Custom, Excise & Service Tax Tribunal
Albright & Wilson Chemicals India Ltd vs Cce (Appeals), Mumbai Ii on 30 April, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Appeal No. E/136/07 (Arising out of Order-in-Appeal No. AT/616/RGD/2006 dated 17.11.2006 passed by the Commissioner of Central Excise (Appeals), Mumbai-II). For approval and signature: Honble Shri P.R. Chandrasekharan, Member (Technical) Honble Shri Anil Choudhary, Member (Judicial) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair copy : Seen of the order? 4. Whether order is to be circulated to the Departmental : Yes authorities? ====================================================== Albright & Wilson Chemicals India Ltd. Appellant Vs. CCE (Appeals), Mumbai II Respondent Appearance: Shri D.B. Shroff, Advocate for Appellant Shri Navneet, Addl. Commissioner (A.R.) for Respondent CORAM: SHRI P.R. CHANDRASEKHARAN, MEMBER (TECHNICAL) SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL) Date of Hearing: 30.04.2014 Date of Decision: 30.04.2014 ORDER NO. Per: Anil Choudhary: Heard the parties.
2. The facts, in brief are that during the period April, 2000 to July, 2004 the appellants other than own manufacture, had manufactured Alpha Olefin Sulphonate (Needles) on job work basis for M/s Hindustan Lever Ltd. Vide show-cause notice dated 29.04.2005 for the period April, 2000 to July, 2004. It was alleged that, the appellants had not properly worked out the assessable value while paying duty on the said goods as they had not included the notional profit @ 10/15% of the manufacturing cost in terms of Rule 8 of the Central Excise Valuation Rules, 2000 read with Section 4 of the Central Excise Act.
3. The appellant contested the show-cause notice on the following grounds:-
3.1 Vide declaration dated 02.05.2000, on behalf of HLL, value was declared at Rs. 51,000/- P.M.T. which included profit margin. Thus allegation or basis of issuing show-cause notice does not exist.
3.2 Value of own goods, in case of stock transfer was declared at Rs. 56,000/- P.M.T. 3.3 Appellant received details of value of AOS needles (job work for HCL) on 27.12.2003 for the period April, 2000 to March, 2002. Based on such data, differential duty was suo motu paid on 10.02.2004, vide PLA Entry Nos. 033 to 037. Interest as applicable amounting to Rs. 78,157/- was also paid vide challan dated 28.12.2004 and intimations filed with department.
3.4 Vide letter dated 27.10.2003, HLL informed the Appellant, for the period November, 2003 onwards, the assessable value is Rs. 46,500/- P.M.T. This value was much below the value of Rs. 51,000/-, at which the goods were cleared from December, 2003 to July, 2004.
3.5 Under the given facts and circumstances provisions of Section 11A were not invocable.
3.6 There being no case of fraud, suppression, willful mis-statement, extended period of limitation was not invocable. Reliance was placed on CBEC Circular No. 268/102/96-CX dated 14.11.96, wherein guidelines for invoking extended period of limitation are given. Further reliance was placed on the ruling of Supreme Court in the case of CCE Vs. HMM Ltd. - 1995 (76) ELT 497.
3.7 No case of active undervaluation of clearance for job work is made out.
3.8 HLL being a bulk purchases/importer of raw materials, could purchase at lower rates, than the rates at which the appellant could source the relevant raw materials.
3.9 The processing charges were revised down from Rs. 24,000/- to Rs. 18,000/- from December, 2003. Thereafter revised upwards to Rs. 18,750/- from May, 2004. Thus, the assessable value reduced on both counts viz. (i) Reduction in raw material cost of HLL and (ii) Reduction in rate of processing charges.
3.10 The appellant have declared the assessable value on the basis of raw material cost (as advised by HLL) plus processing charges plus profit margin of 10%/15% as applicable.
3.11 There is no incentive to undervalue. HLL have to pay the excise duty and is entitled to take CENVAT credit of the same.
3.12 On the basis of cost certificate(s) furnished by HLL (as certified by their Chartered Accountant), suo motu payment of differential duty and interest was made under intimation to department.
3.13 The appellant have a good track record of compliance and payment of tax/duty.
4. That the Additional Commissioner vide Order-in-Original dated 18.11.2005 confirmed the proposed total demand of duty Rs. 36,92,842/- and imposing equal amount of penalty under Section 11AC of the Act as well as penalty of Rs. 2 lacs under Rule 173 of 1944 Rules read with Rule 25 of Central Excise Rule, 2002. Interest was also demanded under Section 11AB of the Act. It was observed that in view of CBEC Circular No. 619/10/2002 CX dated 19.02.2002, read with the Ruling of Hon'ble Apex Court in Ujagar Prints, there is no departure in the mode of valuation for job-work. Valuation can be done as per Rule 11 (Residuary Rule) read with Rule 8. There is no change w.e.f. 01.07.2000. It was further held that in view of Tribunal decision in IPF Vikram India Ltd. 2003 (160) ELT 1017 wherein it is ruled that in case of independent job workers, valuation of goods can be done on the basis of price of comparable goods under Rule 6 (b) (i) and failing it under Rule 6 (b)(ii) of the CEV Rules, 1975, on the basis of cost of manufacture plus notional profit. It was further held that case of undervaluation on the part of appellant is made out with intent to evade the duty.
5. That being aggrieved, the appellant carried the matter in appeal before the Commissioner (Appeals). Vide order dated 17.11.2006, it was held that for the period April, 2000 to June, 2000, earlier Section 4 read with the valuation Rules, 1975 will apply. Under which comparable price can be adopted for valuation for the balance period, as the appellant have not added the profit margin, under valuation is established and extended period rightly invoked. Thus the Order-in-Original was upheld.
6. The appellants in their grounds of appeal submitted that, in view of the law settled by the Apex Court in the case of Ujagar Prints reported at 1989 (39) ELT 93 (SC) and Pawan Biscuits Co. reported at 2000 (120) ELT 24 (SC), the value was correctly worked out and duty was accordingly paid thereon. The comparable prices could not be applicable in the present case as M/s Hindustan Lever Ltd. were procuring requisite raw materials in bulk quantity at cheaper rates and during the period the processing charges were reduced. They pointed out that the assessable value was worked out by taking the value of raw material + value of job work done + manufacturing expenses and after considering notional profit in view of Boards Circular No. 619/10/2002. They further submitted that, the adjudicating authority has misconceived the Tribunals judgment in the case of IPF Vikram India Ltd., reported at 2003 (160) ELT 1017 (Trb.) in as much as they had correctly worked out the assessable value and paid duty after considering the landed cost of raw materials supplied by M/s Hindustan Lever Ltd., plus processing charges plus notional profit which were informed to the department from time to time. As such there was no under valuation, as alleged in the notice or at all. They pleaded that the adjudicating authority has not considered and examined the cost certificates issued by the Chartered Accountant. As regards imposition of penalty under Section 11 AC, they argued that all the facts were disclosed to the department and accordingly duty short paid was paid with interest suo motu much before the issue of show-cause notice. Therefore, penalty was not imposable. They also pleaded that, the demand was clearly time-barred as there was no allegation of suppression of fact or mis-statement etc. It was further stated that the show-cause notice was issued only on the basis of the allegation that notional profit of job worker (appellant) was not added to the assessable value declared. But the courts below have travelled beyond the show-cause notice by confirming demand on the basis of comparable price, hence the impugned order is vitiated and illegal. Reliance is also placed on the Ruling of Tribunal in the case of Kandivali Metal Works 1997 (90) ELT 187 upheld by Hon'ble Supreme Court in 1998 (97) ELT A-222, wherein if it held that where a job worker also manufacturers goods on his own, comparative sales price of own goods cannot be made applicable for valuation. They prayed to set aside the impugned order. As there was no allegation of mis-statement or fraud etc. with intent to evade duty, the demand was hit by limitation. They prayed to set aside the impugned order(s).
7. The ld. Additional Commissioner (A.R.), reiterates the findings of the courts below.
8. We have perused the case records carefully and considered the rival contentions. We find that the adjudicating authority have travelled beyond the show-cause notice by adopting comparable value method for confirmation of the demand alongwith penalty. Further, from the documents on record, it is seen that the appellant communicated the declared assessable value, vide declaration filed under Rule 26, from time to time in respect of job work on behalf of HLL. This declaration has been filed on the basis of communication received from the principal manufacturer. Further the assessable value declared varied only marginally, which is evident from the cost certificate issued by the Chartered Accountant. Further, the appellant had suo motu paid the differential duty alongwith interest, much before the issue of show-cause notice. The show-cause notice does not allege any contumacious conduct or active disregard to provisions of law or concealment on part of the appellant. The only ground taken in show-cause notice is wrong and misconceived. Thus, the impugned order is not sustainable. Thus, the appeal is allowed and the impugned order of the Commissioner (Appeals) as well as the Order-in-Original dated 18.11.2005 is set aside. The appeal is allowed with consequential relief if any. It is informed by the ld. Counsel that during the pendency of appeal, Revenue has collected the impugned demand by way of adjustment of refund. The Revenue is hereby directed to refund the impugned amount collected forthwith, not exceeding 30 days from receipt of the order, alongwith interest as per Rules.
(Operative part pronounced in open Court) (P.R. Chandrasekharan) (Anil Choudhary) Member (Technical) Member (Judicial) Sp 8