duty. Transaction value means the price actually paid or payable for the goods, when sold, and includes any amount that the buyer is liable to pay to the assessee in connection with the sale, whether payable at the time of sale or at any other time, including any amount charged for, or to make provisions for advertising or publicity, marketing and selling, and storage etc., but does not include duty of excise, sales tax, or any other taxes, if any, actually paid or payable on such goods. Therefore, each removal is a different transaction and duty is charged on the value of each transaction. The new Section 4, therefore, accepts different transaction values which may be charged by the assessee to different customers for assessment purposes where one of the three requirements, namely; (a) where the goods are sold for delivery at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst drawing general conclusions and inferences quoting the truism stated by Lord Halsbury that a case is only an authority for what it actually decides and not for what may seem to follow logically from it. 2.1 Further, in paragraph 50, the Hon ble Supreme Court has cited two instances where a manufacturer may sell goods at a price lower than the cost of manufacture and profit and yet the declared value can be considered as normal price. These instances are when the company wants to switch over its business or where a manufacturer has goods which could not be sold within a reasonable time. The Hon ble Court has further held that these examples are not exhaustive. Therefore, mere sale of goods below the manufacturing cost and profit cannot be taken as the sole basis for rejecting the transaction value. Verification of payment of duty 3. The second issue is regarding the procedure to be adopted by the field officers to identify cases where the ratio of the judgment would apply. It may be noted that, under the self- assessment procedure, there is a legal obligation on the assessee to correctly assess and pay the duty in terms of the Central Excise Act, 1944 read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny extra commercial consideration . The Board has also accepted the fact that the Apex Court in its judgment has observed that selling of final products below the manufacturing cost was intended to penetrate the market which also constitutes extra commercial consideration in the hands of the manufacturer. We find that no enquiry or investigation has been undertaken by the Department to reject the transaction value as nothing is appearing in the impugned order and that merely the decision in the case of Fiat India has been mechanically relied to raise the impugned demand, which is basically a reiteration of the proposal in SCN. We also note, as submitted by the Learned Advocate for the appellant, that the loss in their case has been around 10% but that cannot be made the sole criterion to disregard the valuation adopted by the appellant under Section 4(1)(a), as also clarified in para 2 of the aforesaid Circular. In view of the same, the decision in the case of Fiat India (Supra) is clearly distinguishable and has no application to the facts of the present case. 4.11 Commissioner has in the impugned order nowhere concluded that appellants had in case of any contract recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e consideration and has been influenced by some additional commercial consideration. Impugned order seeks to reject the contract value/ transaction value without even showing what was additional commercial consideration flowing from the buyer to seller for the sale of the goods. The impugned order nowhere concludes that appellant has received any amounts over and above the declared transaction value for the payment of duty. The demand thus made contrary to the settled position in law cannot be sustained. 4.12 The charge of undervaluation has been made against the appellant on the basis of the cost auditor report who has concluded that appellant was supplying the bought out items bought from various entities. To establish the undervaluation the Cost Auditor has drawn three statements in the report which are reproduced below: Computation of Profit Margin S N Particulars 2000-01 2001-02 2002-03 2003-04 1 Sales 2304.07 1934.74 1488.01 1453.66 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.96 10 Profit Amount 2257244 2573423 1911888 3568520 11 Reasonable Sale Price Excluding Taxes 129068706 94481370 89613167 124126637 12 Actual assessable Value 53777229 25860648 37243767 92232510 13 Undervaluation 75291477 68620722 52369400 31894127 Total Undervaluation 228175726 Statement II Table Showing the Calculations of Total Cost, Reasonable Sale Value on the basis of average profit margin and actual sale value of Bought Out Goods S N Particulars 2000-01 2001-02 2002-03 2003-04 1 Material Consumed 83457654 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cost Auditor means an auditor appointed to conduct an audit of cost records and shall be a cost accountant within the meaning of The Cost and Works Accountants Act 1959. Cost Accountant is a cost accountant as defined in clause (b) of sub-section (1) of section 2 of The Cost and Works Accountants Act, 1959 (23 of 1959) and who holds a valid certificate of practice under subsection (1) of section 6 and who is deemed to be in practice under subsection (2) of section 2 of that Act and includes a firm of cost accountants. 4.5 Cost Audit Report: Cost Audit Report means the report duly audited and signed by the cost auditor on an independent examination of the cost statements, cost records and other related information of an entity including a non-profit entity, expressing his opinion thereon. It includes any statement, annexure, qualifications, observations, etc. attached to the cost audit report, or that is required by law or regulation. 4.6 Cost Records: Cost Records means books of accounts relating to utilization of materials, labour and other items of cost, to facilitate calculation of true and fair cost of production or cost of operations, cost of sales, and margi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice not only makes the demand by alleging the undervaluation of the manufactured goods by overvaluing the brought out items, it also alleges that appellant has removed the clandestinely removed the bought out items as per the cost auditor report from their premises clandestinely. Interestingly the as per Annexures to Show Cause Notice show that during the relevant period the value of bought items vis a vis those procured from the sister concern is as follows: SNo Financial Year Bought out goods from KC Goa to total Sale Price Total K C Goa % 1 2000-01 8,34,57,654 1,43,84,500 17.24 15,59,31,565 2 2001-02 7,73,72,987 2,12,27,300 27.44 15,39,84,994 3 2002-03 4,67,49,452 1,31,93,500 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive relied upon the following decisions to buttress the findings recorded in the impugned order: Calcutta Chromotype Ltd. [1998 (99) E.L.T. 202 (SC)], the Apex Court relying upon M/s. Mcdowel and Company Ltd. vs. Commercial Tax Officer [(1985) 3 SCC 230], holding that Colourable devices, however, cannot be part of tax planning. The argument advanced by the authorized representative is without merit as the composite contract for supply of the goods involving supply of the goods and services between the independent purchaser and seller cannot be said to be colourable device for the purpose of tax evasion. The other decisions relied upon only state that the best judgement assessment to be adopted in certain cases. However said decisions which are relied would apply only if the transaction value is rejected. In the present case once the conclusion is that sale price between the seller and purchaser is at arms length same cannot be rejected and best judgement assessment resorted too. 4.15 For upholding the charge of clandestine clearance impugned order observes as follows: CLANDESTINE REMOVAL 30. The second allegation of the Show Cause-cum-Demand Noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent has stated that he was working as Manager with KC Goa but no production and clearance of excisable goods were effected from KC Goa. l. Shri Kamat has stated that Shri B M Mujawar, employee of KBEPL had obtained his signatures on two blank books of Challan and bills. According to his knowledge no excisable goods were cleared from Kundaim Goa and he does not know what type of goods have been removed on the said blank but signed challans/bills. m. Shri Mirza has stated that KC Goa has also not got manufactured any excisable goods on job work basis from any other manufacturer. n. Central Excise invoices of KC Goa are written in the handwriting of Shri N.S. Nipane, Purchase Officer of KBEPL Satara who has written Central Excise invoices of KBEPL Satara also on the same dates showing that Central Excise invoices of KC Goa were issued from Satara only and not from Goa. This has been accepted by Shri N.S. Nipane in his statement recorded on 07/04/2005 which has not been retracted till date. o. KBEPL Satara's Stores Section has issued Issue Slips for raw materials supplied to their workshop floor for the manufacture of excisable goods on account of KC Goa. Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly a concocted story. Moreover, this defence has not been supported with any documentary evidence. 31. KBEPL has made a half hearted submission that K C Goa KBEPL have not brought forward any evidence to support the contention of job work. On the contrary, Mr. S.A. Mirza of KC Goa has stated that they have not got manufactured any excisable goods on job work basis from any other manufacturer. Further, even if the goods of KC Goa were manufactured on job work basis, the Central Excise duty should have been paid by that job worker and not KC Goa. This defence, is not convincing in the least. 32. I find that all the above listed evidence collected by the Department shows that the goods said to be bought out from KC Goa were manufactured by KBEPL Satara in their factory and removed without payment of CENVAT duty. 33. KBEPL have argued that the Department has not taken into account duty payment made by KC Goa in Central Excise Goa Commissionerate, issued Central Excise invoices and have filed returns. I find that duty payment in the name of KC Goa is made availing the benefit of concessional rate of duty under SSI Exemption Scheme. I also find that in case of goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em and KBEPL have saved Excise Duty thereon as the goods, in fact, have been manufactured by KBEPL at Satara and were liable to duty @ 16% ad valorem. Further, the motive for this manipulation done by the company is clearly the flexibility it provided to further manipulate the prices between the manufactured items and the bought out items. But for this reason, there could be no logic as to why the goods were shown to have been manufactured in KC Goa. Since it was illegally showing the goods to have been manufactured at Goa and paying duty, such payment cannot be taken to be the payment of duty on those goods since there was no requirement to pay that duty at all. Excise duty payment is not a matter of whim and fancy. It should be paid where it is required to be paid and on the correct value after properly accounting for the same. Therefore, I am not inclined to give any benefit of CENVAT duty paid at Goa for the actual excisable goods manufactured at satara and cleared without payment of excise duty. Therefore, KBEPL are liable to pay Excise Duty as demanded by the Department. 34. Following rulings were also cited by KBEPL in their defence: Martin Harris Laboratories Ltd. V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ledge of authorities when first show cause notice issued, while issuing second and third show cause notices, same or similar facts could not be taken as suppression of facts on part of assessee as these facts already in knowledge of the authorities. In the present show cause notice, all the allegations are being levelled for the first time and the show cause notice is not second or third one and therefore, the facts have been brought to the light for the first time and the show cause notice in the present case is sustainable in the eyes of law. The reference of the ruling is not warranted. vi. In the case of Mistry Extrusion Pvt. Ltd. VS CCE, Surat 2000 (117) ELT 495 (T); it was held that relevant information including delivery challans, invoice numbers, gate pass numbers etc. disclosed by appellant thereby establishing fact of payment of duty on goods. When facts are known to the department, no demand is sustainable. In the present there is no such usage of challans or records etc. and in fact as corroborated there is no maintenance of records itself. Goods cleared under cover of certain delivery challans on which goods have been cleared illicitly without payment of duty, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue not admit that the goods were actually manufactured and cleared by the Goa Unit. Moreover while alleging the goods to be clandestinely cleared by the Appellant the duty is being demanded on the purchase value of the goods from Goa Unit and not on the sale value indicated in the invoices issued by the appellant. If these goods were the manufactured at Satara unit, then the transaction value between the appellant and its customer at the time and place of clearance as per section 4 of the Central excise Act, 1944 would be the sale price of the impugned goods and CENVAT duty paid on the purchase price would be available as CENVAT Credit to the appellant. 4.18 At the time of considering the stay application filed by the Appellant, tribunal has vide order No S/436 to 437/ 08/C-II/EB dated 17.09.2008 observed as follows: 6. As regards the issue at para 4(ii) above is concerned, the allegation is about the clandestine removal of excisable goods from KBEPL, Satara in the guise of bought out goods from K.C. Goa. The Commissioner, on the basis of the detailed evidences recorded in para 30 of the findings portion of the Order, has come to the conclusion that no manufacturing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment at Goa is not denied, whether it is duty or not, it has to be offset against the duty payable at KBEPL, Satara. 4.19 Even if the charge of clandestine clearance of the goods in garb of the goods manufactured at Goa is to be upheld, tribunal has categorically held that the amounts paid at Goa need to be offset against the duty payable by the appellant at Satara. There is no challenge to the above by the revenue and accordingly in our view the amount paid at Goa needs to be offset against the amount payable by the appellant in respect of the goods alleged to be cleared clandestinely. Undisputedly against the impugned order records that an amount of Rs 95,01,741/- has been paid by K C Goa against the clearance of the said goods. A demand of Rs 1,02,69,756/-, has been made and confirmed against the appellant. Thus after offsetting the amount paid in the name of K C Goa registered with Goa Commissionerate during the relevant period an amount of Rs 7,68,015/- is demandable from the appellant 1. 4.20 On the issue of the demand made on the escalation bills, impugned order observes as follows: 35. The third charge pertains to non-discharging of duty in the escalation bil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty on escalation cost in respect of bought out items, demand not sustainable in respect of bought out items. In the present case, the Department has proved that the price of the bought-out goods is already over-valued and so the question of further escalation of bought-out goods does not arise. In view of this, the ruling is not applicable to the present case. 36. In this regard, I am supported by case law in the case of M /s. Pre- stressed Concrete Poles V/s Collector of C.Ex. Chandigarh [1998(102) ELT-237 (Tribunal) Para 3]. The Tribunal has observed that Appellant in the present appeal has no case that the buyer had objected to the debit note on the ground that the escalation clause could not be invoked or there was error in the debit note. Appellant having raised the debit note therein it must be ordinarily follow that the amount covered by the note would be part of the assessable value. Since the appellant has no case that the buyer had objected to the bill on the ground of non application of the escalation clause or on account of any error in the note it: should be held that the amount covered would be the part of the assessable value. The mere fact that the buyer do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CENVAT duty @16% (Rs.) 1 KBE/307 31.03.2003 M/s Shree Dhanlaxmi SSK 5946197 951392 2 KBE/28A 30.06.2003 M/s Shree Dhanlaxmi SSK 11837111 1893938 3 KBE/28B 30.06.2003 M/s Markandeya Coop Sugar Mills Ltd 4775672 764108 Total 22558980 3609438 4.16 Extract of Annexure to show cause notice Statement Showing the Sale Price of Bought Out Items Vis a Vis Purchase Price in R/O M/s Kay Bouvet Engg Pvt Ltd Satara is at cost of repetition reproduced below: SN 2000-01 2001-02 2002-03 2003-04 A Sale Price 15,59,31,565 15,3984,994 10,81,02168* 3,36,04,701* ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted above. If the Purchasers fail to remit the payment due to the Sellers as stated above and the Sellers do not hear from the Purchasers even within 60 days, the Sellers may draw the correct amount of escalation as per escalation clause due to them through Letter of Credit. In the same manner, if the Purchasers is entitled for refund of the price due to de-escalation, the Sellers shall deduct the same from their subsequent bills within 60 days from the publication of RBI bulletin and send to the Purchasers details thereof immediately within 45 days from the publication of the RBI bulletin. Otherwise the Purchasers shall have the right to recover the said amount drawn in excess by the Sellers in any lawful manner. Excise duty and sales tax also will be charged on final escalation amount checked and passed by the Purchasers. The Sellers shall provide all documentary proof in support of payment of excise duty and sales tax on escalation. Payment of excise duty and sales tax should be made in the same manner as mentioned above. The documents for escalation claims should be sent through registered post. PROVIDED FURTHER THAT 1. The Sellers shall not be entitled to claim a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase revenue has not adduced any single evidence to show that appellant have received any amount against the escalation bills issued by them to the purchaser. The escalation bills are not even finalized till today. On the contrary applicant has produced the letter dated 03.03.2008 from the Commissioner for Cane Development and Director of Sugar Bangalore. Against the escalation bills raised by the appellant as reflecting in Show Cause Notice to M/s Shree Dhanalaxmi SSK for an amount of Rs 1,77,83,308/- having duty component of Rs. 28,45,330/- as per the letter dated 03.03.2008, the escalation amount allowed is Rs. 29,88,940/- having the component of duty and taxes of Rs 7,08,565/-. This clearly establishes that the escalation amount as claimed by the appellant in the escalation bills is not the amount received by them but is the amount which is subsequently determined and agreed to by the purchaser. 4.24 Appellants do not deny that the duty needs to be paid on the escalation amount received by them. However as per them the said duty shall be paid only on finalization of the escalation bills. The demand in the present case has been made on the escalation bills raised by them, even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omes payable only on finalization of escalation bills and not at the time of issuance, because the buyer may not agree to pay the whole amount as claimed by the Applicant. However, the Respondent has noted that no such dispute has been raised by any of the buyers of the Application with respect to the Escalation Bills and accordingly, Excise Duty is to be levied on the entire amount of the escalation bill. 4. The Applicant states that the Letter dated 03.03.2008 issued by the Commissioner of Cane Development and Director of Sugar, Karnataka is on such letter wherein it is clearly seen that contrary to the finding recorded by the Respondent, the buyer did object to the escalation bills issued by the Applicant and ultimately finalized the said escalation bills at a much lower amount than what had been claimed by the Applicant. Copy of the aforesaid letter dated 03.03.2008 is annexed hereto and marked as Exhibit A to this Application. 5. That as the findings on this issue (under paragraph 36 of the OIO) clearly fail to consider dispute letters, such as the Letter dated 03.03.2008 issued by the Commissioner of Cane Development and Director of Sugar, Karnataka, the productio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d., in Supply Bills: 1. Adjustment of Mobilisation advance paid for Supply Total Advance paid of Rs. 2,79,00,000.00 Less: 15% Adjusted 2,17,13,686.00 Balance to be adjusted: 61,86,314.00 Retention amount of performance 5% Entry Tax at 26 Total Deduction in Supply Bills (B)(I) 2,17,13,686.00 84,02,646.00 32,50,954.00 3,33,67,286.00 Deduction made by DSSK Ltd., in Erection Bills: 1. Adjustment of Mobilisation advance paid for erection Total Advance paid of Rs. 7,50,000.00 3,60,588.00 Less: 15% Adjusted 3,60,588.00 2,40,392.00 Balance to be adjusted 3,89,412.00 49,040.00 Retention amount of performance 6,50,020.00 TDS Deductions Total Deduction in Erection Bills (B)(II) Total Deductions (B) (1)+ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement dated 10/06/2000 and withdraw the bank guarantee invoked subject to the following conditions:- 1. The settlement of account should be in accordance with the reconcile statement dated 08/01/2008 certified by Chartered Accountant of the federation. 2. M/s. KAY-Bouvet Engineering (P) Ltd., shall furnish an undertaking on a stamped paper to the effect that he will not initiate any legal action/proceedings or disputes in respect any claim pertaining to the agreement dated 10/06/2000 and subsequently. He shall also undertake to furnish any pending drawings of plant and machinery as per the request of the factory. 3. He shall withdraw the case filed in the court of Satara and shall furnish copy of the court order. The Dakshina Kannada SSK Ltd., is directed to take an undertaking letter from M/s. KAY-Bouvet Engineering (P) Ltd., before settling his dues on a stamped paper duly vetted by an advocate Sd/- Commissioner of Cane Development and Director of Sugar, Bangalore 1) Secretary to Government, Co operation Department, M.S. Building, Bangalore. 2) The Managing Director, Karnataka State Co operative Sugar Factories Federation, Malleswar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the visiting Audit Parties from time to time and as such the exercise of cost audit could have been undertaken earlier also land resultantly, extended period prior to October 2004 was not invokable in the instant case. I find that only after the completion of the Cost-Audit exercise, it was detected that there was suppression of information land large scale manipulation of the accounts by over-valuation / under- valuation of bought out items / manufactured goods and clandestine removal resulting in the issue of this Show Cause Notice. Therefore, extended period is rightly invoked in the case. KBEPL have contended that a Show Cause Notice on the issue of CENVAT credit in respect of supply to M/s. Dhanlaxmi SSK was issued to them and so the matter was known to the Department. I find that it was different issue relating to wrong availment of CENVAT credit on bought out goods sent directly to M/s. Dhanlaxmi and credit availed by KBEPL at Satara. I find that in the said case no documents/records relating to the pricing of excisable goods or bought out goods were the subject matter of that Show Cause Notice and the said issue was limited to non- receipt of inputs in the factory of KBEPL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t their Satara Plant, but deliberately shown as manufactured and cleared from their KC Goa, I hold that M/s KBEPL have rendered themselves liable for penal action under the provisions of Sec 11AC as proposed in the subject SCN. 39. Now, I proceed to examine the role of Shri Niraj Chandra, Joint Managing Director and Chief Executive. He was in-charge of responsible for all the activities carried out at KBEPL and KC Goa, and therefore, is the direct beneficiary of the tax evasion and responsible for the loss of revenue caused to Government exchequer. Shri Chandra has deliberately maintained that the goods are manufactured at KC Goa and transported from there to the customers although the investigations have proved the same to be contrary. The Cost Audit Report clearly shows that the assessable value shown by KBEPL is less than the value of raw materials consumed but still Shri Chandra has refused to give any reply on this discrepancy but availed CENVAT credit on the quantity of raw materials consumed. Shri Chandra has tried to make it appear that the CENVAT duty utilisation is higher because of Export of goods but this is not tenable because there is very meagre export of exci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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