Custom, Excise & Service Tax Tribunal
M/S. Automotive Stampings And ... vs Commissioner Of Central Excise, Pune-I on 21 January, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT NO. II
APPEAL NO. E/764,765/ 12-MUM
[Arising out of Order-in- Original No. 05/CEX/2012 dated 15/2/2012 passed by the Commissioner of Central Excise, Pune-I.]
For approval and signature:
Honble Mr. P.K. Jain, Member(Technical)
Honble Mr Ramesh Nair, Member(Judicial)
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1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
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M/s. Automotive Stampings and Assemblies Ltd.
:
Appellants
VS
Commissioner of Central Excise, Pune-I
:
Respondent
Appearance
Shri. Gajendra Jain, Advocate for the Appellants
Shri. V.K. Agarwal, Addl. Commissioner(A.R.) for the Respondent
CORAM:
Honble Mr. P.K. Jain, Member (Technical)
Honble Mr. Ramesh Nair, Member (Judicial)
Date of hearing: 21/1/2015
Date of decision: /2015
ORDER NO.
Per : Ramesh Nair
The appeal is directed against Order-in- Original No. 05/CEX/2012 dated 15/2/2012 passed by the Commissioner of Central Excise, Pune-I, wherein Ld. Commissioner confirmed the duty, penalties as detailed below:
(i) I confirm and demand the duty liability amounting to Rs.49,61,809/- (Rupees Forty Nine Lakhs Sixty One Thousand Eight Hundred and Nine only) as proposed in the Show Cause Notice No. DGCEI/MZU/I&ISB/12(4)65/2009 dated 06.05.2011, in terms of Section 11A(2) of the Central Excise Act, 1944 from ASAL Chakan (Reference to para 12(a) of Show Cause Notice).
(ii) I appropriate the amount of Rs.49,61,809/- already paid by ASAL Chakan, during investigation against the demand determined and confirmed in (i) above (Reference to para 12(a) of Show Cause Notice).
(iii) I order recovery of interest at appropriate rates in terms of Section 11AB of Central Excise Act, 1944 from ASAL Chakan against the demand of duty determined and confirmed at (i) above (Reference to para 12(b) of Show Cause Notice).
(iv) I appropriate the amount of Rs.2,76,081/- already paid by ASAL Chakan during investigation towards interest liability (Reference to para 12(b) of Show Cause Notice).
(v) I confirm and demand duty liability amounting to Rs.2,02,99,124/- (Rupees Two Crores Two Lakhs Ninety Nine Thousand One Hundred and Twenty Four Only) as proposed in the Show Cause Notice No. DGCEI/MZU/I&ISB/12(4)65/2009 dated 06.05.2011, in terms of Section 11A(2) of the Central Excise Act, 1944 from ASAL Chakan (Reference to para 12(c) of Show Cause Notice).
(vi) I appropriate the amount of Rs.1,27,53,276/- paid by ASAL Chakan during investigation towards confirmed demand determined in (v) above (Reference to para 12(c) of Show Cause Notice) and the outstanding duty amounting to Rs.75,45,848/- should be paid forthwith.
(vii) I order recovery of interest at appropriate rates in terms of Section 11AB of Central Excise Act, 1944 from ASAL Chakan (Reference to para 12(d) of Show Cause Notice).
(viii) I appropriate the amount of Rs.10,83,074/- already paid by ASAL Chakan during investigation towards interest liability demanded in (vii) above (Reference to para 12(d) of Show Cause Notice).
(ix) I impose penalties of Rs.49,61,809/- (Rupees Forty Nine Lakhs Sixty One Thousand Eight Hundred and Nine only) and Rs.2,02,99,124/- (Rupees Two Crores Two Lakhs Ninety Nine Thousand One Hundred and Twenty Four Only) under Section 11 AC of Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002 on ASAL Chakan (Reference to para 12(e) of Show Cause Notice).
(x) It is however ordered that if the duty and interest is paid within 30 days from the date of receipt of this order, the assessee is liable to pay only 25% of duty as penalty subject to the condition that the reduced penalty is applicable if the same is paid within 30 days from the date of receipt of this order.
(xi) I confirm and demand the duty liability amounting to Rs.37,79,725 /- (Rupees Thirty Seven Lakhs Seventy Nine Thousand Seven Hundred and Twenty Five only) as proposed in the Show Cause Notice No. DGCEI/MZU/I&ISB/12(4)65/2009 dated 06.05.2011, in terms of Section 11A(2) of the Central Excise Act, 1944 from ASAL Bhosari (Reference to para 13(a) of Show Cause Notice).
(xii) I appropriate the amount of Rs.37,79,725 /- (Rupees Thirty Seven Lakhs Seventy Nine Thousand Seven Hundred and Twenty Five only) already paid by ASAL Bhosari, during investigation towards the interest liability determined and confirmed at (xi) above (Reference to para 13(a) of Show Cause Notice).
(xiii) I order recovery of interest at appropriate rates in terms of Section 11AB of Central Excise Act, 1944 from ASAL Bhosari (Reference to para 13(b) of Show Cause Notice).
(xiv) I appropriate the amount of Rs.1,03,836/- paid by ASAL Bhosari, during investigation towards interest liability determined and confirmed at (xiii) above (Reference to para 13(b) of Show Cause Notice).
(xv) I confirm and demand duty liability amounting to Rs.3,890 /- (Rupees Three Thousand Eight Hundred and Ninety Only) as proposed in the Show Cause Notice No. DGCEI/MZU/I&ISB/12(4)65/2009 dated 06.05.2011, in terms of Section 11A(2) of the Central Excise Act, 1944 from ASAL Bhosari (Reference to para 13(c) of Show Cause Notice).
(xvi) I appropriate the amount of Rs.3,389 /- paid by ASAL Bhosari, during investigation towards confirmed demand in (xv) above (Reference to para 13(c) of Show Cause Notice) and the outstanding duty amounting to Rs.501 /- should be paid forthwith.
(xvii) I order recovery of interest at appropriate rates in terms of Section 11AB of Central Excise Act, 1944 from ASAL Bhosari (Reference to para 13(d) of Show Cause Notice).
(xviii) I appropriate the amount of Rs.405/- already paid by ASAL Bhosari during investigation towards interest liability determined and confirmed at (xvii) above (Reference to para 13(d) of Show Cause Notice).
(xix) I impose penalties of Rs.37,79,725 /- (Rupees Thirty Seven Lakhs Seventy Nine Thousand Seven Hundred and Twenty Five only) and Rs.3,890 /- (Rupees Three Thousand Eight Hundred and Ninety Only) under Section 11 AC of Central Excise Act, 1944 read with Rule 25 of the Central Excise Act, 2002 on ASAL Bhosari (Reference to para 13(e) of Show Cause Notice).
(xx) It is however ordered that if the duty and interest is paid within 30 days from the date of receipt of this order, the assessee is liable to pay only 25% of duty as penalty subject to the condition that the reduced penalty is applicable if the same is paid within 30 days from the date of receipt of this order.
The fact of the case is that M/s. Automotive Stampings and Assemblies Ltd having units at Chakan and Bhosari-Pune and engaged in the manufacture of Sheet Metal Parts and Welded Assemblies for Automotive Sector falling under Chapter Sub Heading 8708 1090 of the First Schedule to the Central Excise Tariff Act, 1985. On an Intelligence, officers of Directorate General of Central Excise Intelligence found that the appellant are :-
(1) not including the cost of amortization of tools/dies in the value of the goods manufactured and cleared by them as required under Rule 6 of the Central Excise Valuation(Determination of Price of Excisable Goods) Rules, (CEVR) 2000.
(2) They are not adding 10% to the cost of production as required under Rule 8 of CEVR, 2000 while clearing the goods to their sister concern.
After investigation carried out, a show cause notice No. DGCE/MZU/I&ISB/12(4) 65/2009 dated 6/5/2011 was issued to the appellant Chakan and Bhosari Units, wherein it was proposed to demand Central Excise duty amounting to Rs. 49,61,809/-, Rs. 2,02,99,124/-, Rs. 37,79,725/- and Rs. 3,890/- from both the units. Penalties and interest were also proposed in the show cause notice. In the show cause notice following issues were raised:
(a) Non inclusion of cost of amortization of tools, dies, welding guns, pallets etc. in the value of goods manufactured and cleared by the manufacturing units of appellant as required under Rule 6 of CEVR, 2000.
(b) Non inclusion of cost of drawing, blueprints, technical maps and charges and similar items in the value of goods manufactured and cleared by the manufacturing units of appellant as per the Rule, 6 of CEVR, 2000.
(c) Non addition of 10% to the cost of production while clearing the goods to sister units as required to be included under Rule 8 of CEVR, 2000.
While in the adjudication Ld. Commissioner confirmed the demand of duty, penalties and interest as detailed in Para 1 above. Aggrieved by the impugned order the appellant are before us.
2. Shri. Gajendra Jain, Ld Counsel for the appellant submits that though the appellant filed appeal for challenging entire order however, he considered that they are not contesting duty however they contest the imposition of penalties and interest. He submits that in the present case the demand of duty in respect of supply made to two categories of consignment. (A) supply of goods to sister concern where valuation is governed by Rule 8 and (B) to out side automobile industries where duty was demanded on non inclusion of amortization cost of mould, dies etc. He submits that this is not the case of clandestine removal of the goods. There is a case where interpretation of valuation provisions are involved. Short payment of duty is not an account of any malafide intention to evade excise duty. It is only due to the interpretation that what value should be adopted for discharging excise duty in respect of clearances made to their sister concern as well as to other concern. He submits that in all the clearances proper duty paying invoices were issued and excise duty was discharged. He further submits that since the goods involved the automobile components and part which is used by the automobile industry and in the case of supply made to the sister concern, it is used as input for manufacture of other final product and therefore in all the cases consignees are taking Cenvat Credit. It is also a fact that all the assessees are paying huge amount of duty from PLA. It is his submission that even if duty demanded in the impugned order would have been paid at the time of clearances the same would have been availed as Cenvat Credit by the respective consignees and as a result payment of duty made by the consignee on their final product from PLA would have stood reduced to the extent of quantum of the present demand. Therefore there is no loss to the Revenue and in this case there is neutrality of Revenue. He placed reliance on following judgments:
(a) Jay Yuhshin Ltd. Vs. Commissioner of Central Excise, New Delhi[2000(119) E.L.T. 718(Tribunal LB)]
(b) P.R. Rolling Mills Pvt. Ltd. Vs. Commissioner of C. Ex. Tirupathi[2010(249) ELT 232(Tri- Bang.)]
(c) Commissioner of Central Excise, Mumbai Vs. Special Steel Ltd. [2010-TIOL-1176-CESTAT-MUM]
(d) Savita Polymers Ltd. Vs. Commissioner of C. Ex. Raigad[2009(240) ELT 616 (Tri- Mumbai)]
(e) Monga Brothers Ltd. Vs. Commissioner of Central Excise, Ludhiana[2013(294) ELT 332(Tri- Del.)] He submits that in the above judgments it has been held that in case of Revenue neutrality, malafide intention can not be attributed to the assessee and accordinly no penalty and interest is imposable.
3. On the other hand, Shri. V.K. Agarwal, Ld. Addl. Commissioner (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He further submits that it is admitted position that appellant was legally bound to pay excise duty on the elements which was not added in the assessable value at the time of clearance of the goods, this itself shows that they have knowingly undervalued the goods. It is his submission that inclusion of value consideration towards amortization of free supply goods i.e. tools, dies, welding guns, pallets etc. is explicitly provided under Rule 6 of CEVR, 2000. Similarly as regard the valuation method for clearance to another unit of the appellant is provided under Rule 8, CEVR, 2000 according to which valuation should be 110% of cost of manufacture of goods. In view of this unambiguous legal position of the valuation it can not be said that issue involved is of interpretation of law. Moreover, the appellant do not contest the duty demand as the same is not under dispute. This undisputed position clearly established malafide intention of the appellant. He further submits that in the show cause notice and in the impugned order proviso to Section 11A was invoked and duty was confirmed for the extended period also. Therefore the ingredients such as suppression of facts, misdeclaration of value etc. very much exist in the present case, therefore there is no question of waiver of penalty and interest on the confirmed demand. As regard Revenue neutrality, he submits that if the theory of Revenue Neutrality argued by the Ld. Counsel is accepted then each and every case where the goods in respect of which any short payment or non payment is involved the duty will not be demanded for the reason that the buyer of the goods in any case entitled for the Cenvat Credit for such duty. He therefore submits that in this particular case there is clear suppression of facts regarding non inclusion of amortization cost in terms of Rule 6 and incorrect valuation under Rule 8 of Central Excise Valuation Rules, 2000. Therefore this case does not fall under the category of Revenue Neutrality. He prayed that impugned order is proper and legal and same be upheld and appeal of the appellant may be dismissed.
4. We have carefully considered the submissions made by both the sides and perused the records.
5. As regard confirmation of duty demand, we observed that duty was demanded on two counts a) on amortization cost of tools, dies, welding guns, pallets etc supplied free of cost by the buyer of the goods. b) in respect of supply made to sister concern of the appellant, valuation was not correctly done in accordance with the rule 8 of Central Excise Valuation Rules, 2000. We find that as regard inclusion of amortization cost in the assessable value of the goods when certain goods such as tools, dies, welding guns, pallets etc supplied free of cost by the customer, the amortized cost must be included in terms of Rule 6 of Central Excise Valuation Rules, 2000, which is reproduced below:
RULE 6.Where the excisable goods are sold in the circumstances specified in clause (a) of sub section (1) of section 4 of the Act except the circumstance where the price is not the sole consideration for sale, the value of such goods shall be deemed to be the aggregate of such transaction value and the amount of money value of any additional consideration flowing directly or indirectly from the buyer to the assessee.?
[Explanation 1] - For removal of doubts, it is hereby clarified that the value, apportioned as appropriate, of the following goods and services, whether supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale of such goods, to the extent that such value has not been included in the price actually paid or payable, shall be treated to be the amount of money value of additional consideration flowing directly or indirectly from the buyer to the assessee in relation to sale of the goods being valued and aggregated accordingly, namely : -
(i) value of materials, components, parts and similar items relatable to such goods;
(ii) value of tools, dies, moulds, drawings, blue prints, technical maps and charts and similar items used in the production of such goods;
(iii) value of material consumed, including packaging materials, in the production of such goods;
(iv) value of engineering, development, art work, design work and plans and sketches undertaken elsewhere than in the factory of production and necessary for the production of such goods.
Explanation 2. - Where an assessee receives any advance payment from the buyer against delivery of any excisable goods, no notional interest on such advance shall be added to the value unless the Central Excise Officer has evidence to the effect that the advance received has influenced the fixation of the price of the goods by way of charging a lesser price from or by offering a special discount to the buyer who has made the advance deposit.
Illustration 1. - X, an assessee, sells his goods to Y against full advance payment at Rs. 100 per piece. However, X also sells such goods to Z without any advance payment at the same price of Rs. 100 per piece. No notional interest on the advance received by X is includible in the transaction value.
Illustration 2. - A, an assessee, manufactures and supplies certain goods as per design and specification furnished by B at a price of Rs. 10 lakhs A takes 50% of the price as advance against these goods and there is no sale of such goods to any other buyer. There is no evidence available with the Central Excise Officer that the notional interest on such advance has resulted in lowering of the prices. Thus, no notional interest on the advance received shall be added to the transaction value.] From the above Rule, it is clear that if certain items supplied by the buyers free of cost to the manufacturer the value consideration of the said items in the form of amortization cost must be added in the assessable value for the reason that the sale value in such case cannot be considered as sole consideration. Therefore, we are of the view on this count that amortization cost is legally includible in the assessable value. As regard the goods supplied by the appellant to their sister concern, it is undisputed that valuation of such goods is adopted by cost construction method in terms of Rule 8 of Central Excise Valuation Rules, 2000. In accordance to which valuation should be 110% of the cost of manufacture of the goods. From the impugned order it was found that the appellants have not correctly valued the goods and not added 10% notional profit in the assessable value while clearing the goods to their sister concern. Therefore we are of the view that Ld. Commissioner has correctly and legally confirmed duty on the value arrived at by following the provision of Rule, 8 of Valuation Rules, 2000. In view of above position we are of the considered view that differential duty demand on both the counts are correct and legal and the same does not require any interference. Now we are taking up the issued of imposition of interest and penalty. From the fact of the case it is admitted that appellant have not added amortization cost in respect of goods supplied to other than related person and also not correctly valued in respect of goods supplied to their sister concern. The fact of incorrect valuation and consequent short payment of duty was clearly suppressed by the appellant from the department therefore proviso to Section 11A in demanding differential duty was correctly invoked. As regard the submission of Ld. Counsel on the ground that since the consignee unit are availing the Cenvat Credit and huge amount of duty paid from PLA this is a case of Revenue neutrality. We do not agree with this submission for the reason that in each and every case the buyer is entitled for the Cenvat credit and if this is so then every manufacture/supplier will be free to either pay or not to pay excise duty. No statute permit that if the buyer is entitled for Cenvat Credit then the supplier can avoid to pay excise duty. It is straight law, irrespective of any other factors as and when a manufactured goods is cleared from the factory of the manufacturer he is bound to pay the correct duty leviable thereon, there is no explanation provided in the excise law that if buyer is entitled for the Cenvat Credit therefore no duty is required to be paid. Therefore, we do not agree that merely because recipient of the goods are entitled for the Cenvat credit, it is a case of revenue neutrality. The availment of Cenvat credit is subsequent act and that cannot be basis for payment of duty in the clearance of the goods from the manufacturer factory. We are in the agreement with the Ld. Commissioner in giving the finding on issue of revenue neutrality, which reproduced below:
I find that ASAL Chakan and ASAL Bhosari have contended that the differential duty, if paid by them, would be available as input credit to the customers. In this regard, it is pertinent to mention that the Honble Supreme Court in the case of Dharampal Satyapal Versus CCE, New Delhi, reported at 2005(183) ELT 241(S.C.) had interalia held that the right to claim proforma/Modvat credit against duty on final product was different from defense of bonafide in a case where circumstances mentioned in proviso to Section 11A(1) of Central Excise Act, 1944, stand proved by the Department for invoking larger period of limitation. Question of duty adjustment/set off against duty on final product not in issue. No record on credit entitlement. I find that the ratio of this case is squarely applicable to the instant case and therefore I do not accept the said contentions of ASAL Chakan and ASAL Bhosari..
In view of above discussion, we are of the considered view that Ld. Commissioner has correctly imposed the penalty under Section 11AC and interest under Section 11AB which does not require any interference. Since in the present case, the invocation of proviso to Section 11A no under dispute, the imposition of penalty under Section 11AC is inevitable as held by the Honble Supreme Court in the case of Union of India Vs. Dharamendra Textile Processor[2008(231) E.L.T. 3(SC)]. We are therefore of the considered view that there is no infirmity in the impugned order. Hence the same is upheld. The appellants appeals are dismissed.
(Order pronounced in the court on__________) P.K. Jain Member (Technical) Ramesh Nair Member (Judicial) sk 2