Custom, Excise & Service Tax Tribunal
M/S. Andhra Pradesh Paper Mills Ltd vs The Commissioner Of Central Excise on 6 September, 2013
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH AT BANGALORE COURT - I Applications Involved: Misc. Application Nos. E/Misc./289/2011 & E/Misc./52/2012 in Appeal No: E/6/2007 Appeal involved: Appeal No: E/6/2007 (Arising out of Order-in-Original No: 17-24/2006 (VR) passed by the Commissioner of Central Excise & Customs, Visakhapatnam-II Commissionerate, Visakhapatnam.) Date of Hearing: 06.09.2013 Date of decision: 06.09.2013 1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3. Whether their Lordship wish to see the fair copy of the Order? Seen 4. Whether Order is to be circulated to the Departmental authorities? Yes M/s. Andhra Pradesh Paper Mills Ltd. Appellant Vs. The Commissioner of Central Excise Visakhapatnam-II Commissionerate Visakhapatnam. Respondent
Appearance For the appellants : Shri C. Saravanan, Advocate For the respondents : Shri Ganesh Havannur, Addl. Commissioner (AR) CORAM SHRI M.V. RAVINDRAN, HONBLE MEMBER (JUDICIAL) SHRI B.S.V. MURTHY, HONBLE MEMBER (TECHNICAL) MISC. ORDER No. 27254 / 2013 FINAL ORDER No. 26571 / 2013 Order per: M. V. Ravindran The miscellaneous applications filed by the appellant as well as by Revenue are not listed today. Since we take up the matter for final disposal, they are disposed of as allowed.
2. This appeal is arising out of order passed by adjudicating authority in 8 show-cause notices issued to the assessee vide Order-in-Original No.17-24/2006 (VR) dated 26.9.2006. The assessee is in appeal against the portion of the order which has confirmed the demand of the differential duty along with interest and imposed penalty.
3. The relevant facts that arise for consideration are the appellants herein is manufacturer of paper and paper products and is registered with the Central Excise department. In addition to sale of their goods at factory gate and depots located at various places, they are also clearing paper and paper board in form of reels on payment of duty to their corporate office/depot at Hyderabad on stock transfer basis for conversion into reams. After conversion, these goods are partly sold at Hyderabad depot and partly through other depots by raising commercial invoices. The value adopted by assessee for assessing and clearances from the factory is ex-mill price i.e., ex-factory price which is uniform to all the wholesale dealers and also for stock transfer to depots. However, in respect of sales through depots, though basic price is one and the same, it varies from dealers price due to inclusion of the expenses towards freight, insurance, etc., for transferring the goods to various depots. The appellant-assessee has taken abatement on Excise duty, CESS and cash discounts in the invoices itself while selling the goods at factory gate, while stock transferring the goods to various depots abatement are claimed for the same but expenses incurred for stock transferring of the goods like freight and insurance which are collectively termed as incidental charges are shown separately on the invoices and are not included in the assessable value for discharging duty liability. After investigation, a show-cause notice dated 14.8.2000 was issued by invoking extended period while other show-cause notices are issued regularly for confirmation of the demand of the differential duty that arises on the appellant and the incidental charges shown by them on the invoices and collected by them. The appellant contested the show-cause notices on merit and has also claimed the bar of limitation in respect of one show-cause notice. The adjudicating authority after considering the submissions made by the appellant before him, and after due process of law did not agree with the contentions raised by the appellant and confirmed the demands. Hence this appeal.
4. Learned counsel appearing on behalf of the appellant would at the outset submit that the period involved in this appeal is overlapping. The demands have been confirmed for the period April 1993 to September 2006 in earlier cases, while the demand in this case is from 28.9.1996 to June 2004. He would submit that the issue of conversion of reels of paper into ream of paper has been decided by this Bench vide Final Order No.24/2010 dated 22.10.2009. He produces the copy of the said order and takes us through the findings recorded by the Bench and more specifically at paragraph 10 and 10.4 to fortify his argument that conversion of paper does not amount to any other new product coming into picture. It is his submission that the Excise duty has been discharged at the factory gate on the reels which after going to Hyderabad depot gets converted into reams. It is his submission that if the product which leaves Hyderabad depot is not the same as it was when it left the factory premises, there cannot be any further inclusion in the assessable value of the said product. He would submit that the goods which were cleared by Hyderabad depot to various other depots were reams of papers and hence the product being different, there cannot be inclusion of the value of the incidental charges which are collected by the appellant. It is also his submission that the decisions of the Honble Supreme Court in the case of Baroda Electric Meters Ltd. vs. CCE: 1997 (94) E.L.T. 13 (S.C.), Indian Oxygen Ltd. vs. CCE: 1998 (36) E.L.T. 723 (S.C.) and Hindustan Lever Ltd. vs. CCE: 2001 (130) E.L.T. 721 (S.C.) would be applicable in this case as if the goods which are already duty-paid, if they do not get manufactured at depot, then the question of inclusion of any further charges collected by the appellant assessee would not arise. He would also submit that the extended period invoked in this case is incorrect in respect of at least one show-cause notice dated 14.8.2000 inasmuch as Revenue authorities have on a very identical issue had issued show-cause notices and which has culminated in an order which is in favour of the assessee by this Tribunal.
5. Learned departmental representative on the other hand at the outset would submit that the issue involved in the Final Order No.24/2010 dated 22.10.2009 is totally on different facts while the facts in the case in hand are totally different. It is his submission that in that case, the appellants were before the Tribunal only in respect of non-inclusion of conversion charges in the assessable value of the reels cleared from the factory premises and converted at Hyderabad depot. On a specific query from the Bench, it is his submission that he is not aware whether Revenue has contested this decision before the higher forum. It is his submission that in the case in hand, the assessee is charged for not including the additional amounts received by them from the wholesaler/dealers or on the inter-depot transfer from Hyderabad. It is his submission that depot is considered as a place of removal and hence the price at which the goods are sold at various depots needs to be considered for arriving at the correct assessable value for discharge of duty liability. He would then takes us through the provisions of Section 4 of the Central Excise Act, 1944 and submit that the transaction value which is contemplated, talks about including in the assessable value all the expenses that are incurred in respect of finished goods till the place of removal. He would also draw our attention to the definition of place of removal and submits that depot is considered as a place of removal and in the case in hand, there is no dispute that the appellant had cleared reams from Hyderabad depot to various depots for further sale. He would submit that identical issue came up before the coordinate bench of the Tribunal in the case of Brakes India Ltd. vs. CCE, Chennai: 2005 (184) E.L.T. 179 (Tri.-Chennai), wherein the Tribunal has taken a view that sale prices prevailing at the concerned depots at the time of clearance of goods from the factory needs to be adopted as assessable value.
6. We have considered the submissions made at length by both sides and perused the records. The issue involved in this case is whether the appellant is required to pay the differential duty on the incidental charges charged by them for clearance of their final goods to various depots and to hold whether clearances from such other depots would constitute clearance from a place of removal.
6.1 The facts as narrated in paragraph 2 are not disputed by both sides.
6.2 On perusal of the records, we find that the period involved in this case is from 28.9.96 to 30.6.2004 wherein the appellant had charged incidental charges like freight charges and insurance charges, for clearance of reams from Hyderabad depot to various depots for further sale. It is also recorded that the said incidental charges are not included in the assessable value by the appellant.
7. For deciding the issue, we have to break the entire period into three segments. The first segment, on which demand of the duty would be from 28.9.1996 to 30.6.2000; the second segment is for the period from 1.7.2000 to 13.5.2003 and the last segment is for the period from 14.5.2003 to 30.6.2004.
7.1 We take up the first segment i.e., period involved between 28.9.1996 to 30.6.2000. During this period, the provisions of Section 4 of Central Excise Act, 1994, mandated ascertaining normal price of the goods cleared from the factory gate. It is undisputed in this case that in order dated 22.10.2009, in respect of the very same assessee, we have categorically held that for the period in question, the place of removal was factory gate and since the conversion of paper reels into reams does not amount to manufacture; we had also held that the factory gate sale price should be adopted for discharge of duty liability. In the case in hand, we find that the appellant had discharged the duty liability on the clearances made during this period at a price considered as factory gate sale price. Though, there was a definition of place of removal being depot, we have in our order dated 22.10.2009 in paragraph 11 categorically held we find that prior to 1.7.2000, APPML had ex-factory clearances of paper in reels. We find that in that case, price for such clearances was the right basis for determining the value for assessment of the impugned clearances prior to 1.7.2000. Unless duty was paid on lower value compared to contemporaneous price for sale of such goods to unrelated buyers at the factory gate, in respect of these clearances, there is no case or any demand. The same findings would apply for the demands raised by the Revenue authorities during the period 28.9.1996 to 30.6.2000 in this case. As already noted above, we have been informed by both sides that the said order of the Tribunal has not been challenged, following the ratio, we are of the view that the demand of differential duty for the period from 28.9.1996 to 30.6.2000 is liable to be set aside and we do so.
7.2 As regards the demand of duty for the period from 1.7.2000 to 13.5.2003, we find that during this material period there was no definition in the provisions of the Central Excise Act for the place of removal. Though the adjudicating authority has relied upon the provisions of Central Excise Valuation Rules, we find that provisions of Section 4 of Central Excise Act, 1944, did not have definition of place of removal; due to which it cannot be held that the clearances made by the appellant from various depots can be termed as clearances from place of removal and price prevailing during this period at those depots needs to be considered. In our view, for the period in question i.e. 1.7.2000 to 13.5.2003, we have no hesitation to hold that there cannot be any demand on the appellant, there being absence of definition of place of removal in the Central Excise Act, 1944.
7.3 Since the demand for the period 28.9.1996 to 13.5.2003 is set aside, we are of the view that any penalty visited on the appellant on these demands is liable to be set aside.
7.4 As regards the period in question from 14.5.2003 to 30.6.2004, we find that the show-cause notice was issued in time. We also find that during this period, definition of place of removal is also enshrined in the provisions of Section 4 of Central Excise Act, 1944. It is to be noted for the period in question, the provisions of transaction value would apply and any price charged by the depots needs to be considered for arriving at the assessable value of the goods cleared from the factory. We find strong force in the contentions raised by the departmental representative that the decision of this Tribunal in the case of Brakes India Ltd. (supra) covers the issue which has been agitated by the appellant. The said ratio is reproduced below:
4.?After considering the submissions, we note that the period of dispute is entirely after the amendment of Section 4 of the Central Excise Act, which was effected on 28-9-96 vide Finance Act, 1996. Both sides have adverted to the amended provisions. After the amendment, a depot or any other place or premises from where the excisable goods are to be sold after their clearance from the factory is also a place of removal for the purpose of valuation of such goods under Section 4 of the Central Excise Act. Place of removal figures significantly in proviso (ia) to Clause (a) of sub-section (1) of Section 4 also.
This provision, which came into force on 28-9-1996, reads as under :-
(ia) Where the price at which such goods are ordinarily sold by the assessee is different for different places of removal, each such price shall, subject to the existence of other circumstances specified in clause (a), be deemed to be the normal price of such goods in relation to each such place of removal. Against the backdrop of the above provisions, we have got to analyze the undisputed facts of this case. The subject goods were removed on payment of duty from Sholinghur factory to packing godown. That was a stock transfer. From the godown, the goods in fully packed condition were stock-transferred to the Chennai depot. Stocks transferred from their Padi (Chennai) factory were also received in a similar manner in this depot. A part of the stock in this depot was put to sale. It was the price prevailing in this depot at the time of removal of the subject goods from the Sholinghur factory that was adopted by the assessee for valuation of the goods. The department looked beyond this depot and found that the subject goods were actually transferred to other depots at Pune, Delhi and Calcutta and sold from there. The sale prices prevailing at these depots concerned at the time of goods from factory were adopted as assessable values, in this manner, the department determined differential value for the goods removed from the factory, depending on the sale price prevailing at Pune, Delhi or Calcutta as the case may be at the time of such removal from the factory. In our view, the said ratio is in favour of the Revenue. We hold that the demand of duty liability on the incidental charges charged by the appellant for transfer of goods from Hyderabad to various depots needs to be included in the assessable value for this period and duty has to be demanded from them. The exact quantification of duty needs to be done by the adjudicating authority, as the show-cause notices issued are overlapping; we would leave the quantification issue to the adjudicating authority to come to a conclusion. Since the demand requires re-quantification, the penalty amount and the interest on the demand of the duty liability also needs to be worked out proportionate to the demand. To that extent only for the quantification of the demand for the period from 14.5.2003 to 30.6.2004, the matter is remitted to the adjudicating authority. Since the issue is decided on merits for the period in question, we are not recording any findings on other various arguments raised by both side.
8. The appeal is disposed of as indicated hereinabove.
(Operative portion of this Order was pronounced in open court on conclusion of hearing) (B.S.V. MURTHY) Member (Technical) (M. V. RAVINDRAN) Member (Judicial) rv 12