Customs, Excise and Gold Tribunal - Calcutta
M/S. Indian Aluminium Co. Ltd. vs Cce, Belgaum on 14 November, 2000
Equivalent citations: 2001(76)ECC539, 2001(137)ELT604(TRI-KOLKATA)
ORDER
Smt. Archana Wadhwa
1. Vide the impugned order Commissioner of Central Excise has confirmed demand of duty of Rs.2,29,57,929/- (Rupees two crores twenty nine lakhs fifty seven thousand nine hundred and twenty nine) in respect of the rolling ingots manufactured by the appellant during the period 1.7.96 to 31.1.98 on the findings that the same has been cleared by the appellant on payment of duty at a lower assessable value determined as per the provisions of section 4(1)(B) of the Central Excise Act, 1944 read with rule 6(b)(1) of Central Excise Valuation Rule, 1975 whereas the correct assessable value was to be determined in terms of rule 6(b)(II) of the said rules. A penalty of equivalent amount has also been imposed under the provision of rule 173Q(1) of Central Excise Rules, 1944 read with section 11AC of Central Excise Act, 1944. Interest in terms of section 11AB of the Act has also been confirmed. Confiscation of land, building, plant, machinery etc. has been ordered with an option to the appellant to redeem the same on payment of redemption fine of Rs. 5 lakhs.
2. The brief factual background of the case is as under:-
2.2 The appellants are engaged in the manufacture of aluminium rolling ingots in their factory at Belgaum. The entire production of the appellants' factory is transferred to its sister unit at Taloja, which is captively consuming the same for manufacture of aluminium coils and sheets. The dispute involved in the present appeal relates to the valuation of rolling ingots manufactured by the appellant.
2.3 During the period relevant for the purposes of the present appellant, the appellants have been clearing the rollings ingots on payment of duty on the assessable value arrived at in terms of rule 6(b)(i) on the basis of comparable goods. During the period 1.7.96 to 20.2.97, the appellant declared the price in the price declaration as Rs.66,800/- per metric ton based upon the value of the commercial grade ingots manufactured by the appellants themselves. For the subsequent period w.e.f. 21.2.97 to 30.6.97 the price was lowered to Rs.66,837/-, by adopting the price of the flat ingots being manufactured by another manufacturer M/s. BALCO. w.e.f. 1.7.97 to 31.1.98, the appellants paid the duty at the price of Rs.68,478/-, which was arrived at by them based upon BALCO's flat ingots price + addition of 1% of the same price so as to make the adjustments. The Revenue's case is that the assessable value of rolling ingots should be arrived at in terms of the provisions of rule 6(b)(ii) on cost construction basis. Accordingly the appellants were served with a show cause notice on 16.3.2000 proposing to revise the assessable value on the basis of the cost data and to recover the differential duty allegedly short paid by the appellant during the period 1.7.96 to 31.1.98. The said show cause notice has culminated into the impugned order passed by the Commissioner of Central Excise, Belgaum. The said order confirming demands of duties and imposing penalties upon the appellants is impugned before us.
3. Shri V.Sreedharan, ld.adv. appearing for the appellant submitted that the provisions of rule 6(b)(ii) are residuary in nature and can only apply if rule 6(b)(i) is inapplicable. He submits that the only case of the Revenue is that as the cost of the goods manufactured by them is higher than the value of the comparable goods, the assessable value should be arrived at in terms of rule 6(b)(ii) based upon the cost data. He submits that the rolling ingots being manufactured by the appellants are comparable to the flat ingots made by M/s. BALCO inasmuch as M/s. BALCO's letter dt.1.1.97 makes it clear that the appellants' rolling ingots are also known as flat ingots in market parlance. M/s. BALCO is a public sector undertaking of Central Govt. and the physical dimensions of flat ingots being manufactured by them and the rolling ingots being manufactured by the appellants are comparable, as is evident from the photographs produced by them. The two types of ingots are being put to the same use by the appellants' Belur and Taloja factories and the same process is being adopted for the manufacture of aluminium sheets. Hence the two have to be taken as comparable goods. He submits that in the impugned order the Commissioner has gone by the fact that since the purity of M/s. BALCO's flat ingots is different from rolling ingots produced by the appellant the two are not comparable. He submits that in fact due to the difference in purity and alloy composition, the appellant has already added 1% to the value of M/s. BALCO's flat ingots and has indicated the same in column 7 of their price declaration filed in form 2C. Rule 6(b)(i) itself requires making of such adjustments on account of the difference in material characteristics of the goods in question and the comparable goods and for such difference the provisions of rule 6(b)(i) are not to be ignored, as has been held by the Tribunal in the case of Synthetics & Chemicals Ltd.v.CCE-1992(57)ELT 480(T). Shri Sreedharan has also drawn our attention to the technical literature showing various aspects of unwrought aluminium to butteress his point that flat ingots and rolling ingots are same form of metal. He has also referred to number of technical books on the aluminium casting principle as also to ISI standards to strengthen his arguments that the ingots can be casted into various shapes depending on their end use and the market price of unwrought aluminium in different forms and shapes is the same. As such he submits that despite the difference in shapes of aluminium, there can be still one price, as is evident from the price lists filed by them for the previous periods and duly approved by the Revenue as also from price control orders issued by the Central Govt., which establishes that shape has no relevance to the per ton value of the metal. As such he submits that adoption of the price of the comparable goods for the valuation of rolling ingots was perfectly in accordance with the provision of law.
4. In any case submits the ld.adv. that the show cause notice as also the impugned order has proceeded on the wrong footing that the cost of the goods manufactured by them was on the higher side. He submits that a wrong principle of costing has been adopted. He submits that while arriving at the cost of the ingots, the total fixed expenses actually incurred has been divided by the total quantity of rolling ingots actually produced during the year to arrive at the fixed valuation heads per ton of rolling ingots produced. This basis is fundamentally incorrect and not in accordance with the well-recognised and established principles of cost accountancy. He submits that when the capacity utilisation is very low, as was there in their case, the above method of arriving at the cost is contrary to the principles of cost accountancy and is also against common sense. The correct principle should be to take the total fixed over head, divided by normal capacity to arrive at per unit fixed over heads based on normal production, otherwise their would be a large distortion. By giving an example, ld.adv. submits that suppose, fixed overheads is Rs.1,00,000/- per annum. The sale price is say Rs.100 per piece. Suppose the normal capacity of the factory is 50,000 pieces. Fixed overheads per unit would be Rs.2. Suppose for some extraordinary reasons, due to floods, labour strikes or financial crises etc. the factory is not able to operate at the capacity of 50,000 units but only produced 100 units per year. It would be illogical to treat fixed overheads per unit to be (Rs.1,00,000/100 units namely) Rs.1000 per unit. If the cost of production has to be worked out on this basis, in this example, fixed overheads alone would be Rs.1000 per piece whereas the sale price itself would be Rs.100 per piece. Fixed overheads per piece would be Rs.2 per piece, being Rs.1,00,000/50,000 units, i.e. total overheads divided by normal production.
He submits that the installed capacity of their plant was 75,000 metric ton, but because of power problem, the plant operate at substantially lower capacity during the period in question and as such the cost might have gone up. If the cost of production computed in accordance with the settled principles of cost accountancy is computed the same would be at a with the assessable value adopted by them. He also submitted that since the appellant is a loss making unit, addition of profit of margin is also incorrect. He refers to certain decisions of the Tribunal on this point specifically the Tribunal's decision in the case of ITC v. CCE, Meerut-1999(32)RLT 440(T). He submits that except for the period February 1997 to June 1997 declared assessable value is much higher than the cost of the metal. Hence the show cause notice alleging otherwise is incorrect.
5. Shri Sreedharan also submits that whatever duty was being paid by them was available as modvat credit to their own unit at Taloja. Hence there was no intention on their part to evade payment of duty. The whole exercise is revenue neutral for the same assessee. In this connection he refers to the Tribunal's decision in the case of CCE v. Chloride Indus.Ltd.-1997(22)RLT 402(T) and to Patson Transformers (P) Ltd.v.CCE-1997(93)ELT 402(T). He also assails the impugned order on the point of limitation and submits that the entire facts were in the knowledge of the department. The case involves only change in the mode of assessments by the department from rule 6(b)(i) to Rule 6(b)(ii) and seeks to change the practice being followed by the appellant for the last 25 years. Hence the proviso to section 11A is inapplicable. Referring to the correspondence exchanged between the department and the appellant during the relevant period, he submits that there was complete knowledge on the part of the department that the value of rolling ingots was based on the sale price of commercial sale ingots being manufactured by them up to January 1996 and thereafter the value of rolling ingots was based on the value of comparable goods of M/s. BALCO namely flat ingots. As such he submits that the demand of duty is barred by limitation. He refers to the Supreme Court's decision in the case of Pushpam Pharmaceuticals v. CCE, Bombay-1995(78) ELT 401 wherein the Tribunal's decision was reversed.
6. Shri R.K.Roy, ld.JDR appearing for the Revenue submits that the appellant had declared the CG ingots as comparable goods to rolling ingots. CG ingots are of smaller sizes weighing 1 kg. to 20 kg. which are meant for re-melting whereas rolling ingots are bigger weighing from 2 to 2.5 tons (approx.) and as such the two cannot be said to be comparable goods on account of difference of sizes. In order to compare the value of the two goods, the same should be identical goods and not the types which are different in nature, characteristics, size and are commercially different articles. He submits that the appellants have themselves admitted that during the relevant period their actual cost of rolling stock was more because of extraordinary situation due to power problem. As such it is clear that they have depressed the prices. For the similar reasons, submits the ld. JDR that flat ingots manufactured by M/s. BALCO cannot be compared with the rolling ingots manufactured by the appellant.
7. As regards limitation Shri Roy reiterates the reasoning of the adjudicating authority and submits that the appellants failed to disclose the relevant and vital information regarding valuation of the goods for the purposes of correct and legal valuation. As such he submits that the longer period has been rightly invoked by the adjudicating authority.
8. After hearing both the sides, we find that the appeal can be disposed of on the point of limitation. The show cause notice has been issued on 6.3.2000 in respect of the clearances of rolling ingots made by the appellant during the period 1.7.96 to 31.1.98. The appellants have referred to the Asstt. Commissioner's letter written on 5.1.96 directing the appellant to furnish copy of the latest Calcutta office price list for all marketed products along with a copy of the inter-office memo of the Calcutta office directing the appellants' unit to follow these prices for determining the assessable value. The appellants vide their letter dt.16.1.96 complied with the above directions and enclosed the price list applicable at head office and also disclosed that the same is being followed in respect of despatch made to their sister unit Taloja. Inter-office memo dt.4.8.95 indicating sale price of commercial grade ingots to be Rs.66,800/- and adopting the same assessable value for despatch of rolling ingots from their factory was also placed before the authorities. From the above it is clear that the assessable value of rolling ingots was being adopted by the appellant based on the sale price of their commercial grade ingots.
9.Thereafter it is seen that vide their letter dt.5.2.97, the appellants filed a numbers declaration in annexure 2C in respect of the assessable value of the aluminium rolling ingots along with a copy of the invoice issued by M/s. Bharat Aluminium Co.Ltd. i.e. BALCO. In the said price declaration it was clearly mentioned by the appellant that the assessable value is being arrived at by them based on the value of comparable goods cleared by M/s. BALCO vide their invoice No.8358 dt.6.1.96. Subsequently on 17.2.97 another price declaration was filed, based on invoice of M/s. BALCO. Vide letter dt.22.10.97, the revised price list was filed effective form 1.7.97, increasing declared assessable value. Invoice dt.1.7.97 was also enclosed. The meteriological report showing alloy composition was also enclosed along with a letter dt.1.2.97 of M/s. BALCO which is to the effect that flat ingots which were being sold to Indal were also known as rolling ingots in the market parlance. In the price list, the appellant increased the value of their product by 1% of the value of the flat ingots of M/s. BALCO so as to adjust for the difference in purity of the metal, if any. As such it is seen that the practice being adopted by the appellant i.e. for arriving at the assessable value in terms of rule 6(b)(i) based upon the comparable price of flat ingots of M/s. BALCO was in the knowledge of the Revenue and the entire facts were being disclosed by the appellant. The objection taken by the Revenue that it is not rule 6(b)(i) but rule 6(b)(ii) which is applicable, could have been taken when the appellant filed their price declaration instead of waiting for more than three years to do so. We find a lot of force in the appellants arguments that the price declarations filed by them were operative during the relevant period for which the demand has been raised and there being no misstatement or suppression on their part with intention to evade payment of duty, there is no justification for invocation of longer period of limitation. The adjudicating authority's finding that during the relevant period there is no correspondence does not impress us inasmuch as the various letters written by the appellants as also by the department as referred above were in force during the period relevant for the present appeal and it is not that in each and every month the assessees are required to lay their claim on a particular issue and renew the same. The reliance by the appellant on the Supreme Court's decision in the case of Puspam Pharmaceuticals is well appropriate. Accordingly, we hold that the demand having been raised after a period of six months from the relevant date is barred by limitation. We accordingly set aside the same as also the impositioin of personal penalty and confirmation of interest against the appellant and the confiscation of their plant, building, machinery etc..
Inasmuch as the appeal has been allowed on the point of limitation, no orders are being passed on the merits of the case.