Custom, Excise & Service Tax Tribunal
Sun Pharmaceuticals Industries Ltd vs Surat-Ii on 13 January, 2023
Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench At Ahmedabad
REGIONAL BENCH- COURT NO.3
Excise Appeal No.10991 of 2014
(Arising out of OIO-SUR-EXCUS-002-COM-037-13-14 dated 03/12/2013 passed by
Commissioner of Central Excise, Customs and Service Tax-SURAT-II)
Sun Pharmaceuticals Industries Ltd ........Appellant
Plot No. 24/2, Gidc, Industrial Estate,
Phase-Iv, Panoli, BHARUCH, GUJARAT
VERSUS
C.C.E. & S.T.-Surat-ii .......Respondent
New C.Ex Building...Opp. Gandhi Baug, Chowk Bazar, Surat, Gujarat-395001 With Excise Appeal No.10992 of 2014 (Arising out of OIO-SUR-EXCUS-002-COM-038-13-14 dated 03/12/2013 passed by Commissioner of Central Excise, Customs and Service Tax-SURAT-II) Sun Pharmaceuticals Industries Ltd ........Appellant Plot No. 24/2, Gidc, Industrial Estate, Phase-Iv, Panoli, BHARUCH, GUJARAT VERSUS C.C.E. & S.T.-Surat-ii .......Respondent New C.Ex Building...Opp. Gandhi Baug, Chowk Bazar, Surat, Gujarat-395001 APPEARANCE:
Shri A B Nawal, Cost Accountant & Ms. Nidhi Nawal, Advocate for the Appellant Shri Ghanasyam Soni, Joint Commissioner (AR) for the Respondent CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON'BLE MEMBER (TECHNICAL), MR. RAJU Final Order No. A/ 10108-10109 /2023 DATE OF HEARING: 14.09.2022 DATE OF DECISION: 13.01.2023 RAMESH NAIR These appeals are directed against the common order-in-original dated 03.12.2013. The issue involved in both the appeals is same and hence both the appeals are taken together and a common order is passed.
2|Page E/10991,10992 /2014 1.1 The facts in brief are that the appellant is a 100% EOU and cleared their excisable goods to their sister concern units on payment of duty as DTA sale. As per department the value of the DTA clearances was lower than the value of identical goods cleared to other related units as compared to clearances of the same products made to other unrelated buyers. The appellant & their sister concern units & other related units were falling under the definition of related person as defined in sub rule 2 of Rule 2 of Customs Valuation (Determination of Value of imported goods) Rules, 2007. The price of the clearance made to sister concern units & other related units appears to have influenced and the price was not the sole consideration in such transaction in as much as the difference in value was huge, hence as per Section 14 of Customs Act, 1962 when there is no sale or the buyer and seller are related, or price is not the sole consideration or in any other case, then the manner of valuation of the goods was to be determined by proceeding sequentially through Rule 3 to 9 of Customs Valuation Rules.
Accordingly, show cause notices were issued to the Appellant and the Learned Commissioner vide impugned order confirmed the demand for central excise duty along with interest. Penalty of an equal amount was also imposed. Aggrieved with the impugned order, the present appeals have been filed.
02. Shri A B Nawal & Ms. Nidhi Nawal, Learned Counsels for the appellants submits that the present order has been passed without giving opportunity to file defence submission of SCN dated 04.04.2013. Learned Commissioner ought to have appreciated each transaction of DTA sale is separate assessment and therefore adjudication also ought to have been based on separate findings and not on earlier replies and submission.
2.1 He submits that the transaction has taken place between related parties but such relationship did not influence the transaction value, the same was determined after negotiation and price is decided between the parties after giving due account to all the business aspects. While clearing the goods in DTA the value is arrived at cost of production plus reasonable profit, which approximates and nearly equal to the transaction value of identical goods in terms of Valuation Rules after adjusting the quantity discount in accordance with Rule 3(3)(b) of the valuation Rules 2007. Rule 3(3)(b) provides that in sale between related person, the transaction value shall be accepted whenever the importer demonstrate that the declared
3|Page E/10991,10992 /2014 value of finished goods being valued, closely approximates to one of the following values ascertained at or or about the same time. While determining the differential duty, shelter of sub-rule 3(3)(b) has been taken but at the same time reservation given in the same rule was not considered by department. To calculate the differential duty department resorted to sub rule 4(1)(a) of Customs Valuation (Determination of Value of imported Goods) Rules 2007. But department failed to take note of all the provisions of Rule 4.
2.2 He also submits while calculating differential duty, transaction value of identical goods was compared but without giving due attention to the difference between the quantities sold to related buyers and independent buyers and considered the highest price for calculating the duty demand as against the lowest to be considered in terms of provisions of Act and rules thereof. It is to be appreciated that in case of the sale to related buyers the quantity sold is substantially higher. Department while demanding the differential duty has not specified the reference of invoice for which rate is compared, in some cases comparison is made with the related party's value only. Department has not followed the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 while considering rate of identical goods sold to non-related parties, highest rate has been taken for comparison whereas in terms of Rule 4(3) the lowest value should be considered when there is more than one value available.
2.3 He further submits that if there is a substantial difference in quantity of disputed clearances with the value of identical goods, the value cannot be compared for the purpose of valuation. Here, in this case, huge quantity is cleared to related parties than to independent buyers hence value of identical goods considered by the department is not comparable and not sustainable in law.
2.4 He placed reliance on the following decisions in support of above submission:-
COMMISSIONER V. TAVADEC INDUSTRIES PVT. LTD. - 2003 (151)ELT A308(SC) TAVADEC INDUSTIRES PVT. LTD. VS. COMM. OF CUSTOMS -
2002(145)ELT 548 (TRI. BANG.)
4|Page E/10991,10992 /2014 BUYING OVERSEAS VS. COMMISSIONER OF CUSTOMS, MUMBAI - 2015(317)ELT 264 (TRI. MUMBAI) EXCIDE INDUSTRIES LTD. VS. COMMISSIONER OF CUSTOMS(I), MUMBAI, 2015(317)ELT 264(TRI-MUMBAI) KOMET PRECISION TOLLS INDIA PVT. LTD. VS. COMM. OF CUS (A), BANGALORE - 2009(245)ELT 737 (TRI. BANG) COMMISSIONER OF CUSTOMS & C.EX. INDORE VS. HINGORA INDUSTRIES LTD. 2009(235)ELT 256 (TRI. DEL) EICHER TRACTOR VS. COMMISSIONER OF CUSTOMS, MUMBAI 2000(122)ELT 321(SC) CADILA HEALTCARE LTD. VS. COMMISSIONER OF C.EX.
VADODARA 2008(224)ELT 108(TRI. AHMD.) MARK AUTO INDUSTRIES LTD. VS. COMMISSIONER OF CUSTOMS. NEW DELHI 2003 (162)ELT 261 (TRI. DEL) COMMISSIONER OF CENTRAL EXCISE, ROHTAK VS. SAI SALES CORPORATION 2012(278)ELT 197 (TRI. DEL) D.R. POLYMERS LTD. VS. COMMISSIONER OF CUSTOMS, ICD, NEW DELHI -2004(166)ELT 393(TRI. DEL) EBRO ARMATUREN INDIA PVT. LTD. VS. COMMR. OF C.EX.
BANGALORE-I 2021(375)ELT 259 (TRI. BANG.) VINTEL DISTRIBUTORS PVT. LTD. VS. COMMISSIONER OF CUSTOMS (SEA), CHENNAI 2002 (149) ELT 145 (TRI. CHENNAI) COMMISSIONER OF CENTRAL EXCISE, NAGOUR VS.
MORARJEE BREMBANA LTD. 2015(318)ELT 600 (SC) COMMISSIONER OF CUSTOMS, MUMBAI VS. FORSOC CHEM (I) LTD. 2003 (161)ELT 1129 (TRI.-MUMBAI) 2.5 He also submits that in the present matter partial demand is barred by limitation. The department is well aware about the clearances to sister concern and they have started the enquiry much before the first letter of enquiry was issued 25.07.2011 & from that date department is well aware about the fact but show cause notice was issued much later i.e. on 20.09.2012 i.e after one year from the date of knowledge and hence the demand is hit by limitation to the extent of Rs. 68,43.291/- He placed reliance on the following decisions:-
5|Page E/10991,10992 /2014
COMMISSIONER OF C.EX., PUNE VS. EMCURE
PHARMACEUTICAL LTD. 2016(342)ELT 172 (BOM) RELIANCE INDUSTRIES LTD. VS. COMMISSIONER OF C.EX. & CUS. RAJKOT -2009(244)ELT 254 (TRI. -AHMD) MOTOROL SPECILAITY OILS LTD. VS. COMMISSIONER OF C.EX. & CUS., VADODARA 2009(243)ELT 449 (TRI. AHMD) HEWLETT PACKARD INDIA SALES (P) LTD. VS. COMMR. OF CUSTOMS, BANGALORE -2009(241)ELT 545 (TRI. BANG.) SIYARAM METAL PVT. LTD. VS. C.C.E, RAJKOT 2009(239)ELT 147 (TRI. AHMD.) TITAN ENERGY SYSTEMS LTD. VS. COMMISSIONER OF C.EX., HYDERABAD 2009(236)ELT 705 (TRI. BANG,)
03. Shri Ghanasyam Soni, learned Joint Commissioner (AR) for the department reiterates the findings of impugned order.
04. We have given careful consideration to the rival submissions and perused the records. We find that the Learned Commissioner has gone only on the basis that the buyer and seller are related in terms of Rule 2(2) of CVR, and proceeded to judge transactions in terms of valuation rule ibid. However, in terms of Rule 3 (3)(a) of CVR, where the buyer and seller are related, the transaction value shall be accepted provided that the examination of the circumstances of the sale of the goods indicate that the relationship did not influence the price. Neither the show cause notice issuing authority nor the adjudicating authority have given reasons to hold that how the relation has indeed affected the price. The declared prices cannot be reviewed without any evidence to the effect that the relation between the appellant and the related buyer which has influenced the declared price or to the effect that there was a flow back of money between the appellant and related buyers.
4.1 We find that proviso under Rule 3 (3)(b) provided that in applying the values used for comparison, due account shall be taken to demonstrate a difference in commercial levels, quantity levels, adjustments in accordance to provision of Rule 10 and cost incurred by the seller in sales in which he and the buyer are not related. In the present matter the grievance of the Appellants is also that difference in commercial levels, quantity levels was totally ignored by the Learned Commissioner. Further submission made by
6|Page E/10991,10992 /2014 the appellants and judicial decisions relied upon by the appellant before him was not considered.
4.2 Under the circumstances, we find that the case needs to go back to the adjudicating authority for a proper examination of all the facts of the case, the submissions of the appellants including case laws in this regard and to pass a speaking and reasoned order as per law.
05. In view of the above, the adjudicating authority is directed to consider the issue afresh, as per our observations as above, and to pass an order after giving an opportunity to the appellants. The appeals are thus allowed by way of remand.
(Pronounced in the open court on 13.01.2023) (RAMESH NAIR) MEMBER (JUDICIAL) (RAJU) MEMBER (TECHNICAL) Mehul