Custom, Excise & Service Tax Tribunal
) M/S.The Tinplate Co. Of India Ltd. ... vs Commissioner Of Central Excise, ... on 10 May, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH: KOLKATA
1-4) Appeal Nos.EA-83, 84, 85, 86/05
(Arising out of Order-in-Original No.51/COMMR/2004 dated 28.07.2004 passed by the Commissioner of Central Excise, Jamshedpur.)
FOR APPROVAL AND SIGNATURE
HONBLE SHRI H.K.THAKUR, MEMBER(TECHNICAL)
HONBLE SHRI P.K.CHOUDHARY, MEMBER(JUDICIAL)
1. Whether Press Reporters may be allowed to see
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
CESTAT(Procedure) Rules, 1982 for publication in any
Authorative report or not?
3. Whether Their Lordship wishes to see the fair copy
of the Order?
4. Whether Order is to be circulated to the Departmental
Authorities?
1) M/s.The Tinplate Co. of India Ltd. (TCIL)
2) Shri M.K.Jha
3) M/s.Tata Iron & Steel Co.Ltd. (TISCO)
4) Shri B.Muthuraman
Applicant (s)/Appellant (s)
Vs.
Commissioner of Central Excise, Jamshedpur
Respondent (s)
Appearance:
Dr.Samir Chakraborty, Advocate & Shri Abhijit Biswas, Advocate for the Appellant (s) Shri K.Chowdhury, Supdt.(AR) for the Revenue CORAM:
HONBLE SHRI H.K.THAKUR, MEMBER(TECHNICAL) HONBLE SHRI P.K.CHOUDHARY, MEMBER(JUDICIAL) Date of Hearing:- 10.05.2016 Date of Pronouncement :- 10.05.2016 ORDER NO.FO/A/75396-75399/2016 Per Shri H.K.Thakur.
These Appeals have been filed by the Appellants against Order-in-Original No.51/COMMR/2004 dated 28.07.2004, issued on 09.11.2004 passed by the Commissioner of Central Excise, Jamshedpur. Under this Order-in-Original Adjudicating authority has confirmed a demand of Rs.2,00,07,358/-(Rupees Two Crore Seven Thousand Three Hundred and Fifty Eight only) against Appellant M/s.The Tinplate Co. of India Ltd. (TCIL) along with interest and imposed equivalent penalty. A penalty of Rs.1,00,000/-(Rupees One Lakh only) has been imposed upon Appellant M/s.Tata Iron & Steel Co.Ltd.(TISCO), Jamshedpur and penalty of Rs.50,000/-(Rupees Fifty Thousand only) has been imposed upon Appellant Shri B.Muthuraman, MD of M/s.Tata Iron & Steel Co.Ltd.(TISCO). A penalty of Rs.20,000/-(Rupees Twenty Thousand only) has been imposed upon Appellant Shri M.K.Jha, Deputy Controller of Accounts of Appellant M/s.The Tinplace Co. of India Ltd. (TCIL).
2. Dr.Samir Chakraborty (Advocate) and Shri Abhijit Biswas (Advocate) appeared on behalf of the Appellants. Dr.Samir Chakraborty (Advocate) argued that Appellant M/s.The Tinplate Co. of India Ltd.(TCIL), Jamshedpur (Job-worker) is getting Hot Rolled (HR) Coils from M/s.TISCO, which are converted into Full Hard Cold Rolled (FHCR) Coils by the job-worker. That after detailed investigation a Show Cause Notice was issued to the Appellants on the grounds that duty for the period after 01.07.2000 was required to be paid at 115% of the cost of production of FHCR Coils at the hands of M/s.TCIL under Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. It is the case of M/s.TCIL that Appellant is a job-worker and not a sister concern and the valuation of the goods manufactured by the job-worker should be determined in view of the Supreme Courts judgement in the case of Ujagar Prints Etc.Etc. vs. UOI and Others [1988 (38) ELT 535 (SC)] and Apex Courts decision in the case of Pawan Biscuits Co. (Pvt.) Ltd. v. Commissioner of Central Excise, Patna [2000 (120) ELT 24 (SC)] and not Rule 8 of the Valuation Rules. Ld.Advocate relied upon another case law of the Apex Court in the case of Commissioner of C.Ex., Pune vs. Mahindra Ugine Steel Co.Ltd. [2015 (318) ELT 592(SC)] wherein it has been held by the Apex Court that motor vehicle parts manufactured on job-work basis are required to be subject to valuation under Rule 11 of the Central Excise Valuation Rules, 2000 and that the provisions of Rule 8 of these Rules are not applicable to such goods manufactured on job-work basis. That the same view stands upheld by the Apex Court in the case of Commissioner of C.Ex., Goa vs. Cosme Farma Laboratories Ltd. [2015 (318) ELT 545(SC)] where it was held that valuation in case of goods manufactured under job-work mechanism has to be decided on the basis of Apex Courts decision in the case of Pawan Biscuits Co. (Pvt.) Ltd. v. Commissioner of Central Excise, Patna (supra). That the demand raised for the period 01.07.2000 to 09.02.2001 based on 115% of the cost of manufacture of FHCR Coils comes to Rs.85.00 Lakhs (approx.) which is required to be dropped as valuation cannot be done under Rule 8 of the Valuation Rules. It was also the case of the Appellant that out of total demand of Rs.2,00,07,358/-(Rupees Two Crore Seven Thousand Three Hundred and Fifty Eight only) Appellant has already deposited an amount of Rs.1,03,35,025/-(Rupees One Crore Three Lakh Thirty Five Thousand and Twenty Five only) on 27.02.2011 whereas the actual differential duty payable comes to Rs.78,12,928/-(Rupees Seventy Eight Lakh Twelve Thousand Nine Hundred and Twenty Eight only).
3. That Adjudicating authority has confirmed a demand of Rs.17.00 Lakhs (approx.) on the grounds that yield percentage as per conversion agreement between M/s.TISCO and M/s.TCIL should always be based on 92%. It is the case of the Appellant TCIL that actual yield percentages during the relevant period were 94.86%, 95.46% and 95.17%. The Ld.Advocate made the Bench go through the relevant data maintained by the Appellant for the relevant period and emphasized that these facts were brought to the notice of the Adjudicating authority as per Para-14 of their reply to the Show Cause Notice dated 17.06.2002. Ld.Advocate also made the Bench go through the relevant conversion agreement where such a yield has been fixed at 92% but also mentions that yield shall be calculated on actual basis and is open to review. That in view of the variable nature of yield percentage Adjudicating authority has wrongly confirmed demand by taking yield percentage as 92%.
4. Ld.Advocate also argued that demand with respect to inward freight incurred on raw materials and outward freight incurred on the finished goods sent to M/s.TISCO have been added to arrive at the assessable value. It is the case of the Appellant that outward freight incurred for transporting finished goods is not required to be added to the assessable value and the excess duty demanded on such inclusion of outward freight comes to Rs.17.00 Lakhs (approx.) which is not demandable. That another demand of Rs.2.00 Lakhs (approx.) has been demanded excess in the Show Cause Notice which is due to calculation errors.
5. On the issue of imposition of penalties Ld.Advocate relied upon the case law of Commr. of C.Ex. & Cus., Vadodara-II v. Indeos ABS Ltd. [2010 (254) ELT 628(Guj.)] to argue that entire exercise is revenue neutral as the excess duty, if any, payable by the job-worker will be admissible as Cenvat Credit to M/s.TISCO. It was thus the case of the Appellant that no penalty under Section 11AC and Rule 173Q is imposable upon the Appellants as per case law Agarwal Pharmaceuticals vs. Commissioner of C.Ex., Delhi-I [2002 (146) ELT 190(Tri.-Del.)].
6. Shri K.Chowdhury, Supdt.(AR) appearing on behalf of the Revenue argued that in view of the Apex Courts decision in the case of Commssioner of Central Excise, Mumbai vs. Mahindra & Mahindra Ltd. [2005 (179) ELT 21(SC)] and Punjab Tractors Ltd. vs. Commissioner of C.Ex., Chandigarh [2005 (181) ELT 380 (SC)] revenue neutrality cannot be the only factor for not invoking extended period against the Appellant and for imposing penalties. Ld.AR thus strongly defended that penalties have been correctly imposed upon all the Appellants. On the issue of applicability of Supreme Courts judgement relied upon by the Appellant it was argued by Ld.AR that these judgements delivered in the year 2015 are after the date of adjudication which were not available before the Adjudicating authority. Similarly on the issue of calculation of demand on yield percentage of 92% and inclusion of outward freight on the finished goods, it was argued by Ld.AR that the case may be remanded to the Adjudicating authority. Ld.AR thus strongly defended the order passed by the Adjudicating authority.
7. Heard both sides and perused the case records. Main issue involved in these Appeals is regarding valuation of goods manufactured by M/s.TCIL on job-work basis for M/s.TISCO. Following issues are required to be decided in these Appeals:-
1) Whether valuation of goods manufactured on job-work basis are required to be done @ 115% of the cost of manufacture of FHCR Coil under Rule 8 of the Central Excise Valuation Rules during the period 01.07.2000 to 09.02.2001?
2) Whether demand of Rs.17.00 Lakhs (approx.) calculated by the Adjudicating authority by taking the yield percentage as 92% was correct?
3) Whether outward freight incurred by M/s.TCIL on transporting finished goods from the factory is required to be included in the assessable value?
4) Whether duty to the tune of Rs.2.00 Lakhs has been demanded excess due to calculation errors?
5) Whether penalties have been correctly imposed upon the Appellants?
8. So far as the issue mentioned at point No.1 of para-7 above is concerned Apex Court in the case of Commissioner of C.Ex., Goa vs. Cosme Farma Laboratories Ltd. (supra) has held that valuation of goods manufactured on job-work basis has to be done as per CBEC CircularNo.619/10/2002-CX dated 19.02.2002 and Apex Courts decision in the case of Pawan Biscuits Co. (Pvt.) Ltd. v. Commissioner of Central Excise, Patna (supra). Further in the case of Commissioner of C.Ex., Pune vs. Mahindra Ugine Steel Co.Ltd. (supra) it has been opined by the Apex Court that Rule 8 of the Central Excise Valuation Rules is not applicable to the goods manufactured on job-work basis and that valuation has to be done under residuary provision of Rule 11 of the Central Excise Valuation Rules. In the present case job-worker M/s.TCIL is not a sister concern of M/s.TISCO and the goods manufactured by the job-worker are not used captively by him or on his behalf (job-workers behalf) in the production or manufacture of other articles. In view of the above observations and the settled proposition of law duty on manufacture by job-worker M/s.TCIL cannot be demanded @115% of the cost of manufacture for the period 01.07.2000 to 09.02.2001, under Rule 8 of the Central Excise Valuation Rules. Accordingly demand raised on the basis of 115% for the period 01.07.2000 to 09.02.2001 is required to be set aside.
9. On the issue of calculation of demand based on a maximum yield of 92% it is observed that as per the conversion agreement between M/s.TCIL and M/s.TISCO minimum yield has been considered to be 92% but at the same time the contract also mentions it clearly that yield shall be calculated on actual basis. Appellant has brought on record the documents conveying that yield during the relevant period of demand varies from 94.86% to 95.42%. Accordingly quantification of demand, if any, has to be done by taking into consideration the percentage of actual yield during the period under consideration. However, such a quantification is required to be done by the Adjudicating authority for which this aspect is required to be remanded back to the Adjudicating authority for quantification purpose only.
10. Regarding inclusion of outward freight incurred by M/s.TCIL in the valuation of finished goods it is a settled law that only expenses up to place of removal have to be taken into consideration while calculating the assessable value. Having considered the job-worker as the manufacturer the expenses incurred on account of freight from the place of removal of finished goods cannot be added to the assessable value. However, Adjudicating authority has observed that Appellant M/s.TCIL has not given the required data as to how much freight shown in his books of account pertain to inward freight on raw materials and how much pertain to outward freight on the finished products. On merits it is held that outward freight incurred by the Appellant from the place of removal is not required to be added to the assessable value of the goods manufactured on job-work basis which are cleared on payment of duty from the factory gate of the job-worker. However, the quantum of such outward freight incurred by the Appellant is required to be substantiated by the relevant record maintained by the Appellant and also supported by a Cost Accountants Certificate. For this quantification also the matter is required to be remanded back to the Adjudicating authority for quantifying the demand, if any, based on Cost Accountants Certificate to be produced by the Appellant before the Adjudicating authority.
11. So far as imposition of penalties upon the Appellants is concerned, it is observed that Appellant M/s.TCIL was aware of the fact that cost of raw materials supplied by M/s.TISCO was on a higher side. M/s.TCIL took up the matter with M/s.TISCO regarding calculating duty liability based on higher value of raw materials supplied. This correspondence regarding payment of duty at higher cost of raw material supplied with M/s.TISCO was also initiated only after department started investigating into the matter. At that stage Appellant M/s.TCIL was required to approach the department as soon as they realized higher cost of raw material supplied. Accordingly penalty is required to be imposed upon the Appellant only under Rule 173Q of the Central Excise Rules, 1944. Bench is of the considered view that excess duty, if any, paid by the Appellant would be admissible as Cenvat Credit to M/s.TISCO, therefore, there cannot be any intention to evade payment of duty for attracting imposition of penalty under Section 11AC as held by CESTAT Delhi in the case of Agarwal Pharmaceuticals vs. Commissioner of C.Ex., Delhi-I (supra).
12. So far as imposition of penalties upon Appellant M/s.TISCO, Shri B.Muthuraman, MD and Shri M.K.Jha, Dy.Controller of Accounts of M/s.TCIL is concerned, it is observed that Shri B.Muthuraman, MD and Shri M.K.Jha, Dy.Controller of Accounts were the employees of M/s.TISCO and M/s.TCIL and were not to gain financially on account of short payment for which credit was also admissible. Similarly M/s.TISCO has not dealt directly with the manufacture and clearance of goods on which duty has been demanded. Accordingly, it is held that no penalty is imposable upon Appellants M/s.TISCO, Shri B.Muthuraman and Shri M.K.Jha. Appeals filed by these Appellants with respect to imposition of penalties are allowed.
13. In view of the above observations Appeal filed by the Appellant M/s.TCIL is allowed by way of remand to the Adjudicating authority for quantification of duty demand with respect to yield percentage actually arisen during the course of manufacture, on account of deduction of outward freight incurred on the finished goods manufactured by Appellant M/s.TCIL and excess demand on account of calculation errors. Needless to say that an opportunity of personal hearing should be extended to the appellant M/s.TCIL, to explain their case on quantification of duty, before deciding the case in remand proceedings. After quantification of exact duty liability of the Appellant an appropriate penalty, commensurate with the duty short paid, is imposable upon Appellant M/s.TCIL under Rule 173Q of the Central Excise Rules, 1944.
14. Appeals filed by the above Appellants are disposed of in terms of the parameters indicated hereinabove.
(Operative part of the order was pronounced in the court.)
SD/ SD/
(P.K.CHOUDHARY) (H.K.THAKUR)
MEMBER(JUDICIAL) MEMBER(TECHNICAL)
sm
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EA-83, 84, 85, 86/05