Custom, Excise & Service Tax Tribunal
Mumbai-Iii vs Vidyut Metallics Ltd on 2 June, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NOS: E/3209/2004 & E/3308/2005
Cross-Objection No: E/CO-663/2004
[Arising out of 11/KKS/2003-2004 dated 30/09/2003 & 07/KKS/2004 dated 17/08/2004 passed by the Commissioner of Central Excise, Mumbai-III.]
For approval and signature:
Honble Shri P.K. Jain, Member (Technical)
Honble Shri S. S. Garg, 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?
:
No
2.
Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
Yes
3.
Whether Their Lordships wish to see the fair copy of the Order?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
Commissioner of Central Excise
Mumbai-III
Appellant
vs.
Vidyut Metallics Ltd.
Respondent
Appearance:
Shri Hitesh Shah, Commissioner (AR) for the appellant Shri V. Sridharan, Sr. Advocate with Shri Prakash Shah, Advocate for the respondent CORAM:
Honble Shri P.K. Jain, Member (Technical) Honble Shri S. S. Garg, Member (Judicial) Date of hearing: 02/06/2015 Date of decision: 04/08/2015 ORDER NO: ____________________________ Per: P.K. Jain:
These two appeals are filed by the Revenue against Order Nos. 11/KKS/2003-04 dated 30/09/2003 & 07/KKS/2004 dated 17/08/2004 passed by the Commissioner of Central Excise, Mumbai III. The second order has been passed consequent to an issue arising from the partial payment of duty demanded in the demand notice corresponding to the first order-in-original and availment of credit of duty so paid through supplementary invoices. Hence the two orders-in-original are linked and are being taken up together for consideration and disposal.
2. Appeal No. E/3209/2004 is filed against the order dated 30/09/2003 and appeal No. E/3308/2005 is against order-in-original dated 17/08/2004. In the order dated 30/09/2003 the Commissioner has upheld the demand on merits but dropped the demand for the extended period of limitation i.e., beyond one year, in this case from February, 1997 to March, 2001 and confirmed the demand for the normal period of limitation which is April, 2001 to May, 2002. Penalty under Section 11AC was also dropped. Revenue is in appeal against dropping of demand for extended period of limitation as also penalty. The respondent-assessee had deposited certain amounts during investigation for the normal period of limitation. However, after the filing of the appeal by the Revenue, the respondent-assessee has filed cross-objection No. E/CO-663/2004 contending that the confirmation of demand for the normal period is not correct on various grounds mentioned in the cross-objection.
3. Appeal No. E/3308/2005 is filed against the second order-in-original dated 17/08/2004 whereby the Commissioner has dropped the proceedings initiated under Rule 7(1)(b) of the CENVAT Credit Rules, 2002 to deny the CENVAT credit taken by the manufacturing unit I of the respondent-assessee. The Commissioner has dropped the demand on the ground that, as held by him in his order dated 30/09/2003 the demands were confirmed within the normal period of limitation and it was held that there is no suppression of fact or willful mis-statement, etc. and hence taking CENVAT credit is not irregular. Revenue is in appeal on the ground that even with regard to the demands in respect of normal period of limitation there is suppression of facts, willful mis-statement, etc. and, therefore, the respondent is not eligible to take credit on the basis of supplementary invoices.
4. To understand the lis between the Revenue and the respondent-assessee the brief facts are:-
4.1. The respondent-assessee is a manufacturer of safety razor blades and shaving systems. They have three manufacturing units located in and around Mumbai. The activities in the three plants are different. For excise purpose, three units have separate registration and pay duty independently. In the second manufacturing unit or Plant No.2, they manufacture CRSS strips, machinery, tools, and parts. After the manufacture of said item, these are cleared on payment of duty. A part of the goods so manufactured are cleared to the first manufacturing unit or Plant 1 located nearby and the remaining goods are cleared to two independent units located in Hyderabad. These, two independent units located in Hyderabad are job-workers for respondent-assessee. As far as Excise department is concerned, these two job-workers are independent manufacturing units inasmuch as they avail CENVAT credit and they pay the duty on the final products. Similarly, the third manufacturing unit or Plant III of the respondent-assessee manufacture goods viz. wax paper and lanolin wax. Here again, after the manufacture of the said goods, they cleared it on payment of duty and as in the case of the second manufacturing unit, part of the goods are cleared to first manufacturing unit which is located nearby and the remaining goods are cleared to two job-workers located in Hyderabad. Manufacturing unit or plant 1 and two independent job-workers avail CENVAT credit on various inputs including the goods received from Plant II and III and also pay the duty on the finished goods.
4.2. Since the goods produced in second and third manufacturing units are not formally sold to the first manufacturing unit or to the job-workers or to any other customer, the sale-price of the goods are not available and duty is paid based upon the computed value. The value is computed in terms of Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975 and Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. There is no dispute between the Revenue and the respondent-assessee about the applicability of the said Rules. However, the dispute is relating to the details in the computation of value as per Rule 6(b)(ii) of old Rules or Rule 8 of the new Rules.
4.3. Case was initiated based upon information collected by Central Excise Intelligence that the respondent-assessee were declaring the said values or the cost of production or manufacture on lower side. Respondent-assessee was filing price declaration under erstwhile Rule 173C of the Central Excise Rules, 1944 on the basis of Chartered Accountants certificate. Revenues case is that the cost of production or manufacture declared by the respondent-assessee was suppressed as all the expenses that were required to be added as per CBEC Circular No. 258/92/96 dated 30/10/1996 were in reality not added. After detailed investigation show cause notices were issued for arriving at the correct assessable value as per the Circular dated 30/10/1996. Show cause notice dated 28/02/2002 covering the period from June 1996 to March, 2001 was first issued. Subsequently, 9 other show cause notices for the subsequent periods on the similar basis were issued. In the show cause notices differential duty was demanded. It was proposed to impose penalty under Section 11AC, Rule 173Q/Rule 25 as also interest.
4.4. All the ten show cause notices were adjudicated by the Commissioner vide order dated 30/09/2003 wherein he agreed on the merits of the case i.e. that the value has been suppressed and therefore has not been correctly taken by the respondent-assessee and the proposed value as per the demand notices were the correct value. However, the Commissioner took the view that extended period of limitation is not invokable in the facts and circumstances of the case and, therefore, he dropped the demand for the extended period. Commissioner has also dropped the proposal of penalty under Section 11AC, Rule 173Q/Rule 25.
4.5. Revenue is in appeal against the order dated 30/09/2003 on the issue of extended period of limitation and penalty. Consequently, respondent-assessee has filed cross-objection on merits of the issue.
4.6. The respondent-assessee paid certain amounts in respect of second and third manufacturing units during investigations and before adjudication and issued supplementary invoices. These payments were for normal period of limitation. Based upon these supplementary invoices, first manufacturing unit took the credit of the duty so paid.
4.7. Show cause notices dated 01/05/2003 and 24/07/2003 were issued to the first manufacturing unit I of respondent-assessee for denial of the CENVAT credit under Rule 7(1)(b) of the CENVAT Credit Rules, 2001/2002. The show cause notices were issued as Revenue was of the view that this is a case of willful mis-statement and suppression of facts and, therefore, the respondent-assessee could not have taken the credit on the basis of supplementary invoices. The case was adjudicated vide order dated 30/09/2003 and the Commissioner dropped the proceedings on the ground that he has already upheld that there was no suppression of facts or willful mis-statement so as to invoke the extended period of limitation and hence taking the credit is in order.
4.8. Revenue is in appeal against the said order, for the reason that there is suppression of facts and willful mis-statement.
5. The case was heard extensively on 27th May, 28th May, 1st June and 2nd June, 2015.
6. Learned Commissioner (AR), in respect of appeal No. E/3209/2004 submitted that the Commissioner in the impugned order has agreed with all the charges leveled in the show cause notice in para 111 to 124 and 126 of the impugned order. However, in para 125 he has dropped the extended period on the grounds that:
(a) Department never questioned the CA Certificates earlier, hence, assessee had a bona fide belief that the value declared by them is correct;
(b) demand is made based on assessees own records which were never hidden from the Department;
(c) issue of determining assessable value of captively consumed goods was not free of doubt and Circular dated 30/10/1996 30.10.96 was not clear. Hence, it could be an issue of interpretation.
(d) Plant I would be eligible for MODVAT/CENVAT credit and the situation is revenue neutral, hence, intention to evade duty cannot be alleged.
7. It was further submitted that the findings and absolution given by the Commissioner at para 125 of the impugned order are contradictory to his findings at para 111 to 124 & 126 thereof. The Commissioner agrees with the allegations in the notices that the cost was not correctly worked out in terms of the Circular date 30.10.96, the CA admitted this and also confessed that he merely certified cost certificates prepared by the assessee. The Commissioner finds at para 120 that specific knowledge and supporting documents are required to calculate cost (and not merely financial records) which were in the possession of the assessee only. The Commissioner at para 121 holds that the assessee was fully aware of the Circular dated 30.10.96 and the facts as to the method of calculation therein and was reiterating the same to the Department. The Commissioner at para 124 holds that, the assessee decided which overheads to include and prepared the basic certificate which was given to the hired CA to certify without informing him of the requirements of Central Excise law. The Commissioner at para 126 holds that the assessee has not maintained /produced plantwise/productwise details of indirect overheads/ costs. Hence, the same are correctly apportioned on reasonable basis from expenditures booked in respective heads for VML as a whole. Hence, as per the Commissioners findings the assessee is guilty of suppression because inspite of fully understanding the Circular of 30.10.96 which clearly says at para 3 that all elements which are otherwise includible in Section 4(1)(a) price have to be included in the cost of production they did not include them and rather concocted a certificate to be signed by a hired CA. No details of overheads were given uptil March 2001. It was only when AD (Cost) verified the records of the assessee that the suppression was detected. No productwise/plant wise details of expenditure /cost has been submitted till date and also to the Commissioner during adjudication as recorded by him. Although claim has been made that the valuation and quantification in the SCN is bad because the cost of CRSS( inclusive of Gross Profit and Overheads) as per Price List of 1993, is taken as the base for calculation, Yet, the assessee has not produced any authentic record of cost for the period 1997 to 2001 by which the demand in the SCN can be rebutted. Hence, the quantification for the extended period is correct.
8. As far as the cross-objection filed by the respondent-assessee is concerned, it was submitted that in the cross-objection the assessee has claimed that the Commissioner has erred in adding expenses other than the cost of manufacture, raw material and profit, did not follow the earlier CESTAT orders and now assessee wants the matter should be remanded for re-determination of the amount in show cause notices. The learned Commissioner (AR) relied upon the following case-laws to support his various contentions:
(i) Bombay Tyre International Ltd. 1983(14) ELT 1896 (SC)
(ii) Otis elevator Co. 2012 (280) ELT 531(T)
(iii) Greaves Ltd. 2006(205) ELT 407(T)
(iv) Mahindra & Mahindra 2005(179) ELT 21 (SC-LB)
(v) Dharampal Satyapal 2005 (183) ELT 241 (SC)
(vi) Piya Pharmaceutical Works 1985 (19) ELT 272 (T)
(vii) Coal Tar Chemicals Mfg Co. 1987 (32) ELT 602 (T)
(viii) Coal Tar Chemicals Mfg Co. 2003 (158) ELT 402 (SC)
(ix) Madurai Soft Drinks Pvt Ltd. 1994 (74) ELT 647 (T)
(x) Madurai Soft Drinks Pvt Ltd. 1994(73)ELT A179(SC)
(xi) Tata Iron & Steel Co. Ltd. 2014(300) ELT 571 (T)
(xii) Nirlon Ltd. 2004(177) ELT 836 (T)(para 14 to 23)
(xiii) Phaarmasia Ltd. 2004(173) ELT 481(T)
(xiv) Phaarmasia Ltd. 2015 (319) ELT 360(SC)
9. It was also submitted that mere availability of MODVAT/ CENVAT credit to Plant No. I of duties paid by Plant Nos. II and III cannot be lead to a situation of revenue neutrality and hence absence of intent to evade payment of duty. It was also submitted that a portion of the goods were also sent to two job-workers located in Hyderabad and, therefore, it cannot be considered as a case of revenue neutral. In support of this contention, learned AR relied upon the following case laws:
(a) Hero Honda Motors India Ltd 2012 (273) ELT 89(T);
(b) Bayer Abs Ltd 2012 (281) ELT 296 (T);
(c) CCE Vs SKF India 2009 (239) ELT 385 (SC);
(d) CCE Vs International Auto Ltd. 2010 (250) ELT 3 (SC);
(e) UOI Vs Ind Swift Laboratories Ltd 2011 (265) ELT 3 (SC);
10. It was also submitted that the decision of the honble Supreme Court in the case of Nirlon Limited 2015-TIOL-96-SC-CX is not binding because it does not take into consideration and is contrary to the decisions of the larger bench of the Supreme Court in the case of Mahindra & Mahindra Ltd. 2005 (179) ELT 21 (SC-LB) and a 3-Judge bench of he Supreme Court in the case of Dharampal Satyapal 2005 (183) ELT 241 (SC). In addition to the above it was submitted that the cost of production of manufacture as prescribed in Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975 or Rule 8 of Rules, 2000 is the actual cost of production or manufacture and it includes all costs as prescribed by the circular dated 30/10/1996. It was further submitted that the honble Supreme Court in the case of Die Ichhi Karkaria reported in 1999 (112) ELT 353 (SC) and Union Carbide India Ltd. 2003 (158) ELT 15 (SC) has held that cost of production or manufacture refers to actual cost to the manufacture and has relied upon its judgment in Challapalli Sugars Ltd. vs. CIT 1975 AIR 97 (SC). It was also submitted that the term actual cost is not statutorily defined and is to be understood as a man of commerce understand it. It was also submitted that in the case of Challapalli Sugars Ltd. (supra) the Court held that interest paid for borrowing capital for both the initial setting up of a plant before production as well as for borrowing funds during the course of manufacture/ production are actual cost incurred. It was also submitted that Guidance Notes to CAS 4 clearly states that interest paid for borrowed funds is not considered as includable in CAS4 because the prescribed norm of 115% or 110% of cost of production/manufacture includes such cost of borrowings.
11. Learned Commissioner (AR) further submitted that as per `Cost Accounting Records (Shaving Systems) Rules.1996, GSR 202(E) dt.6.5.1996, depreciation, interest, research and development expenses, other overheads etc. are all to be considered as Costs. The Rules prescribe exactly as per the Circular of 1996. The Schedule II, Proforma C of the said Rules for ` Statement Showing the Cost of self-manufactured Components/Process materials (used in Shaving Systems/Parts thereof), clearly shows that all items of cost as prescribed in Circular dated 30/10/1996, including interest, depreciation etc. are includible.
12. It was also submitted that decisions of the honble Supreme Court in the case of Cadbury India 2006 (200) ELT 353 (SC) which considered the decision of this Tribunal in the case of ITC 2005 (190) ELT 119 (T) does not bind either the department or the Tribunal on applicability of CAS4 for any period prior to the Circular of 2003. It was also submitted that the department had appealed against the Tribunals decision in the case of ITC (supra) and the honble Supreme Court in its decision reported in 2006(204) ELT 363 (SC) directed that in any subsequent matter involving valuation of captively consumed goods its decision shall not be taken as precedent.
13. As far as appeal No. E/3308/2005 filed by the Revenue is concerned, learned Commissioner (AR) submitted that since the extended period of limitation is invokable in appeal E/3209/2004, appeal No. E/3308/2005 needs to be allowed. It was also submitted The ratio of the decision of Karnataka Soaps and Detergents Ltd 2005 (192) ELT 892 (T) and decisions following it, relied upon by the assessee, if applied would disentitle, all instances of stock transfer not involving sale, from credit of differential duty paid by way of supplementary invoice, whether paid on account of demands within the normal period of limitation or on account of demands involving suppression, willful misstatement, fraud etc. Learned AR further submitted that the ratio of the decision of Karnataka Soaps and Detergents Ltd. 2010 (258) ELT 62 (Kar) and decisions following it, holding that Rule 7 of the CCR ,2002 is illustrative and cannot place any fetters on Rule 3 thereof, relied upon by the assessee is not binding as it is contrary to the decisions of the Supreme Court and other High Courts on the issue as follows:
(i) The decision in Ballarpur Industries Ltd. 2001(138) ELT 94 (T) is revered by the Supreme Court in 2007 (215) ELT 489(SC);
(ii) Rule 57G of the CER 44 was amended by Notification No. 28/95 CE (NT) to introduce a time limit of 6 months for taking credit. This was assailed on the ground that it placed fetters on the inherent right to take MODVAT credit under Rule 57A. The Honble Supreme Court in Osram Surya Ltd. 2002 (142) ELT 5 (SC) upheld a 5 Member Bench decision of CESTAT in Kusum Ingots & Alloys Ltd 2000(120) ELT 214 (T-LB) that right to credit under Rule 57A is controlled by the procedure under Rule 57G;
(iii) Similarly from 1.4.2000 onwards Rule 57AC controls eligibility to credit under Rule 57AA as held in CCE Vs. Saurashtra Chemicals Ltd. 2007 (212) ELT 7 (SC) and UOI Vs Jindal Praxair Oxygen Co. Ltd 2014(301) ELT 49 (Kar.);
(iv) Rule 57G controls Rule 57A Qamar Steel Tubes (P) Ltd. 2010 (252) ELT 349(All);
(v) Rule 52A and 57GG control Rule 57A CCE Vs Spectra Electronics 2009(235) ELT 795 (HP); CCE Vs. Chandra Laxmi Tempered Glass Co. 2009 (234) ELT 245 (HP); CCE Vs. Karamchand Appliances 2009 (238) ELT 706 (HP);
(vi) Rule 7 & 9 of CCR, 2002 control Rule 3 Sheela Dyeing and Printing Mills Pvt. Ltd. 2008 (232)ELT 408 (Guj);
(vii) The Honble Supreme Court has in UOI Vs Ind Swift Laboratories Ltd. 2011 (265) ELT 3 (SC) specifically held with respect to the CENVAT Rules that Rule 3 & 4 are subject to Rule 14 and that there can be no dilution or reading down or ignoring of any word or condition expressly provided in any of the CENVAT Rules.
14. It was also submitted that the decision in CCE Vs. Jairaj Ispat Ltd 2009 (245) ELT 118 (AP) is not binding for the same reasons. Further, the honble Supreme Court in the case of Union of India vs. Marmugao Steel Ltd. 2008 (229) ELT 481 (SC) has held that Rule 57A is subject to the procedure in Rule 57G. Further this Tribunal in the case of Tamil Nadu Petro Products Ltd. 2009 (241) ELT 529 (T) held that the rigours of Rule 57E of Central Excise Rules, 1944 have to be met to avail credit.
15. The learned sr. counsel, on behalf of the respondent-assessee, submitted that the Supreme Courts decision in the case of Bombay Tyre International is not relevant for interpretation of Rule 6(b)(ii). In support of his contention, learned sr. counsel relied upon this Tribunals observation in para 8 of the judgment in the case of Aaram Plastics (P) Ltd. vs. Commissioner 2014 (307) ELT 904. The observation of this Tribunal in the case of Cadbury India Ltd. vs. Commissioner of Central Excise 2001 (135) ELT 510, in paras 3,5, 6, 9 and 10 were quoted. It was further contended that Revenues contention that in view of Section 4(1)(b) of the Central Excise Act, 1944 even under Rule 6(b)(ii) nearest ascertainable equivalent of sale price is to be determined is incorrect as the said Section used the word nearest ascertainable equivalent thereof determined in the prescribed manner. It was further submitted that once the manner is prescribed one has to merely look at the actual wordings and nothing more. Learned sr. counsel also quoted the honble Supreme Courts observation in para 4, 5 and 6 in the case of Union Carbide India Ltd. vs. Commissioner of Central Excise 2003 (158) ELT 15 (SC). It was submitted that the honble Supreme Court has approved the judgment of the Tribunal by writing a detailed judgment. It was further submitted that, meaning of the term cost of production or manufacture as per well settled principles of cost accountancy has to be taken. It was submitted that CAS-4 clearly specifies in heading 5.7 administrative overheads and heading 5.16 interest and financial charges. Thus, interest and financial charges shall not be considered to be a part of cost of production. It was submitted that it would be seen that from Cost Audit (Report) Rules, 1996 and Cost Audit (Report) Rules, 2001 issued under Companies Act, 1956 which prescribes proforma for computing the cost of production, cost of sales, etc., that interest and selling and distribution expenses are items after cost of production forming part of cost of sales and not forming part of cost of production. It was submitted that these proformas would clarify that interest and financial charges are not considered as the cost of production. Similar position emerges from the Standard text book titled Cost Accounting by M.Y. Khan and P.K. Jain. It was further submitted that following judicial decisions have laid down meaning of cost of production for Rule 6(b)(ii):
(a) Mafatlal Industries Limited vs. Commissioner of Central Excise 2001 (134) E.L.T. 725 (Tri. - Mumbai)
(b) Ashima Denim Limited vs. Commissioner of Central Excise -2005 (191) E.L.T. 318 (Tri. - Mumbai)
(c) Nirma Ltd. vs. Commissioner of Central Excise, reported in 2006 (200) E.L.T. 213 (Tri.-Mumbai),
(d) Commissioner of Central Excise vs. Bombay Dyeing and Manufacturing Company Limited 2009 (246) E.L.T. 390 (Tri. - Mumbai)
(e) Aaram Plastics (P) Ltd. vs. Commissioner of Central Excise 2014 (307) E.L.T. 904 (Tri.-Del).
(f) Swaraj Foundry Division vs. Commissioner of Central Excise 2012 (284) E.L.T. 689 (Tri.Del)
16. Further, the honble Supreme Courts decision in the case of Cadbury India Ltd. 2001 (200) ELT 353 (SC), (para 12 to 14) was quoted. It was further submitted that the contention of the learned Commissioner (AR) that the judgment in the case of Cadbury India is not binding precedent in view of the decision of the bench of three learned judges in the case of ITC Ltd. 2006 (204) ELT 363 (SC) is not correct in view of the subsequent judgment of the bench of three learned judges in the case of Raymond Ltd. expressly approving its judgment in the case of Cadbury India (supra). It was further submitted that the principles laid down in Circular dated 13/02/2003 applies to pending matters relating to the past period. It was submitted that the circular dated 13/02/2003 was only issued to correct earlier circular dated 30/10/1996 which was against fundamental principles of cost accounting. This is also clear from the judgment of the honble Madras High Court in the case of Sterlite Industries Ltd. vs. CEGAT 2009 (246) ELT 109 (Mad.). It was also submitted that this Tribunal in the case of Nrima Ltd. vs. Commissioner of Central Excise (supra) has held that the circular being clarificatory in nature is retrospective and all the pending proceedings shall be covered by it. It was also submitted that following judgments have held that even period prior to 13/02/2003 the cost of production must be determined on the basis of the method prescribed under CAS-4.
(a) Commissioner of Central Excise, Pune vs. Cadbury India Ltd. (supra);
(b) Aaram Plastics (P) Ltd. vs. Commissioner of Central Excise, Jaipur (supra);
(c) Swaraj Foundry Division vs. Commissioner of Central Excise (supra);
(d) Hindustan Zinc Limited vs. Commissioner of Central Excise -2011 (273) E.L.T. 405 (Tri. - Del.)
17. It was, therefore, submitted that the assessable value of captively consumed goods as determined by the learned Commissioner by following Circular dated 30/10/1996 is erroneous. It was further submitted that the expenses incurred for the company as a whole cannot be considered for determination of cost of production of goods in question. In support of this contention learned sr. counsel relied upon the judgment of the honble Supreme Court in the case of Cadbury India (supra) and in the case of Commissioner of Central Excise vs. Raymond Ltd. 2006 (204) ELT 3 (SC). It was further submitted that the only case in the show cause notice is that all the expenses appearing in the profit and loss account should be taken into account for calculating the cost of production and since this basis is incorrect, proceedings have to be terminated.
18. It was also submitted that in any event, the goods were removed from manufacturing unit II to manufacturing unit I are exempt from duty under Notification 67/1995. As far as limitation is concerned it was submitted that all the facts to arrive at the value as determined in the show cause notice or in the impugned order were already available with the department hence there cannot be any suppression of facts.
19. It was further submitted that if all the overheads were to be considered the same were available from the profit and loss account of the respondent-assessee and the profit and loss account were submitted to the department and therefore, there cannot be any suppression. It was further submitted that the Assistant Director (Cost) has based his report upon the balance sheet and profit and loss account which were available with the department and hence no suppression of facts can be invoked. The decision in the case of Hindalco Industries Ltd. vs. Commissioner of Central Excise 2003 (106) ELT 346 (Tri.Del) (Para 6) was quoted. Further, similarly, in para 6.5 of this Tribunals observation in the case of P.R. Rolling Mills Pvt. Ltd. 2010 (249) ELT 232 (Tri.-Bang.) was also quoted. It was submitted that Civil Appeal filed by the department against the said decision was dismissed as reported in 2010 (260) ELT A84 (SC).
20. It was also submitted that Director General, Central Excise Anti Evasion had issued a show cause notice No. DGAE/BZU/202/ 12(4)24/97/2507 dated 25/05/1998 to Plant II seeking to recover the duty on SS Strips for the period December 1994 to January 1997. Annexure III to the show cause notice adopted the Overheads and Gross profit as per the working of the Respondents. Thus, even DGCEI did not consider the entire expenses of the Respondent Company to calculate the costs of production.
21. Similarly, the show cause notice issued by the Range Superintendent to Plant II for the further period February 1998 to March 1998 also adopted the overhead and gross profit as per the working of the respondent-assessee. It was also submitted that the Additional Commissioner has dropped the proceedings initiated in the show cause notice dated 03/05/1999 for the period October, 1998 to March, 1999 and show cause notice dated 02/11/1999 for the period April 1999 to September, 1999 on the ground that the respondent has submitted the revised price-lists for the year 1997-98 and did not impose any penalty. It is thus submitted that, the department was in the possession of the price declaration for the year 1997-98 during the disputed period for the first show cause notice and thus no suppression can be alleged either for prior or post period of dispute.
22. It was also submitted that the statements of Shri A.K. Jain, Chartered Accountant, if read together totally support the case of the respondent-assessee. He has specifically stated that interest, selling and distribution expenses, etc. do not form part of cost of production as per accounting practice as per Companies Act. It was submitted that the certificate dated 19/05/1993, 07/07/1998 and 05/03/1999 have been signed by other Chartered Accountants and the department has not recorded any statement from other Chartered Accountants.
23. It was further submitted by the learned sr. counsel that the whole exercise is revenue neutral as the duty-paid in Plant II and III are available to Plant I and to the job-workers as CENVAT credit. It was submitted that Plant I has paid duty in cash far in excess of the duty now sought to be demanded. Learned sr. counsel also rely upon para 7 and 8 of the honble Supreme Courts decision in the case of Nirlon Ltd. vs. Commissioner of Central Excise 2015-TIOL-96-SC-CX. It was also submitted that the case of Dharampal Satyapal (supra) has no application in the facts of the present case. The judgment of this Tribunal in the case of Gopal Zarda Udyog vs. Commissioner of Central Excise 2001 (128) ELT 409 was quoted to support the contention.
24. The learned sr. counsel rely upon the following case laws:
(a) Commissioner of Central Excise vs. Indeos ABS Limited-2010 (254) E.L.T. 628 (Guj.).
(b) Mafatlal Industries Ltd. vs. Commissioner of Central Excise, Daman [2009 (241) ELT 153 (T-Ahmd)]
(c) Castrol India Ltd. vs. Commissioner of Central Excise & Customs, Vapi 2014 (311) ELT 71 (Tri.-Ahmd.)
(d) Siddeshwar Textile Mills Pvt. Ltd. vs. Commissioner of Central Excise, Pune-III 2009 (248) ELT 290 (Tri.-Mumbai)
(e) Hydraulics Pvt. Ltd. vs. Commissioner of Central Excise, Chennai 2008 (228) ELT 598 (Tri.-Chennai)
(f) P.R. Rolling Mills Pvt. Ltd. vs. Commissioner of Central Excise, Tirupathi reported in 2010 (249) E.L.T. 232 (Tri.-Bang). [upheld by Honble Apex Court as reported in 2010 (260) E.L.T. A84 (S.C.)].
(g) The Commissioner of Central Excise, Ahmedabad-II vs. Reclamation Welding Ltd. 2014 (308) ELT 542 (Tri.-Ahmd.)
25. It was submitted extended period is not invokable in the facts and circumstances of the case. It was further submitted that suppression cannot be alleged for the subsequent periods.
26. It was also submitted that the department cannot deny credit of the duty paid by Plant II to Plant I and the department cannot allege suppression in 9 periodical show cause notices issued to the respondent-assessee post the issuance of the first show cause notice. Para 18 and 19 of the honble Supreme Courts decision in the case of Modipon Fiber Company 2007 (218) ELT 8 (SC) was quoted in support of the contention. Similarly para 10 of this Tribunals decision in the case of Andhra Pradesh Electricity Board 1988 (35) ELT 1999 was quoted to support the contention. Para 4 of the honble Supreme Courts decision in the case of ECE Industries Ltd. vs. Commissioner of Central Excise 2004 (164) ELT 236 (SC) was also quoted. Further, para 4 of the honble Supreme Courts decision in the case of Hyderabad Polymers (P) Ltd. vs. Commissioner of Central Excise 2004 (166) ELT 151 (SC) was also quoted.
27. It was further submitted that there is no bar on the eligibility of Plant I to avail credit of additional amount of duty paid by Plant II subsequently on the basis of supplementary invoices. It was submitted that Rule 57E of Central Excise Rules, 1944 as effective up to February, 1997 did not provide that the credit of the additional duty paid by the supplier factory subsequently which became recoverable from the supplier factory due to suppression will not be available to the recipient factory. It was submitted that the said rule was amended vide Notification 6/97-CE dated 01/03/1997. It was submitted that even after the amendment, on reading clause (2) with clause (3) the bar contained in clause (3) of amended Rule 57E shall apply only in case of sale and no inter unit transfer. It was submitted that vide Notification 27/2000-CE dated 31/03/2000 Rule 57AE came into existence and it would be seen from the said rule that there was no bar from 01/03/2000 to 28/02/2001 to take credit of additional duty paid by the supplier unit even if the additional amount of duty was recoverable by reason of suppression etc. either in Rule 57E or Rule 57AE. Rule 57AE was further amended vide Notification No. 6/2001 (NT) dated 01/03/2001 and clause (i) was introduced. Even after this amendment, if there was no sale the credit was allowed. Thus, the bar contained in Rule 57AE did not apply to inter-unit transfer. It was submitted that CENVAT Credit Rules, 2001 were introduced w.e.f. 01/07/2001 and CENVAT Credit Rules, 2002 came into force w.e.f. 01/03/2002. In both the rules, the prohibition is applicable only if the goods are sold and not inter unit transfer, as in the present case.
28. The decision of the honble High Court of Karnataka in the case of Karnataka Soaps & Detergents Ltd. vs. Commissioner of Central Excise reported in 2010 (258) ELT 62 (Kar.) was quoted. Para 37 and 40 of the judgment were quoted. It was further submitted that the ratio of the above judgment is followed by the honble Andhra Pradesh High Court in the case of Jairaj Ispat Limited 2009 (245) ELT 118 (AP). It was submitted that the ratio of the above judgment has already been followed by this Tribunal in the case of Essar Oil Ltd. 2014 (303) ELT 255 (Tri.-Ahm.) and United Phosphorous Ltd. 2014 (313) ELT 418 (Tri.Ahm.). It was submitted that, in any case suppression cannot be alleged in the subsequent 9 show cause notice issued for the period April 2001 to May 2002.
29. We have considered the submissions made by both the sides. In order to appreciate the issue involved, we reproduce below the relevant section, rules and the Boards circular:
Section 4:- Valuation of excisable goods for purposes 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 a 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:
Provided that
(i) ..
(ii)
(iii)
(b) Where the normal price of such goods is not ascertainable for the reason, that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof determined in such manner as may be prescribed.
(2) .
30. As per the above Section 4(1)(b), which is the relevant clause for the present situation, one has to compute the nearest ascertainable equivalent thereof, determined in such manner as may be prescribed. We note that nearest ascertainable equivalent thereof implies nearest to normal value as per Section 4(1)(a).In pursuance of the said section the Central Excise (Valuation) Rules, 1975 details how to determine the value and Rule 6(b) which is the relevant sub-rule, is reproduced below:
Rule 6. If the value of the excisable goods under assessment cannot be determined under rule 4 or rule 5, and
(a)
(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, the value shall be based
(i) On the value of the comparable goods produced or manufactured by the assessee 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; Clause (ii) is the relevant clause. However, in view of Section 4(1)(b), this sub-rule should not be read in isolation but with clause (i) as also Section 4(1)(b).
31. A combined reading of the Section 4(1)(b) and Rule 6(b) would indicate that the value of the goods as in the present case is required to be computed as nearest ascertainable equivalent thereof, determined in such manner as may be prescribed. This would imply that the determination has to be done in the prescribed manner and the prescribed manner is to be in accordance with the earlier portion nearest ascertainable equivalent thereof. If in the prescribed manner, there is any doubt about what to include or what not to include, one will have to interpret after taking into account the former portion i.e. nearest ascertainable equivalent thereof. As per Rule 6(b)(i), if the 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, one has to take the value (i.e. normal sale value) of comparable goods produced or manufactured by the assessee or by any other assessee. Thus, the law anticipates that, even in the situation where the goods are not being sold and are being captively consumed and if comparable goods (which may not be exactly same) are being sold by the assessee then one will have to take that value for the purpose of assessment. In fact, the law further provides that even if the assessee is not selling such goods but some other assessee is selling comparable goods, then the value of other assessee is required to be taken for the purpose of assessment. Rule 6(b)(ii) provides that if the value cannot be determined as per the above clause then it has to be based on the cost of production or manufacture including profits, if any, which the assessee would have normally earned on the sale of such goods. A combined reading of Section 4(1)(b) and Rule 6(b)(i) as also Rule 6(b)(ii) leaves no doubt that the value to be determined is to be as near to the normal value as possible on which the goods are likely to be sold if the actual sale takes place.
32. CBEC has issued a circular dated 30/10/1996 detailing how to determine assessable value under Rule 6(b)(ii) viz. the cost of production or manufacture. The said circular has been quoted by both the sides and reproduced below:
Circular No. 258/92/96-CX dated 30/10/96 F.No. 6/28/94-CX.1 Government of India Ministry of Finance Department of Revenue Central Board of Excise and Customs, New Delhi Subject: Assessable Value in the case of Goods captively consumed-Addition of Profit- Reg.
I am directed to refer to instructions contained in Board's letter F.No. 6/64/80-CX.1 dated 6.12.80, Circular F.No. 6/72/85-CX.1 dated 11.3.86 and Issue 'A' of Section 37B order No. 24/14/93 dated 31.12.93 regarding the method to be followed for determining assessable value of goods captively consumed. The Board in its order dated 31.12.93 issued under section 37-B has clarified that for the purpose of assessment of goods captively consumed, value should be arrived at by adding previous year's gross profit, if any, of the assessee as per their audited balance sheets.
2. Subsequently, a doubt has been raised as to which profit whether "Gross Profit" (i.e. profit before depreciation & taxation) or "Profit before tax" or any other profit has to be taken into consideration for determination of assessable value of the goods captively consumed. Another doubt has also been raised whether the present method of determining profit margin as a percentage with reference to sales turnover and loading the profit margin of the preceding year to the cost of production of the present year to arrive at the assessable value are to be continued.
3. The matter has been further examined in consultation with the Cost Accounts Branch of Department of Expenditure. Board has observed that the method of calculation provided under Rule 6(b) (ii) of the Central Excise (Valuation) Rules, 1975 is to ascertain the nearest equivalent of the normal price. Therefore, while determining the cost of production of captively consumed goods during the current year, all elements which are otherwise includible in Section 4(1)(a) price have to be included in the cost of production.
It is hereby clarified that for calculation of value of the goods captively consumed under rule 6(b)(ii) the following steps are to be followed:-
(i) The cost of production of the goods has to be determined so as to include inter alia, the cost of material, labour cost and overheads including administrative cost, advertising expenses, depreciation, interest etc.
(ii) Profit before tax has to be taken from audited balance sheet of the previous year and the profit margin has to be calculated as a percentage of cost of production in the previous year as per the formula prescribed by the Cost Accounts Branch of Department of Expenditure (copy enclosed.
(iii) The profit margin of the previous year as arrived at step (ii) as a percentage of cost of production has to be loaded to the cost of production of the impugned goods derived at (i) above for the current year to arrive at the assessable value of captively consumed goods.
C.A. certificate and the loss and profit statement should be scrutinised carefully, in the light of these guidelines and should not be accepted blindly or automatically.
4. Board's earlier circular/ instructions as mentioned above stand modified to this extent.
33. It is important to note that the respondent-assessee has never disputed the applicability of the said circular and was arriving at the assessable value as per Rule 6(b)(ii) read with circular dated 30/10/1996. In fact there has been no dispute whatsoever even during the investigation about the validity or the fact that computation of the value is required to be as per the said circular. Even at the time of adjudication, there has been no claim whatsoever that the circular is not correct or is not required to be used in their case. The case was adjudicated on the basis of the said rule and the circular. Even after the Revenue has filed an appeal, the respondent-assessee has filed the cross-objection and even in the cross-objection there is no claim that the said circular is in any way incorrect or is not required to be followed. In 2002 during investigation, at some stage, the respondent-assessee made certain payments in relation to the clearance made between May, 2001 onwards following the said circular but as per Departments interpretation. It also appears that May 2002 onwards, they themselves paid the duty as per the said circular and Departments interpretation as there is no demand notice after that. We note that it is only at the time of final arguments that learned sr. counsel has raised the question of includability of various components under the Circular of 1996 vs. CAS-4 and wants case to be remanded for determination as per CAS-4.
34. In 2000, the said Section 4 was replaced by a new Section wherein the concept of transaction value in place of normal value/ price was introduced. Thus under new section, it is the transaction value and not any deeming value or the normal value on which duty is to be charged. The new Section 4(1)(b) which is relevant in the present case is as under:
Section 4. Valuation of excisable goods for purposes 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, then, 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.
35. It to be notedthat new Section 4(1)(b) does not have the words the nearest ascertainable equivalent thereof as was the case in old Section 4(1)(b). It is important to note that in earlier regime, if normal value of an item is ` 100/- and for some reason a manufacturer decides to sell it for ` 98/- to a particular customer, manufacturer was required to pay duty on ` 100/- alone and not ` 98/-. In transaction value regime, in such a situation, manufacturer is required to pay duty on ` 98/- only. This is a major departure viz. to take transactional values rather than deemed value. Thus where goods are not sold but consumed otherwise, the issue turns to what value will be transaction value for assessment purpose.
36. Pursuant to the new section, Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 were introduced and the relevant rule for goods manufactured for captive consumption is Rule 8 which reads as under:
Rule 8. Where the excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufacture of other articles, the value shall be one hundred and ten percent of the cost of production or manufacture of such goods. It is very important to note that in new Rules, there is no provision corresponding to Rule 6(b)(i) of old Rules. It is no more permissible to take value at which other assessee is selling similar goods.
37. After introduction of the new rules, the Board vide Circular No. 354/81/2000-TRU dated 30/06/2000 in para 21 clarified that for valuing goods which are captively consumed, the general principles of costing would be adopted for applying Rule 8. However, no detailed circular of how to determine the value following the general principles of costing or what exactly are these general principles of accounting was issued. It was only vide Circular No. 692/8/2003 dated 13/02/2003 that a new circular was issued after the Institute of Cost and Works Institute of India developed cost accounting standard CAS 2, 3 and 4 on capacity determination, overheads and cost of production for captive consumption, respectively, and the Board, thereafter directed that the cost of production of captively consumed goods will henceforth will be done strictly in accordance with CAS-4.
38. It would thus be seen from 01/07/2000 onwards, the concept of nearest ascertainable equivalent thereof is not there in the Section 4 of the Act and the Rule 8 also states that the value will be 115/110% of the cost of production or manufacture of such goods without specifying how the cost of production or manufacture would be determined. All that was stated was cost of production will be as per generally accepted principles of accountancy. Keeping in view the changes in legal position at different points of time, there can be no doubt that for determining the value up to 30/06/2000 one has to follow the circular dated 30/10/1996 and while following the circular, concept of nearest ascertainable equivalent thereof is to be kept in mind. W.e.f. 01/07/2000 though there has been change in the legal position but still no detailed method for determination of cost of production or manufacture was specified and came to be specified only on 13/02/2003. In our considered view, in such a situation, cases pending for finalization on the date of issue of the circular i.e., 13/02/2003 but pertaining to the period after 01/07/2000 can be dealt in accordance with the new circular. Cases pertaining to earlier period i.e. before 01/07/2000 will have to be dealt in accordance with old Section 4(1)(b), Rule 6(b)(ii) and Circular dated 30/10/1996.
39. Computation of value in the old Section 4 read with Rule 6(b)(ii) and hence Circular of 1996 has been matter of dispute in certain aspects. One of the dispute that has arisen in many case is that the goods for which the value is being ascertained as per Rule 6(b)(ii) are not their finished goods and many of the expenditure which are incurred by the manufacturer are for the final products and not relating to the goods for which value under Rule 6(b)(ii) is being determined e.g. the manufacturer may be spending substantial money on the advertisement of their final product and the department wants to add advertisement cost in the value of the intermediate product which is being valued under Rule 6(b)(ii) and intermediate product is not being advertised at all. Similarly, there may be other administrative expenses which are exclusively relatable to the final product and not to the intermediate products being valued under Rule 6(b)(ii). In our view there can not be two opinions that various costs (except the profit margin) in the circular of 1996 have to relate to the goods being valued under Rule 6(b)(ii) and not to any other goods being produced or manufactured by the same assessee. Thus various costs should be for intermediate products and not the final products. Similar situation has arisen in the case of Cadbury India Ltd. and the Honble Supreme Court in this case reported in 2006 (200) ELT 353 (SC) has observed:
15. It may be noted that in the present case the intermediate products (milk crumbs, refined milk chocolate and four other intermediate products) are captively consumed in the Respondents own factory. These intermediate products are not sold nor are marketable. Hence there can be no question of including the expenses of the factory which produces the final product namely the chocolate e.g. advertising, insurance and other expenses in their valuation as was sought to be added by the Commissioner (Appeals) and the Assistant Commissioner.
40. We may add here that, at times, it may not be practically possible for the manufacturer assessee to segregate and provide the details of a particular component of cost of production in respect of the intermediate goods being valued under Rule 6(b)(ii) but are available for all the goods being produced and in such a situation the only way left for the Revenue would be to take the expenditure incurred by the assessee as a whole. Similarly, many a times, a manufacturer may have number of plants and the goods being valued may be produced in one plant but certain costs may be available for all the plants put together and not for individual plants, in such a situation, as mentioned earlier, the only way left with Revenue is to take the overall cost. However, wherever, it can be demonstrated that a particular component of expenditure is not at all relating to the goods being valued under Rule 6(b)(ii), there is no question of adding cost/expenditure corresponding to that component of expenditure.
41. In the present case, the respondent-assesssee were following Rule 6(b)(ii) procedure. They were also following the Boards circular of 1996. They have never questioned the correctness or anything relating to the said Boards Circular. As required in the circular they were submitting price declarations along with a certificate from a Chartered Accountant regarding assessable value of various items which were being transferred from manufacturers unit No. 2 and 3 to manufacturers unit 1 and other two independent job-workers located in Hyderabad. The Chartered Accountants certificate was assumed to be as per Boards circular of 1996. These declarations as filed by the assessee were being accepted by the department. However, lateron intelligence was gathered that the respondent-assessee is declaring the prices on the lower side by under declaring certain components in the cost of production. Investigation was taken up. Statements of various persons including Factory Managers, Accounts Manager, Manager (Excise) and Shri A.K. Jain, Practicing Chartered Accountant, whose certificate was enclosed with the declaration, were recorded. Help of cost accounts expert in the department viz. Assistant Director (Cost) was taken up to decipher the correctness of the declaration and Chartered Accountants certificate. The main dispute was relating to the overheads. On investigation, it was found that the assessee-respondent are not including the following expenses under the overheads:
(i) indirect material;
(ii) indirect labour/wages/salary;
(iii) service charges;
(iv) rent paid for use of machinery;
(v) royalty;
(vi) freight outwards, coolie, and cartage, rent, auditors remuneration, Directors meeting fee charges;
(vii) interest;
(viii) depreciation;
(ix) R&D expenses.
42. The fact that the above mentioned expenses were not being included has been admitted by Shri A.K. Jain, Chartered Accountant, who has signed one of such certificates. Commissioner in his findings in the impugned order has analysed each of these expenses and has come to the conclusion that the expenditure incurred in respect of the above mentioned items needs to be included. It also appears to us, during investigation and before adjudication of the case, respondent-assessee has agreed to the same and in fact has paid certain amounts in respect of the clearances made from May 2001 to May 2002. We may add that the demands made and the amounts paid do not appear to be tallying and it is not clear to us whether the respondent-assessee agreed for all the nine items or agreed for few of them. It is possible that figures available may be relating to goods transferred from manufacturing Unit II and III to Unit I only. There may be similar payments for goods transferred to two job workers in Hyderabad. Be that as it may be, we find that the respondent-assessee did not file any appeal against the Commissioners order. We find, in the cross-objection filed by the respondent-assessee, it is stated that with a view to avoid litigation with the department and since the entire amount was available as credit to the respondent-assessee in Plant 1 they debited total amount of ` 96,71,259/- from time-to-time during the months of May, 2002 and June, 2002 against supplementary invoices for the goods cleared to Plant 1 during the period May, 2001 to May, 2002. The grounds of filing the cross-objection are that:
(i) the appellant Commissioner erred in adding the expenses other than the cost of manufacture, cost of raw material and profit in the value of the goods transferred from Plant II and Plant III to Plant I of the respondent-assessee for the purpose of assessment;
(ii) the appellant-Commissioner erred in not following the binding orders of the Tribunal in the cases of Cadbury India Ltd. vs. Commissioner of Central Excise, Pune reported in 2001 (135) ELT 510, Hindustan Tyres Pvt. Ltd. vs. Collector of Central Excise, reported in 1998 (34) ELT 324 and GEC Alsthom India Ltd. vs. Commissioner of Central Excise reported in 1997 (96) ELT 473;
(iii) the appellant-Commissioner erred in including the entire overheads of the Company as a whole including the expenses of other factories and unrelated and unconnected to the manufacture of the goods under assessment;
(iv) the appellant-Commissioner further failed to appreciate that on perusal of the certificate dated 13th May, 1993, it would reveal that the cost of CRSS of ` 180.84 per kg. includes overheads of approximately 5% and gross profit of 17.77% of 1991-92 ought to have been deducted for taking the cost of production as overheads and profit is being separately sought to be added.
43. From the above grounds of cross-objection, we find that one of the objections raised is that the appellant-Commissioner has added expenses other than cost of manufacture, cost of raw material and profits. The respondent-assessee has not specified which component of cost of manufacture (out of the 9 listed in para 41 above) which the Commissioner has added is not required to be added. Without these specific details the contention needs to be rejected. As held earlier, for the period upto 30/06/2000 the value has to be determined as per the Boards circular 1996 and thereafter as per CAS-4. We also note that value as per CAS-4 generally works out to be much lower compared to earlier method. CAS-4 does not consider many components such as interest and financing components as cost of production, even though in real life if the goods were to be sold, manufacturer will include these components.
44. It is also submitted by the respondent-assessee that the appellant-Commissioner erred in including the entire overheads of the company as it will include the expenses of other factory and unrelated to the manufacture of the goods under assessment. We have already indicated that the overheads relating to other manufacturing units cannot be added for arriving at the assessable value. Similarly, if there is any overhead which is unrelated and totally unconnected to the manufacture of the goods in dispute the same needs to be excluded. We find from the report of the Asstt. Director (Cost) in the impugned order that assessee was not able to give the details plant-wise or the intermediate productwise and it is under those circumstances Revenue was left with no option but include the entire overheads viz. for all plants together. In a situation like the present one, the details has to come from the respondent-assessee alone and he is required to satisfy the jurisdictional authorities with the details and it is only thereafter that the respondent-assessee can claim the benefit. Since the respondent-assessee is not in a position to provide the details, Revenue had no option but to take the overall figures. We note that respondent-assessee has not provided any such details either during investigation or adjudication by the original authority or before this Tribunal and in these facts and circumstances the contention needs to be rejected. We also note that number of items in the present case are marketable like wax paper, lanolin wax, CRSS, CRSS (P&H), etc. which was not so in the case of Cadbury India Ltd. (supra).
45. Appellant has also submitted about the cost of CRSS of ` 180.84% per kg includes overheads approximately 5% and gross profit 17.77% of the year 1991-92. In our view the period in the present case pertains to 1996-97 onwards and the figures of 1991-92 will be of no relevance. The respondent-assessee should have submitted the actual figures of CRSS for various raw materials as those were prevailing at the relevant time and not of the earlier period. Even before us no such details have been provided. We, therefore, reject the contention.
46. In view of the above analysis, in our view, for the period prior to 01/07/2000 the value determined by the Commissioner is correct and we uphold the same. As far as computation of value after 01/07/2000 is concerned the same can be computed as per CAS-4. We also note that respondent-assessee has not produced any such costing details/CAS-4 certificate during adjudication or before this Tribunal. In fact, from May, 2001 onwards, respondent-assessee has accepted 1996 circular, paid differential duty and took credit of same in other plant. However, it is not clear whether entire differential duty was paid or only part of it was paid. If entire duty was paid and credit thereof taken in other plant, those assessment need not be disturbed. However, if not, respondent-assessee will be required to submit the CAS-4 certificate from Cost Accountant supported by the details which may be examined by the Commissioner. Commissioner is free to take necessary help from Asstt. Director (Cost), if considered necessary. If the monthwise duty paid (and credit taken) is more than computed as per CAS-4, same need not be disturbed at this stage.
47. Another ground raised in the Revenues appeal is that the extended period of limitation is applicable while the learned Sr. Counsel for the respondent-assessee has opposed it and submitted that the balance sheet and profit and loss account, etc. were all available with the department and under the circumstances, it cannot be said that there was a suppression of fact or willful mis-statement. Learned sr. counsel has also submitted that this is a case of revenue neutrality and under the circumstances it cannot be said that there is willful mis-statement or suppression of fact. We have considered the arguments of both the sides. In our view, since the respondent-assessee themselves are following the circular of 1996 and were not disputing any part of the circular, it was their boundan duty to compute the value strictly as per the circular. In the present facts and circumstances of the case, we find that though the respondent-assessee was purportedly following the circular but were including only few components in the category of overheads and were excluding other components, some of which were specifically listed in the circular and were to be included as per the circular of 1996 and these facts were in the exclusive knowledge of the respondent-assessee. In fact, it also appears that after computing the overheads in percentage in the above manner, they were just giving these figures (i.e. amount or %)to the Chartered Accountant who in turn were issuing the certificate without going into the question which are the items of expenditure within the category of overheads which have been included or excluded. We find that it is an admitted position that in the price declaration submitted to the department they were only indicating in terms of percentage overheads i.e., overheads constitute 3.34% as against the actual computation of 33.7%. For purpose of computation of value, the details provided by any assessee are normally accepted until and unless there is intelligence to the contrary. In this case also similar thing has happened. Revenue was accepting the percentage figure as given by the respondent-assessee viz. 3.34%. It was only when intelligence was collected that the matter was taken up for investigation and the help of Assistant Director (Cost) was sought and taken, and only thereafter details came out in the open. Keeping in view these facts including the conduct of the assessee, in our considered view, this is a clear-cut case of suppression of facts with willful intention to evade payment of duty and hence extended period of limitation is correctly invokable and for the same reason penalty under Section 11AC is also impossable.
48. Learned sr. counsel has given lot of emphasis on the decision of the honble Supreme Court in the case of Nirlon (supra). We have gone through the said decision. The facts of that case was entirely different. M/s. Nirlon Limited were manufacturing a product which they were selling and also captivelly consuming. They had filed a price-list indicating the sale-price to others as that also for captive consumption. Later on, it was found that there is some difference in the specification of the goods captivelly consumed and in those circumstances, the honble Supreme Court has come to the conclusion that the extended period of limitation is not applicable as the situation is Revenue neutral. In the present case, it is clear that the respondent-assessee has understated the overheads (3.34% as against 33.7%) while pretending that he is following the circular of 1996 and, therefore, there is suppression of facts and extended period is correctly invokable. The fact that they could have taken the credit of the duty is immaterial. We also note that in the present case, part of the goods were also going to two job-workers located in Hyderabad. Theory that they are eligible for CENVAT credit, would be true in case of all captive consumption cases and therefore one can take a view there is no need even to compute the cost of production, etc. However, this is not permitted under law. We, therefore, hold that extended period of limitation and consequently penalty under Section 11AC is invokable. We accordingly, set aside the order of the Commissioner as far as invocation of the extended period of limitation and penalty under Section 11AC are concerned.
49. However, as we ordered above, from 01/07/2000 the value can be computed in terms of CAS-4. The demand of duty as also the penalty under Section 11AC required to be computed as far as first show cause notice dated 28/02/2002 is concerned.
50. We find that, with the issuance of first show cause notice all the facts had come to the notice of the department and subsequent show cause notices were issued with the same or similar set of information and in our view, charge of suppression of facts cannot be invoked in respect of the show cause notices issued subsequent to the show cause notice dated 28/02/2002. No penalty under Section 11AC would be therefore imposable in respect of the demand of duty that will arise in the subsequent show cause notice.
51. The learned sr. counsel for the respondent-assessee has also submitted that they could have availed benefit of Notification 67/1995 and in that situation they were not required to pay any duty. In our view, this contention is required to be rejected for the simple reason the respondent-assessee has not opted for the benefit of Notification 67/1995. The respondent-assessee has not followed the procedure, safeguard, etc. prescribed under the said Notification and at this stage the respondent-assessee cannot be permitted to ask for the benefit of the said Notification without following rigours of that Notification. If they wanted the benefit of the said Notification they should have followed the same at time of clearance of the goods. Moreover, part of the goods were being sent to the job-worker, who for excise purpose is independent manufacturer, for whom the said Notification will not be applicable.
52. The learned sr. counsel also submitted that DGCEI has also issued a show cause notice in which they have approved the overheads indicated by them. We are not impressed with this argument. As mentioned in that case, the DGCEI on the basis of intelligence was investigating that the cost of material has not been increased by the appellant over a period of years and the investigation was confined to that point. Overheads as declared by the respondent-assessee were deemed to be correct and no investigation was undertaken on this aspect. In the absence of any such investigation, it cannot be said that the Revenue has accepted the overheads after investigation and cannot be allowed to open at this stage. This contention is also rejected.
53. As far as the second appeal filed by Revenue is concerned, i.e. appeal No. E/3308/2005 against the order dated 17/08/2004. Learned sr. counsel has submitted that the issue is squarely covered by the decision of the honble High Court of Karnataka in the case of Karnataka Soaps & Detergents Ltd. vs. Commissioner of Central Excise, Mysore 2010 (258) ELT 62 (Kar.) wherein the honble High Court has upheld the order of the Tribunal. Learned Commissioner (AR), on the other hand, has submitted that, if the reasoning adopted by the Karnataka High Court is to be followed then the said provision would become redundant in case of instances of stock transfer not involving sale. Learned (AR) further submitted a catena of judgments to support the contention that one rule of the CENVAT credit can whittle down the other rule and in view of this submission supported by catena of judgments the judgment of the honble High Court of Karnataka should not be taken as precedent. We have considered the submissions of both the sides and gone through the judgment of the honble High Court of Karnataka. We find that the judgment of the honble High Court of Karnataka is squarely on the point under consideration. In fact, the honble High Court has upheld the decision of this Tribunal. The honble High Court of Karnataka in para 40 of the said judgment has observed as under:
40.?We are of the considered opinion that Rule 7 is illustrative in nature and it cannot place any fetters on Rule 3. The additional duty has been paid under re-assessment or on being detected by the department and such duty paid is available as credit under Rule 3 of CENVAT Credit Rules to the assessee & it cannot be allowed to be whittled down by Rule 7(1)(b). Thus, principles enunciated in Ballarpur Industries would be inapplicable to the facts of the case. The Commissioner while passing the Order-in-Original has accepted that there has been no loss of revenue to the Government. In paragraph 15 of the Order-in-Original dated 25-2-2005 it is held as follows :
However, I find some force in the defence plea that there was no loss of revenue to the department since whatever duty paid by their Mysore unit is admissible as cenvat credit, but for the reason discussed in the earlier paragraph. It is also relevant to note that there is no allegation of any suppression of any facts, made against the assessee and the credit taken on the supplementary invoices is clearly indicated by the assessee in their monthly returns. Since the credit taken on the said supplementary invoices is held to be not admissible, I observe that this in itself is sufficient punishment to the assessee, notwithstanding the fact that they are also held liable to pay appropriate interest on the said cenvat credit so wrongly taken. Hence, we are of the opinion that questions of law formulated will have to be answered in favour of assessee and against revenue.
54. In view of the said decision of the honble High Court and the fact that the decision quoted by the learned Commissioner (AR) are not exactly on the issue before us, we respectfully following the judgment of the honble High Court of Karnataka, dismiss the second appeal of the Revenue.
55. We also note that both the sides have quoted very large number of judgments in respect of both the appeals. We have gone through the judgments and in view of our analysis relating to the law, we do not find that any of these judgments is contradictory. Facts in all these judgments are different. Many of these are based upon the facts in those cases such as marketability or concession granted by Revenue or Tribunal etc and are therefore distinguishable. We do not consider it necessary to discuss these judgments.
56. In view of the above, the demand of duty up to 30/06/2000 as proposed in the notice is confirmed. Penalty of equal amount under Section 11AC/Rule 173Q as proposed in the show cause notice is also confirmed. Demand of duty from 01/07/2000 to 31/03/2001 is required to be computed based upon the value determined under CAS-4. Respondent-assessee will provide within three months from the receipt of order the necessary certificate from the Cost/Chartered Accountant along with details which will be examined by the Commissioner as per our directions in earlier part of this order. The quantum of short-levy (from July 2000 to March, 2001) will there after be arrived. Respondent-assessee will be liable to penalty equal to the amount of short-levy so determined under Section 11AC/173Q. In case, respondent-assessee fails to produce details as per CAS-4 short-levy as proposed in the show cause notice along with penalty will stand confirmed.
57. As far as second and subsequent show cause notices are concerned, value is to be determined as per CAS-4 and thereafter duty leviable. If there is short-levy, the same will be paid by the respondent-assessee. In case, respondent-assessee fails to produce details as per CAS-4, short-levy as proposed in the show cause notice will stand confirmed. No penalty under Section 11AC/Rule 173Q/Rule 25 will be impossable.
58. Interest in respect of demands as per para 56 and 57 above would also be chargeable. Keeping in view facts and circumstances, in our view, confiscation is not warranted. Similarly, penalties in other notices are also not warranted.
59. As far as appeal No. E/3308/2005 is concerned the same is dismissed.
60. Both the appeals and cross-objection are disposed of in the above terms.
(Pronounced in Court on 04/08/2015) (S. S. Garg) Member (Judicial) (P.K. Jain) Member (Technical) */as 54