Custom, Excise & Service Tax Tribunal
Chemplast Sanmar Ltd vs Commissioner Of Central Excise & St, Ltu on 6 October, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH CHENNAI Appeal Nos.E/276/2005 & E/957/2005 [Arising out of Order-in-Appeal No.421/2004-CE (SLM) dt. 31.12.2004 and OIA No.151/2005-CE (SLM) dt. 12.8.2005 both passed by the Commissioner of Central Excise (Appeals), Salem] Chemplast Sanmar Ltd. Appellant Versus Commissioner of Central Excise & ST, LTU Chennai Respondent
Appeal No.E/635/2005 [Arising out of Order-in-Appeal No.61/2005-CE (SLM) dt.28.4.2005 passed by the Commissioner of Central Excise (Appeals), Salem] Cabot Sanmar Ltd. Appellant Versus Commissioner of Central Excise, Salem Respondent Appeal Nos.E/636 & 637/2005, E/700-702/2005 [Arising out of Order-in-Appeal No.59 & 60/2005-CE (SLM) dt.28.4.2005 and OIA No.62,63 & 64/2005-CE (SLM) dt. 28.4.2005 both passed by the Commissioner of Central Excise (Appeals), Salem] Chemplast Sanmar Ltd. Appellant Versus Commissioner of Central Excise, Salem Respondent Appearance:
Ms. L.Mythili, Advocate For the Appellant Shri K.P. Muralidharan, AC (AR) For the Respondent CORAM :
Honble Shri D.N. Panda, Judicial Member Hon'ble Shri Madhu Mohan Damodhar, Technical Member Date of hearing / decision : 6.10.2016 FINAL ORDER No.42271-42278/2016 Per D.N. Panda E/276/2005 & E/957/2005 Appellants principal grievance is that the adjudications relating to the period September 1997 to December 2001 covered by Appeal Nos.E/276/2005 and E/957/2005 was made ignoring the law laid down in Section 4 (1) of Central Excise Act, 1944 (in short, "the Act") read with different definitions given under Section 4 (4) thereof, questioning the transaction value adopted by the appellant. The periods covered in these two appeals having undergone test of law through three different phases of law, it would be proper to make a survey of the law prevailing during these periods.
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.
6. The impugned order considered the sale price of a solitary transaction as is apparent from paragraphs 6.5.2, 6.5.3, 6.5.4 of the impugned order to arrive at the assessable value. The manner of examination done by the appellate authority below does not demonstrate proper application of the law introduced w.e.f. 28.9.1996 till 30.6.2000. Representative sale price prevailed at the particular point of time at the place of removal to satisfy the condition of Section 4(1) (a) of the Central Excise Act, 1944 was not considered by that Authority. Such legal infirmities demonstrate improper application of law. Therefore, in the light of the above analysis of law, it would be proper for both sides to place their case before the appellate authority on the date that may be fixed by him, issuing notice to both sides within three months of receipt of this order. He shall hear them thoroughly on the basis of the law for the time being in force and test the transactions on the touch stone of law in respect of the issues involved in these two appeals to arrive at the assessable value. Pleading of the appellant shall be recorded and a reasoned and speaking order passed.
7. Appellants further submission is that the time-bar aspect may also to be looked into since there was no intention of the appellant to cause evasion and nothing in the show cause notice shows that elements of proviso to Section 11A were present to invoke extended period. Therefore no penalty may be imposed. The matter having been remitted as above, if any plea is made by appellant in respect of time bar, in the course of readjudication, such aspect is left open to the appellate authority to examine and outcome of his examination shall be recorded by the Authority and resolved. He shall decide penalty issue accordingly.
8. In the result, both the above appeals are remanded with the direction above, expecting the learned appellate authority to pass the order afresh by 31st March 2017.
E/635/2005, E/636 & 637/2005, E/700-702/2005 9.1 These six appeals involve different periods as tabulated below and governed by the law prevailing during such period.
Appeal No. Period involved E/635/05 E/637/05 E/701/05 Post 2000 amendment but prior to 2003 amendment [i.e. from 1.7.2000 upto 13.5.2003] E/636/05, E/700/05 & E/702/05 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.
10. According to appellant, if the law relating to transaction value enacted in different clauses and sub-clauses as well as Explanation of Section 4 of the Act during different periods is interpreted harmoniously in the manner the analysis of law has been made herein before, in respect of the two appeals aforesaid, the dispute involved in these six appeals may be resolved at the gross root and appellant may have no grievance.
11. Considering submission of appellant to be reasonable, it is expected that appreciating the object of law as outlined in the preceding paragraphs, the authority shall determine transaction value taking into account normal sales transactions made and resolve the dispute.
12. Normally, we do not prefer to send back a matter to the authority below. But finding legal infirmity in the impugned order due to non-application of law in its letter and spirit, the matters are sent back to the appellate authority to hear the grievance of both sides afresh and reduce the dispute at the gross root level. He shall threadbare examine the material facts and considering the pleadings of appellant, both on fact and law shall test the evidence and apply the relevant law to pass appropriate order recording reason of his decision. Accordingly, these six appeals are remanded to the learned Commissioner (Appeals).
(Dictated and pronounced in open court)
(MADHU MOHAN DAMODHAR) (D.N.PANDA)
TECHNICAL MEMBER JUDICIAL MEMBER
gs
2