Custom, Excise & Service Tax Tribunal
Tata Motors Limited vs Pune I on 17 August, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NO: E/119/2007
[Arising out of Order-in-Original No: 24/CEX/2006 dated 27th November 2006 passed by the Commissioner of Central Excise, Pune-I.]
For approval and signature:
Honble Shri M V Ravindran, Member (Judicial)
Honble Shri C J Mathew, Member (Technical)
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 CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
No
3.
Whether Their Lordships wish to see the fair copy of the Order?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
Tata Motors Limited
Appellant
Versus
Commissioner of Central Excise
Pune I
Respondent
Appearance:
Shri Gajendra Jain, Advocate for the appellant Shri Ashuthosh Nath, Asstt. Commissioner (AR) for the respondent CORAM:
Honble Shri M V Ravindran, Member (Judicial) Honble Shri C J Mathew, Member (Technical) Date of hearing: 17/08/2016 Date of decision: 19/12/2016 ORDER NO: ____________________________ Per: C J Mathew:
At the core of the dispute arising from order-in-original no. 24/CEX/2006 dated 30th November 2006 of Commissioner of Central Excise, Pune I is the valuation of scrap cleared by the appellant, M/s Tata Motors Limited, to its own foundries at Maval and Chinchwad for use in manufacture of castings which are utilised by the appellant. The contention of Central Excise authorities in the notice issued to appellant for demand of differential duty of ` 64,57,407/- for the period from January 2003 to December 2005 is that the value of clearances were not in conformity with the trend of prices at which scrap was being procured from market sources by the same foundries.
2. The allegation in the notice leading to impugned order is that the appellant had been clearing scrap at uniform rate of ` 7,825/- per metric ton from April 2000 and it was only after this was questioned that the rates were revised upwards to ` 9,310/- in May 2003 and thereafter steadily increased to ` 17,300/- in March 2005 implying that appellant had not been complying with the Central Excise (Valuation of Price of Excisable Goods) Rules, 2000.
3. The scrap generated by appellant was contracted by the foundries to M/s Sahajeevan Audhyogic Sahakari Sanstha Ltd to be taken over at the premises of appellant before cleaning, baling and transporting and it is alleged by the tax authorities in the notice that the deduction of transportation charges borne by supplier of market scrap for computing at the assessable value for clearance of scrap by appellant is not correct when baling charges have also been allowed as deduction.
4. It is common ground that the nature of transaction between appellant and foundries precludes the application of any rule other than rule 11 of Central Excise (Valuation of Price of Excisable Goods) Rules, 2000 which is the residuary method of valuation. We are, therefore, required to determine whether the adjudicating authority has adopted a reasonable method which is in conformity with the Central Excise (Valuation of Price of Excisable Goods) Rules, 2000 and section 4 of Central Excise Act, 1944 in determining the assessable value and computing the differential duty.
5. Learned Counsel for appellant relies upon the decision of the Tribunal in PR Rolling Mills Pvt Ltd v. Commissioner of Central Excise, Tirupathi [2010 (249) ELT 232 (Tri-Bang)] to demonstrate that the scrap could well have been cleared under rule 4(5)(a) of CENVAT Credit Rules, 2002 without payment of duty and upon the decision of the Tribunal in Alembic Ltd v. Commissioner of Central Excise, Vadodara-II [2014 (308) ELT 535 (Tri-Ahmd)] that there was no cause for them to evade duty with deliberate intent in a revenue neutral situation. Two earlier disputes of almost identical nature pertaining to their erstwhile avatar as M/s TELCO [CESTAT order no. 1823-1829/WZB/2006/C-III(EB) dated 7th September 2006 and CESTAT order no. 1722/WZB/2004/C-I dated 16th November 2004] had been decided in their favour by the Tribunal which relied upon the decision of the Larger Bench in re Wyeth Laboratories [2000 (120) ELT 218] to hold that such clearances are not dutiable. The decision of the Honble Supreme Court in Nirlon Ltd v. Commissioner of Central Excise, Mumbai [2015 (320) ELT 22 (SC)] and of the Tribunal in Rallis (India) Ltd v. Commissioner of Central Excise, Belapur [2016-VIL-459-CESTAT-MUM-CE] were also cited.
6. Learned Authorized Representative urged us not accept the claim of revenue neutrality in view of the decision of the Honble Supreme Court in Star Industries v. Commissioner of Customs (Import), Raigad [2015 (324) ELT 656 (SC)] as well as that of the Tribunal in M/s Automotive Stampings and Assemblies Ltd v. Commissioner of Central Excise, Pune I [2015-TIOL-836-CESTAT-MUM] and the decisions in Commissioner of Central Excise, Vishakhapatnam v. Mehta & Co. [2011 (264) ELT 481 (SC)] as well as that in Commissioner of Central Excise v. Kitply Industries Ltd [2011 (267) ELT 289 (SC)]. Learned Authorized Representative drew our attention to the majority view of the Tribunal pronounced in Sharda Ispat Ltd v. Commissioner of Customs [2013 (288) ELT 547 (Tri-Mumbai)] to show that allegation of deliberate intent to evade duty is sustainable when assessee is aware of differing prices.
7. Deluged as we are by the rival contentions on the issue of the transactions being subject to duty and on the culpability in arranging the transaction to evade duty, the central issue appears to have been lost sight of. Appellant clears scrap on payment of duty and it is not germane whether they could have resorted to alternate transactions that would have precluded duty liability. It is more pertinent to ascertain if the discharge of duty liability was in compliance with the appropriate rules. Appellant did contend so in the proceedings leading to the impugned order.
8. Appellant clears scrap on payment of duty to their own foundry and receives the finished products, viz., castings for use in the undertaking that manufactures automobiles. The foundries also procure scrap from the market for utilisation in the production of castings that are, presumably, supplied to the undertaking that manufactures automobiles. There is no allegation that the foundries market their castings to other customers. It is moot whether the Central Excise Act, 1944 mandates the re-determination of duty in such circumstances and, if no purpose is achieved by such exercise, whether such academic endeavours are required to be pursued. We must admit to being at a loss in comprehending the justification thereof.
9. Even if the statute does require such exercise to be undertaken, resort to rule 11 Central Excise (Valuation of Price of Excisable Goods) Rules, 2000 for recovery of differential duty carries with it the responsibility of the assessable value by examination of each component that is included therein by Revenue. That is the bounden obligation of an adjudicating authority who is unable to carry out the task within the straitjacket that restrain the preceding rules. The show cause notice does allege that transportation charges have been deducted twice independently and also with the cost of baling which is considered to be improper as the contract for delivery at the foundry includes the cost of transport. We are not certain if the contract/purchase order is reflected, as it is, in the detailed bills raised by the contractor who was awarded the work or whether baling and transporting were separately reflected there. These are aspects that the adjudicating Commissioner should have gone into and rendered a finding; more particularly, in the context of Rule 11 Central Excise (Valuation of Price of Excisable Goods) Rules, 2000, i.e. 11. If the value of any excisable goods cannot be determined under the foregoing rules, the value shall be determined using reasonable means consistent with the principles and general provisions of these rules and sub-section (1) of section 4 of the Act. which is susceptible to any connotation. We note a conspicuous lack of provision in the impugned order.
10. The impugned order contains not a sentence on the computation variance between that of appellant and that in the show cause notice. On the contrary, the confirmation of demand is founded on the alleged failure of noticee to defend the valuation adopted by them, the accolade heaped on the investigators for bringing the alleged evasion to light, the admission of noticee that rule 11 alone is applicable, a general reference to the geographical proximity of Mumbai to Pune which apparently marginalises the transport cost, that the assessee was compelled to periodical revision of the assessable value only after alerts from the department and that the assessee had consistently been distancing itself from its responsibilities.
11. In an adjudication order spanning sixteen and half pages, about one page is devoted to that finding that differential duty arises while three and half pages discuss the plea of limitation. Even if the noticee failed to provide adequate rebuttal to the allegations in the notice, by no stretch does the residuary rule of valuation stand on its own as it lacks any defining parameter. In the absence of any finding on the manner and validity of computation proposed in the show cause notice, there is nothing that we can apply our mind to ascertain the legality and propriety of the impugned order. A less than diligent approach to adjudication is manifest in the entire proceedings before the original authority and adds no credit to the individual or the high office that he adorned.
12. That we are not overreacting should be apparent in the relevant, and entire, portion that deals with the issue of short-payment viz., 32. I have gone through the impugned notice, the relied upon documents, the case records and the assessees reply filed vide their letter No. AC/CEX/438/402 dated 24/09/2006. I am required to decide as to whether there has been under valuation of scrap by the assessee resulting in a duty demand and if so whether extended period is invokable and whether penalty is imposable under Section 11 AC of the Act and whether interest is recoverable under Section 11 AB of the Act.
33. I commence with the case on merits. It is observed that no where in their rather detailed defence have the assessee contended that their valuation is correct. Their entire defence is based on the plea of revenue neutrality. The department has thoroughly investigated the issue and brought out the under valuation. The double deduction of transport charges for valuation was discovered by the department. This fact is of prime importance since it brought out the difference in the value of the scrap of the assessees units and their other vendors. The department has brought out the fact that 1.10% was given as deduction to the vendors while the same was not being given to, the assessees units. The assessee have discussed valuation methodologies but have not been able to explain the difference in the scrap value as can be seen. The assessee have themselves admitted to the fact that valuation was required to be done as per Rule 11 of the Valuation Rules. Thus, the aspect of applicability of the correct rules is final inasmuch as the impugned notice alleged the valuation was not as per Rule 11 and the assessee have in their defence admitted to the applicability of Rule 11 of the Valuation Rules. This fact also stands admitted by Shri S.K. Das, Deputy Manager of the assessee in his statements dated 09/01/2006 and 30/01/2006 recorded under Section 14 of the Act wherein he admitted that since the value of scrap is realizable value and as the cost of production cannot be determined as per CAS - 4, the principles of Rule 8 cannot be applied, owing to which Rule 11 of the Valuation Rules were applicable.
34. The assessable value of scrap for the purpose of duty was to be determined as per the Valuation Rules, in all cases where the goods are cleared to their own units. However, it is on record that they cleared the scrap to their foundry units at Chinchwad and Maval Under Rule 11 of the Valuation Rules without determining and paying appropriate duty thereon. This fact has been properly brought out by the department wherein the values of scrap as furnished by the assessee themselves were compared. It has been established by the department that the value of the scrap procured from dealers was much higher than the value the assessee applied. They have misleadingly advanced the concept of the variation occurring due to transportation charges. Though the transportation charges would be higher from Mumbai to Pune, but when considering the fact that the entire consignments come in truckloads, the overall difference would be marginal since Mumbai is rather close to Pune. Further for the scrap dealers getting big orders from the assessee and staying as regular vendors for the assessee would be of a far greater importance than the minor freight costs. Hence, there is no tangible reason for difference in the comparable values of scrap. The reason advanced by the assessee is not correct and does not merit consideration.
35. Another noteworthy aspect is that the departmental officers visited the assessees unit in March 2003 during which period the assessable value of scrap per metric ton was Rs.7,825/-. However, the correction in the assessable value by the assessee immediately thereafter proves the charge of undervaluation. The assessee revised the assessable value to Rs. 9,310/- pmt wef May 2003 and to Rs. 10,874/- pmt wef Oct 2004 till it increased to Rs. 15,373/- pmt wef March 2004 and to Rs. 17,300/- pmt in March 2005. Thus, within a year of the visit of the departmental officers, the value of scrap was doubled. This rate revision was mainly because of the assessees acceptance of the departments stand that the scrap was being undervalued. It goes to show that they were fully aware that in the system of self assessment, the onus and responsibility to determine the value correctly and to discharge the duty liability correctly rests with them and that the scrap was certainly being undervalued. Thus, the allegation of under valuation and the consequent short payment of duty is proved beyond reasonable doubt.
36. It was the responsibility of the assessee to correctly determine and pay the duty. Further, the statement of the assessee itself provides substantial cause for proving and upholding suppression. The omissions of the assessee are that they did not correctly determine and pay the duty on scrap and they did not inform the department the practice followed by them which proves the intent to evade payment of duty. The assessee were fully aware of the provisions of the Valuation Rules in force but did not comply with the same. In spite of acknowledging the undervaluation pointed out by the department, they merely changed their valuation subsequently. However, they have for reasons best known not put forth any defence as regards the non acceptance of the duty liability as made out in the impugned notice. This dual stand goes to prove their malafides. Obviously, the assessee had suppressed the facts and they have contravened the provisions of the Act and the rules made there under. For these reasons the extended period invoked is correct and requires to be upheld.
13. In view of this sketchy and airy disposal of the issue for determination in the impugned order, we feel that the matter must be decided afresh. We, therefore, set aside the impugned order and remand the matter back to the original authority to determine and record reasons for arriving at an assessable value at variance with that adopted by appellant after analysing the components of the costs that are deductible from the price at which market scrap is procured by the foundries.
14. Appeal allowed by way of remand.
(Pronounced in Court on 19/12/2016) (M V Ravindran) Member (Judicial) (C J Mathew) Member (Technical) */as 12 11