Custom, Excise & Service Tax Tribunal
M/S Darshan Metal Industries vs Cce, Panchkula on 10 May, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi 110 066.
COURT NO. II
Date of Hearing : 10.5.2011
Date of Pronouncement:
Excise Appeal No. 2342 of 2005-Ex.
[Arising out of the Order-in-Appeal No. 199/AKG/PCK/2005 dated 6.4.2005 passed by the Commissioner (Appeals), Central Excise, Delhi]
Coram:
Honble Shri D.N. Panda, Judicial Member
Honble Shri Mathew John, Technical Member
1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether their Whether their Lordships wish to see the fair copy of the order?
4. Whether order is to be circulated to the Department Authorities?
M/s Darshan Metal Industries Appellant
Vs.
CCE, Panchkula Respondent
Appearance:
Appeared for Appellant : Shri Alok Arora, Advocate
Appeared for Respondent : Shri B.K. Singh, Jt. CDR
Coram:
Honble Shri D.N. Panda, Judicial Member
Honble Shri Mathew John, Technical Member
Order No.dated.
Per Mathew John:
The Appellant is engaged in the manufacture of stainless steel cold rolled pattas/pattis, circles, utensils and waste and scrap of aluminum falling under chapter sub-headings 7220.20, 7220.40. 7323.90 and 7204.20 of the Central Excise Tariff. The raw material for manufacture of the above items is stainless steel flats which were received on duty paid invoices. The flats were cut into pieces and converted into pattas/pattis by hot-rolling. During the impugned period the Appellants had made two sales of pattas/pattis to outside buyers. Mostly the Appellants were clearing circles on payment of duty to outside buyers and also using circles manufactured by them in manufacture of utensils within the same factory. Circles for such use was exempt from duty under sub-heading 7222.50 but the Appellant continued to pay duty on such circles and claimed SSI exemption under Notification 9/98-CE which was for SSI units wanting to avail Modvat credit.
2. According to the Revenue, aluminum circles captively used in the manufacture of utensils was exempt from duty and the Appellant could not have paid duty on such circles. Having regard to provisions in Notification No. 67/95-CE duty the Appellant should have paid duty on pattas/pattis used in manufacture of such non-dutiable aluminum circles or 10% of the value of utensils should have been reversed in their Modvat account as per provisions of rule 57CC of the Central Excise Rules, 1944. The dispute relates to the period 01-04-98 to 27-10-98.
3. A show cause notice was issued demanding duty on stainless steel pattas/pattis captively consumed in the factory during the period 01-04-98 to 27-10-98. For working out this demand the value of patta/patti was taken as Rs. 50 per Kg which was the price at which such goods were sold by the Appellant vide invoice no.71 dated 17-09-98 and invoice No. 74 dated 19-09-98. Duty amounting to Rs. 8,46,363/- was demanded and penalty under Rule 173 Q read with section 11AC was proposed. The SCN was adjudicated vide order dated 16-08-01 and the duty demanded was confirmed along with appropriate interest and penalty equal to the duty confirmed was imposed under Rule 173 Q read with section 11AC.
4. The Appellant contested before the Commissioner (Appeal) the method of valuation for determining the duty on the ground that the two invoices which were taken as basis for valuation were for sale of goods of superior quality and not of the quality used in making utensils. They were contesting that the value of circles consumed by them should be based on value of similar circles sold by them to unrelated buyers. The Appellant did not succeed before Commissioner (Appeal) because he ruled that the value of patta/patti should be taken because circles captively consumed were exempt and the only sales of patta/patti were under invoice 71 and 74. Against the order of Commissioner (Appeal) an Appeal was filed before the Tribunal which was decided by Final Order No. 741/03-NB(A) dated 23-12-03. During the hearing in Tribunal the issue raised was that the sale under invoices 71 and 74 were stray sales and the goods sold under these two invoices were of higher quality than that used by them in the manufacture of utensils; that they had 34 other invoices issued during the relevant period wherein the value of such goods sold were lower and the values in such invoices should be taken into account for working out the duty demand. Since these documents were not produced before the lower authority the order challenged was set aside for de-novo consideration of the matter on the basis of documents to be produced before the adjudicating authority.
5. The present proceedings result from the second round of adjudication and appeal, consequent to Tribunals decision in order dated 23-12-03.
6. During the denovo proceeding the Appellant submitted that the pattas/pattis sold vide invoice numbers 71 and 74 were for patta/patti made from special quality raw material to meet the needs of one customer and the raw material used by them in making utensils were of lower quality and they wanted that the duty demand should be based on the value of goods capatively consumed and not the price at which stray sales of higher quality material was made. They submitted the copies of 34 invoices which they had mentioned before the Tribunal while passing the order dated 23-12-03.
7. The adjudicating authority observed that these invoices were issued to self and were not for sale of such goods to unrelated buyers and hence cannot be taken as a basis for arriving at the value of goods captively consumed. He also observed that there was no mention of any specific quality in the two invoices taken as basis by the Revenue. For these reasons the adjudicating authority confirmed the duty demanded in the first round of adjudication based on the value of pattas/pattis sold under the invoices 71 and 74.
8. Aggrieved by the order the Appellant filed an appeal with Commissioner (Appeal). The Appellant did not get any relief except that the duty paid at the stage of circles and waste and scrap manufactured out of pata/patti was allowed to be set off. Further, he set aside the penalty imposed. Aggrieved by this order the Appellant is before the Tribunal.
9. The Counsel for the Appellant has been able to demonstrate that the goods covered by invoices 71 and 74 in fact related to patta/patti manufactured from 3.830 MT stainless steel strips purchased by them at the rate of Rs. 40500 per MT under invoice no. 07638 dated 09-09-1998 from Jindal Strips Ltd, because the total quantity of raw material supplied under said invoice no. 07638 tallies with quantity of final product sold under invoice no.71 dated 17-09-98 and invoice No. 74 dated 19-09-98 after allowing reasonable production losses. It is also clear from the invoices for procurement of remaining 113.260 MT of raw material at an average price of Rs. 29900 per MT that the raw material procured by the Appellant for its normal activities was at lower prices. It is evident that the value of the goods captively consumed has not been worked out in the impugned order based on value of goods of the same quality. The Appellant had also produced invoices for sale of aluminum circles to unrelated buyers which supported that the value being contested by the Appellant.
10. The contention of the Ld. DR is that the invoices for patta/patti produced by the Appellant is not for sale and cannot be taken as basis for any valuation under Central Excise Rules. He further argues that the price at which aluminum circles are sold cannot form basis because what is being valued is pattas/pattis used in the manufacture of circles and not circles itself. The Ld DR argues that whatever be the order that may be passed by the Tribunal in this proceeding the Rule under which valuation is being arrived at should be made clear.
11. We have heard arguments on both sides and perused the record.
12. The initial observation that we want to make is that the exact Rule under which value is being determined is not mentioned or discussed in any of the orders passed earlier. We also want to record that this is a case where the assessable value is determined by Revenue based on the value of goods of different quality and prima facie there is a case of excess demand for duty.
13. Now let us examine the relevant legal provisions in this regard during the relevant time. During the relevant time the value as per section 4 of CE Act was the normal price thereof that is to say the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade. If such normal price was not ascertainable for the reason that such goods were not sold the nearest equivalent of such price was to be ascertained as per the provisions of Central Excise (Valuation) Rules, 1975 notified as per provisions of Section 4 (b) of Central Excise Act. In this case it is very clear that such goods were not sold because what was sold was pattas/pattis of superior quality. So recourse should have been taken to the Valuation Rules. Since the methods prescribed in Rules 4 and 5 of the Valuation Rules were not applicable in this case, provisions of Rule 6 should have been applied. This rule read as under :-
RULE-6 If the value of the excisable goods under assessment cannot be determined under rule 4 or rule 5, and-
(a) where such goods are sold by the assessee in retail, the value shall be based on the retail price of such goods reduced by such amount as is necessary and reasonable in the opinion of the proper officer to arrive at the price at which the assessee would have sold such goods in the course of wholesale trade to a person other than a related person:
[Provided that in determining the amount of reduction, due regard shall be had to the nature of the excisable goods, the trade practice in that commodity and other relevant factors]
(b) where the excisable goods are not sold by the assessee but are used or consumed by him or on his behalf in the production or manufacture of other articles, by value shall be based-
(i) on the value of the comparable goods produced or manufactured by the assesee or by any other assessee:
Provided that in determining the value under this sub-clause, the proper officer shall make such adjustments as appear to him reasonable, taking into consideration all relevant factors and, in particular, the difference, if any, in the material characteristics of the goods to be assessed and of the comparable goods;
(ii) if the value cannot be determined under sub-clause (i) on the cost of production or manufacture including profits, if any, which the assessee would have normally earned on the sale of such goods:
(c) where the assesee so arranges that the excisable goods are generally not sold by him in the course of wholesale trade except to or through a related person and the value cannot be determined under clause (iii) of the proviso to clause (a) of sub-section (1) of Section 4 of the Act, the value of the goods so sold shall be determined-
(i) in a case where the assessee sells the goods to a related person who sells such goods in retail, in the manner specified in clause (a) of this rule;
(ii) in a case where a related person does not sell the goods but uses or consumes such goods in the production or manufacture of other articles, in the manner specified in clause (b) of this rule;
(iii) in a case where a related person sells the goods in the course of wholesale trade to buyers, other than dealers and related persons, and the class to which such buyers belong is known at the time of removal, on the basis of the price at which the goods are ordinarily sold by the related person to such class of buyers.
14. If the adjudicating officer was applying Rule 6 (b) (i) by comparing the price of pattas/pattis sold by the Appellant then adjustment for the difference in quality as stipulated in the proviso, should have been made. If this method was not possible, there was the alternative of Rule 6 (b) (ii). The value arrived at should be reasonable considering the value at which circles manufactured from raw material of similar quality were sold by the Appellant to unrelated buyers. It is to be borne in mind that circles are products made from patta/patti with minimum further processing.
15. It is very disappointing, to say the least, that the lower authorities are not willing to look at the applicable Rules and state which Rule is being applied and for what reason. At the same time, a semblance of following the Rules is shown by arguing that price of pattas/pattis and not the price of circles is to be considered since the goods to be valued is pattas/patties and not circles. While giving this argument the lower authorities are making an error in judgment by considering that pattas/patties made from raw material of a different quality is more of a similar goods than circles made from raw material of the same quality as the material being valued. Since this Appellant has been contesting the issue for about a decade with the backing of all needed records, we do not want to send this case back for another fresh consideration.
16. In the facts and circumstances of the case we hold that the correct rule to be applied in this case was Rule 6 (b) (ii) of the Valuation Rule then in force. The Appellant had given the cost sheet for arriving at the value declared by him. No infirmity in the cost sheet has been pointed out by Revenue. Their only argument is that value should be taken based on the value of pattas/patties sold by him which is not similar goods as already observed by us. So we accept the values declared by the Appellant based on costing.
17. With the result appellant succeeds in his submissions in the matter of valuation. Appeal is allowed with consequential relief.
(Pronounced on------------------------) (D. N. Panda) Judicial Member (Mathew John) Technical Member RM