Custom, Excise & Service Tax Tribunal
L.G. Polymers India Ltd vs Commissioner Of Central Excise on 12 April, 2017
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
SOUTH REGIONAL BENCH AT HYDERABAD
Division Bench
Court - I
Appeal No.E/536/2010
[Arising out of Order-in-Original No.26/2009 (RS) dt. 31.12.2009 passed by the Commissioner of Central Excise, Customs & Service Tax, Visakhapatnam-I]
L.G. Polymers India Ltd.
Appellant
Versus
Commissioner of Central Excise,
Visakhapatnam-I Respondent
Appearance:
Shri B.N. Gururaj, Advocate For the Appellant Shri Arun Kumar, (AR) For the Respondent CORAM:
Honble Shri Justice (Dr.) Satish Chandra, President Honble Shri Madhu Mohan Damodhar, Member (Technical) Date of hearing : 23.02.2017 Date of Pronouncement:
FINAL ORDER No._________ Per : Madhu Mohan Damodhar The brief facts of the case are that appellants are engaged in the manufacture of Polystyrene falling under Chapter sub-heading No.3903.10 of the Central Excise Tariff. They are clearing polystyrene of different grades of factory gate as well as on stock transfer basis to their depots / consignment sales agents (CSAs) across the country. It appeared to the department that appellants were clearing polystyrene to certain depots/CSAs by adopting a price lower than the price prevailing at the depot on the day of clearances from the factory. Appellant had not requested for provisional assessment under Rule 9B of Central Excise Rules, 1944 and Rule 7 of Central Excise Rules, 2002 and had self-assessed the goods contrary to the procedure prescribed in Board's circular dt. 14-10-1996 and 30-06-2000. Accordingly, eleven show cause notices were issued to appellants as follows :
S.No. SCN No. Date of SCN Period of SCN Duty Amount (Rs.) Duty Amount debited (Rs.)
1. V/15/103/03-Adj.
29.04.2004 09/1999 to 09/2003 1,12,10,234 16,10,554
2. V/15/125/04-Adj.
18.10.2004 10/2003 to 04/2004 6,02,485 78478 78,47,833
3. V/15/46/05-Adj.
26.05.2005 05/2004 to 10/2004 6,43,208
4. V/15/102/05-Adj.
24.11.2005 11/2004 to 04/2005 28,57,580
5. V/15/64/06-Adj.
12.05.2006 05/2005 to 10/2005 37,44,560
6. V/15/141/06-Adj.
27.11.2006 11/2005 to 05/2006 44,43,892 88,61,776
7. V/15/75/07-Adj.
03.07.2007 06/2006 to 12/2006 13,65,931
8. V/15/07/08-Adj.
16.01.2008 01/2007 to 06/2007 14,05,449
9. V/15/81/08-Adj.
30.06.2008 07/2007 to 12/2007 8,38,676
10. V/15/08/09-Adj.
04.02.2009 01/2008 to 06/2008 8,07,828
11. V/15/89/09-Adj.
15.07.2009 07/2008 to 12/2008 96,98,677 96,98,677 3,76,18,520 2,80,18,840 The first 5 notices were adjudicated by Commissioner vide OIO dt. 05-09-2009 in favour of Revenue which, on appeal to CESTAT, was set aside and ordered for de novo adjudication after following principles of natural justice vide a Final Order No.84/2009 dt.
26-02-2009. Accordingly, these five notices (in de novo adjudication) as also the SCNs at Sl.Nos. 6 to 11 in the above table were taken up for common adjudication. After due process of adjudication, vide OIO dt. 31-12-2009 (Impugned Order), the total of the amounts proposed in the aforesaid 11 notices amounting to Rs.3,76,18,520/- was confirmed by the adjudicating authority, along with interest liability thereon. Penalties of Rs.1,12,10,234/- under Section 11AC of the Central Excise Act and Rs.10,00,000/- under Rule 25 of Central Excise Rules, 2002 were also imposed. Aggrieved, the appellants are before this form in appeal.
2. On 23-02-2017, when the matter came up for hearing, Shri B.N. Gururaj appearing for the appellants reiterated the grounds of appeal and also submitted written submissions. The main contentions of the appellants/ld. Counsel can be summarized as follows :
(i) Though the demand is based on Rule 7 for largest part of the period of dispute, the method of computation adopted in the notice and OIO is not based on normal transaction value. Instead, duty is demanded based on the sale price of depot at the nearest point of time. This is contrary to the rule invoked. The basis of demand in the notice has been abandoned in favour of another method not invoked in the notice.
(ii) There was no definition of "Place of Removal" between 1.7.2000 to 13.5.2003. Therefore, during this period, duty cannot be demanded based on the sale price at the depot or the place of consignment. On this basis, the appellant submits that the duty demand of Rs.79,45,485/- has to abate. Judgments of the Apex Court in CC & CE Nagpur Vs Ispat Industries Ltd.- 2015 (324) ELT 670 (SC) and Associated Drug Co. Vs CCE - 2005 (191) ELT 168 (T-Bang.) relied on in support of this submission.
(iii) Further more, for the same reason, as also on the basis of judgments relied on by the appellant, cost of transportation upto the place of removal cannot form part of the assessable value Judgment in the case of Classic Polytubes Pvt. Ltd. v. CCE - 2016 (336) ELT 180 (Tri.-All) and CCE Madurai v TCP Ltd. and others - 2011-TIOL-21-CESTAT-MAD relied on in support of this submission.
(iv) Differential value on which duty has been demanded not treated as cum-duty value. Demand raised on the entire differential value. Reliance placed on CCE Vs Maruti Udyog Ltd. - 2002 (141) ELT 3 (SC).
(v) If the deduction of cost of transportation from the value is considered in the eleven SCNs, the duty liability will be further reduced, with consequential reduction in the interest liability and penalty.
(vi) For the year 2000-01, there is an error in computing the value of clearance to Southern region in the SCN. Duty liability wrongly shown as Rs.7,63,425/- instead of Rs.3,52,645/-. There will be further reduction of Rs.4,10,780/- in the total duty demand.
(vii) Between October 2008 to December 2008, goods removed for captive consumption have been wrongly considered as stock transfer to Kolkata branch. If this value is excluded, there will be further reduction of duty demand of Rs.6,85,839/-.
(viii) On limitation, the department has engaged in correspondence with the appellant since 17-05-2000, but has issued notice in April 2004. Hence, the demand under the first show cause notice is barred by limitation. Consequently, penalty under section 11AC is also liable to be set aside.
3. On the other hand, Shri Arun Kumar, Ld. A.R appearing for Revenue, supports the adjudication.
4. We have heard both sides and have gone through the records.
5. Demand of duty is based on sale price at the depot and place of consignment of agents of the appellants. Demand is based on the concept of "place of removal" between September 1999 and June 2000 and thereafter based on Rule 7 of the Central Excise (Determination of Price of Excisable Goods), Rules, 2000. The first SCN dt.29-04-2004 for the period September 1999 to September 2003 has invoked extended period of limitation and other notices, however, have been issued under normal period of limitation.
6. We find that the periods covered in this appeal have undergone different phases of law in respect of method of valuation to be followed and the concept of "place of removal" thereof. We find that in a recent Final Order No.42271-42278/2016 dt. 06-10-2016 in respect of appeals filed by M/s.Chemplast Sanmar Ltd. & Cabot Sanmar Ltd., the Tribunal has undertaken a survey of the law prevailing during these periods which would be very useful in analyzing this appeal. Therefore, the relevant portion of that decision is reproduced hereinbelow for ready reference :
POSITION OF LAW FROM 28.9.1996 to 30.6.2000 1.2 The law relating to determination of the assessable value prevailing before 28.9.1996 underwent amendment and clearance of the excisable goods from different places at different point of time was called "transaction value".
1.3 According to section 4 (1) of the Act, the goods ordinarily sold by an assessee at the time of removal from the respective place of removal charging different prices were considered to be normal price, in relation to that place of removal at the time of removal thereof, wherefrom the sales occurred. The said sub-section reads as under :
SECTION 4 Valuation of excisable goods for the purpose of charging of duty of excise (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value, shall, subject to the other provisions of this section, be deemed to be
(a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale.
1.4 The expression "place of removal" was defined by section 4 (4) (b) of the Act as under:
SECTION 4 Valuation of excisable goods for the purpose of charging of duty of excise .... .... ....
(4) For the purposes of this section, ?
(a) .... .... ....
(b) "place of removal" means ?
(i) a factory or any other place or premises of production or manufacture of the excisable goods;
(ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty;
(iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory and, from where such goods are removed;
1.5 According to the above definition, the places enumerated in the definition were recognised to be place of removal to determine assessable value of the excisable goods cleared therefrom. Accordingly, normal price charged to non-related buyers in the course of wholesale trade for delivery "at the time" and "place of removal" was recognised to be transaction value.
1.6 The expression "time of removal" was defined by section 4(4) (ba) of the Act as under :
SECTION 4 Valuation of excisable goods for the purpose of charging of duty of excise .... .... ....
(4) For the purposes of this section, ?
(a) .... .... ....
(b) .... .... ....
(ba) "time of removal", in respect of goods removed from the place of removal referred to in sub-clause (iii) of clause (b), shall be deemed to be the time at which such goods are cleared from the factory.
1.7 According to law as that was prevailing during material period, sale price charged in respect of a solitary transaction did not become basis for determination of assessable value of the goods cleared from any of the above said place of removal at the time of removal thereof. Related party transactions were dealt by different set of provision of law.
1.8. The terms 'place of removal' and 'time of removal' as defined above in terms of section 4 (4) (b) and 4 (4) (ba) of the Act remained in force for the period 28.9.1996 to 30.6.2000.
POSITION OF LAW FROM 1.7.2000 to 13.5.2003 1.9 Section 4 of the Act prescribing mode of valuation of excisable goods stated as under :-
SECTION 4 Valuation of excisable goods for the purpose of charging of duty of excise (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, on each removal of the goods, such value shall
(a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value.
(b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed.
1.10 From 1.7.2000 to 13.5.2003, the term 'place of removal' and 'transaction value' underwent amendment. The term "place of removal" was defined as under:
Section 4 (3) (c) : "place of removal" means ?
(i) a factory or any other place or premises of production or manufacture of the excisable goods;
(ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty, from where such goods are removed;
1.11 The term "transaction value" was defined as under :
Section 4 (3) (d) : "transaction value" means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods.
1.12 Rule 7 of Central Excise (Valuation) Rules, 2000 w.e.f.1.7.2000 prescribed mode of valuation of goods cleared as under :
RULE 7 : Where the excisable goods are not sold by the assessee at the time and place of removal but are transferred to a depot, premises of a consignment agent or any other place or premises (hereinafter referred to as "such other place") from where the excisable goods are to be sold after their clearance from the place of removal and where the assessee and the buyer of the said goods are not related and the price is the sole consideration for the sale, the value shall be the normal transaction value of such goods sold from such other place at or about the same time and where such goods are not sold at or about the same time, at the time nearest to the time of removal of goods under assessment.
POSITION OF LAW FROM 14.5.2003 1.13 Again, Section 4 of the Central Excise Act, 1944 underwent amendment with effect from 14.5.2003. The mode of valuation prescribed by section 4(1) of the Act read as under :
SECTION 4 Valuation of excisable goods for the purpose of charging of duty of excise (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, on each removal of the goods, such value shall
(a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value.
(b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed.
Explanation.? For the removal of doubts, it is hereby declared that the price-cum-duty of the excisable goods sold by the assesee shall be the price actually paid to him for the goods sold and the money value of the additional in connection with the sale of such goods, and such price-cum-duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods.
1.14 The terms "place of removal" and "time of removal" were under :
Section 4 (3) (c) - "place of removal" means ?
(i) a factory or any other place or premises of production or manufacture of the excisable goods
(ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty
(iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory from where such goods are removed;
Section 4 (3) (cc) "time of removal", in respect of the excisable goods removed from the place of removal referred to in sub-clause (iii) of clause (c), shall be deemed to the time at which such goods are cleared from the factory.
1.15 In these two cases, during relevant period under appeal, a depot, premises of consignment agent or any place or premises from where the excisable goods were sold after clearance from the factory were treated as 'places of removal'. Such "places of removal" was significant to ascertain the price prevailing thereat at the time of removal of excisable goods therefrom. Law contemplated that the price prevailing at a relevant point of time at the place of removal was to be considered as normal transaction value. Therefore, the term time of removal was defined to specify the moment of removal of the goods from the places referred to in sub-clause (iii) of clause (b) of Section 4(1) (a) of the Act to rule out abnormality and anomaly in valuation of excisable goods. That was deemed to be the time at which excisable goods were cleared from the factory.
2. Appellant submitted that a combined reading of the provision of Section 4(1) and 4(4) of the Act leads to the conclusion that the normal sale price of the excisable goods prevailed at a place of removal at the time of removal thereof was recognised by law to be basis for determination of assessable value in respect of unrelated party transactions. Any solitary transaction or any unusual transaction was not intended to provide basis to determine transaction value. However, learned appellate authority in these two appeals, without having regard to the intention of the legislature, passed order adopting price of a solitary transaction of a day made at a depot holding that to be basis for determination of transaction value of all sales of that day, which is not the intention of law.
3. Per contra, Revenue submits that learned Commissioner (Appeals) examined the transaction value of the clearances appearing in the annexure to show cause notice and held that adjudication findings were made properly for which there should be no interference to his order.
4. Heard both sides and perused the record.
5. Learned Commissioner (Appeals) has passed the impugned order without examining the amendments to the law made during different periods as depicted above since above two appeals relate to September 1997 to December 2001. The first dose of amendment came into force with effect from 28.9.1996 and second dose of amendment came into force w.e.f. 1.7.2000 and remained in force till 13.5.2003 which prescribed the principles relating to determination of assessable value. The law prevailing at the relevant point of time has following propositions :-
(i) "Normal price" is the basis to determine the assessable value of clearance of excisable goods made at the time of removal from the place of removal thereof. Although the term "normal price" was not defined, the price charged in respect of normal transactions at the relevant point of time and cleared from the relevant place shall be decisive to arrive at normal value of clearances.
(ii) The situs of sale and the range of the price prevailed at the given point of time are determinative of the assessable value.
(iii) Proviso (ia) to Section 4 (1) (a) [upto 30.6.2000] intended that the price at which goods are ordinarily sold shall be the normal value. That may vary at different places of removal at different point of time. Therefore, each such price subject to other circumstances specified in clause (a) of Section 4 (1) is intended to be normal price of the goods in relation to the relevant place of removal. Rule 7 of Central Excise (Valuation) Rules, 2000 which came into force w.e.f 1.7.2000 dealt with valuation of depot sales transactions. That also weights consideration.
(iv) The concept of 'each such place of removal' used in the proviso (ia) to Section 4 (1) (a) [upto 30.6.2000] covers factory, ware house or any other place or premises where excisable goods are permitted to be stored, depot, premises of a consignment agent or any other place or premises wherefrom the excisable goods are to be sold after their clearance from the factory.
(v) Law intended that the representative price at the time of removal from the respective place shall be the assessable value.
7. For the period post-2000 amendment, the Tribunal has further found as follows :
Period involved Post 2000 amendment but prior to 2003 amendment [i.e. from 1.7.2000 upto 13.5.2003] Post 2000 amendment but prior [i.e. from 1.7.2000 to 13.5.2003] and after 2003 amendment [from 14.5.03] "9.2 The terms place of removal as defined by Explanation (c) to Section 4(3) of the Central Excise Act, 1944 confined its territory to a factory or any other place or premises of production or manufacture of the excisable goods and a warehouse or any other place or premises wherein the excisable goods were permitted to be deposited without payment of duty. Meaning of the term transaction value remained the same as amended from 1.7.2000, as extracted herein before."
8. Even a cursory perusal of the impugned order will indicate that the adjudicating authority has not analysed the contentious issues with respect to changes in law that were effected on at least two occasions during the entire period of dispute. While the period of disputes starts from 09/1999, the adjudicating authority has considered the law only from 01-07-2000 when Section 4 of the Central Excise Act was substituted vide Finance Act, 2000. This is very evident from para-15 of the impugned order. There also appears to be merit in the contention of the appellant. Although there is some discussion on provision of law prior to 01-07-2000 in para-25 of the order, however, the authority has only made a passing reference thereof and has not analyzed the applicability thereof and to what extent, to the disputed period prior to 01-07-2000. Lower authority appears to have prejudged the issue and confirmed the huge demand amounting to Rs.3,76,18,520/- without adequate analysis and application of mind.
9. In these circumstances, we find legal infirmity in the impugned order due to non-application of law in its letter and spirit. The issues involved in this appeal will therefore have to be remanded for de novo consideration by original authority who will threadbare examine the material facts and considering the pleadings of the appellant, both on fact and law shall test the evidence and apply relevant law, to pass appropriate order recording reason of its decision. The de novo adjudicating authority shall also take into consideration the contentions of the appellant as broadly brought out in para-2 above and pass a reasoned order.
10. With these directions, the impugned order is set aside and matter is remanded for de novo adjudication.
Appeal is disposed of in the above terms.
(Pronounced in open court on ______________)
(Madhu Mohan Damodhar) (Justice Dr. Satish Chandra)
Member (Technical) President
gs./Jaya
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Appeal No.E/536/2010