Customs, Excise and Gold Tribunal - Tamil Nadu
Commissioner Of Central Excise, Trichy vs M/S Kothari Sugars & Chemicals Ltd. on 31 August, 2001
ORDER
Shri Jeet Ram Kait
1. These five Revenue appeals arise form common order-in-appeal dated 5.5.97 passed by the Commissioner (Appeals) Trichy allowing the appeals of Revenue partly by holding the assessable value at Rs.1500/- per MT for the period form May'94 to March'95 and for the period prior to May 1994 the Ld. Commissioner has fixed the value at Rs.2700 per MT Revenue has come in appeal against Commissioner (Appeals) order who, while upholding the order of the AC in fixing the assessable value of molasses at Rs.2700/- for the assessment only for the period March to April'94 and for the subsequent period, has ordered that the sale price of molasses adopted by the assessee in May'94 could be adopted at assessable value of the molasses cleared from 5/94 to 3/95 under Rule 6B(1) of the Valuation Rules 1975 in as much as the bonafide nature of sale that has taken place in May'94 has not been questioned by the department. The Commissioner (Appeals) has decided to adopt the price on molasses at Rs.1500/- for the reason that bonafide nature of the sale has not been questioned by the department which the department feels is not correct since in the show cause notice itself the lower price of Rs.1500/- has been disputed and it has been well discussed in OIO that assessee has failed to furnish his specific reasons for reduction of price from Rs. 2700/- to Rs.1500 per MT. They have therefore submitted that sale price for molasses at Rs.1500/- for the sales in May'94 by Revenue could not be accepted for the period from May'94 to Jan'95 as it was fixed without any basis. They have therefore submitted that operative price available in Feb'94 i.e. Rs.2700/- per MT would from the basis for adoption of assessable value for the period from May'94 to March'95 under Rule 6B(1) of Valuation Rules, 1975. Therefore from the above ground they have submitted that OIA passed in regard to fixation of assessable value of molasses at Rs.1500/- for the period of captive consumption is not legal and proper. Revenue has therefore requested that the order of the Commissioner (Appeals) may be set aside in regard to fixation of assessable value of Rs.1500/- Per MT for the period from May 1994 to March'95 vide his order-in-appeal No.71 to 75/97 dated 5.5.97.
2. Ld. DR Shri Soundararajan states that the State Govt. had fixed the price of molasses at the rate of Rs.2675/- per MT for the quarter ending 30.1.94.
3. Ld. Counsel Shri J.Sankararaman counters this submission made by Ld.DR and he submits that in terms of the price fixed by the Commissioner of Sugars of the Tamil Nadu Government, The price fixed is minimum price of molasses to distilleries, pharmaceutical industry, and chemical industry at the rate of Rs.1300/- PMT for the quarter ending 30.1.94. HE submits that stay price charged by them from Ms/. Nataraj Ceramic & Chemical Industries at the rate of Rs.2700/- per MT cannot be the basis for higher value. The Commissioner of Sugar has also given option to sugar factories to sell the molasses at a price of Rs.1900/- per MT, if they so desired. He submits that even they have sold only in one stray case that too to M/s. Nataraj Ceramic & Chemical Industries and that price cannot be adopted for the purpose of assessment.
4. We have carefully gone through the records and find that the Commissioner (Appeals) Trichy in his impugned order in para-3 to 12 which are extracted herein below has thoroughly analysed all the evidences and quoted various judgments of CEGAT:-
3. I have given my careful consideration to all the facts herein and I have also seen the impugned orders. The matters was heard through Shri R.Raghavan, Advocate when he briefly submitted that molasses is produced only during the crushing season and the price varies depending upon the quantity of molasses produced in a given month. As there was no sale to the distillery unit, they had adopted Rs.1000/- per MT based upon the costing, but the AC has adopted the price of Rs.2700/- at which the product was sold to M/s. Nataraj Ceramics, Dalmiapuram, who is a class of buyers different from the distillery unit which is another class of buyer. He stated that as per Supreme Court decision in the MRF's case the price adopted for one class of buyer cannot be applied for other classes of buyers. He also produced data to show that during the relevant period, a sale price of Rs.1000/- per MT to Rs. 1300/- M.T was changed by the sugar factories for in classes & old to different distillery unit who constituted the same class of buyers. He pleaded that this price be accepted instead of Rs.2700/- MT. As an alternative proposals he stated that the AC ought to have accepted Rs.1500/- per MT, the sale price that obtained in April/May 94.
4. The issue involved in these appeal is whether for the assessment of molasses cleared for captive consumption during the period March 94 to January 95 the AC was right in adopting the price of Rs.2700/- per MT at which molasses was cleared in Feb'94 to M/s. Nataraj Ceramics, Dalmiapuram instead of Rs.1000/- or Rs.1500/- Per MT (for sale in May 94) or the orders requires my intervention.
5. In the ground of appeal, the appellants have stated that molasses cleared for captive consumption by the appellants was to a distillery unit for use in the manufacture of ethyl alcohol and denatured ethyl alcohol, whereas the supply of molasses to M/s. Nataraj Ceramics and Chemical Industries was not for the same purpose as the said customer was not a distillery unit. They have also pointed out that the quantity sold to M/s. Nataraj Ceramics was only 29.28 MT whereas the quantity cleared to the distillery unit is 9522 MT. They further pointed out that Nataraj Ceramics is not a wholesale dealer and that the sale was only as isolated sale not in the course of wholesale trade or the price ordinarily charged and so this cannot be taken to be the normal price under Section 4(1)(a). They adopted the price of Rs.1000/- based on the cost of manufacture and was correctly declared in Part VI as per rule 6 of the Central Excise (Valuation) Rules. The advocate has also given a written not and a chart showing the price of molasses at Rs.1000/- per MT to Rs.1300/- per MT charged by various sugar mills during the relevant period and stated they themselves had purchased molasses at the price of Rs.1300/- per MT only and so this price be adopted as the class of buyers is the same. Alternatively, the department may adopt Rs.1500/- per MT, the price sold in May'94. To support the point at the price of molasses fluctuates, he has cited decision in the case of M/s. Gangeswar Limited - 1997 (91) ELT 496 (Commissioner)(Appeals). In their view the price of Rs.2700/- obtained in February'94 i.e. prior to introduction of duty in March cannot be adopted for assessment during the relevant period.
6. According to Section 4(1)(a) of the Central Excise Act, where the duty of excise is chargeable with reference, to value, such value will be the normal price - 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 sale. The same section also provides that where in accordance with the normal practice of the wholesale trade in such goods, the goods are sold by the assessee at different prices to different classes of buyers (not being related person) each such price shall be deemed to be the normal price in relation to such class of buyers. A per Section 4(1)(b) where the normal price is not ascertainable for the reason that such goods are not sold or for any other reason, the assessable value will be the nearest ascertainable equivalent there of determined in the prescribed manner. Rule 6(b) of the Valuation Rules deals with the Situation 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 excisable articles. In such cases, the value shall be based (i) on the comparable goods produced or manufactured by the assessee or by any other assessee, provided suitable adjustments are made after taking into consideration all relevant factors such as differences in the material characteristics of the goods to be assessed and of the comparable goods and (ii) if the value cannot be determined as above, it will be based on the cost of production or manufacture including the profits, if any which the assessee would have normally earned on the sale of such goods.
7. Coming to the subject case, the ACT has adopted for the entire period the sale of price of Rs.2700/- per MT in February'94 made to M/s. Nataraj Ceramics for a quantity of 29.28 MT. The appellants plea is that this was only an isolated sale of a meagre quantity made in February'94 i.e. prior to introduction of advalorem levy firstly and that the purchaser was not a distillery unit and so fell under a different class of buyer. They have also stated that this is not a price under Section 4(1)(a).
8. I am afraid I cannot agree with the appellants plea. From their submissions it is clear that the price of molasses varies depending upon the forces of demand and supply which in turn depend on various factors like the on or off season. The fact is that the appellant had sold molasses to M/s. Nataraj Ceramics at a price of Rs.2700/- MT in Feb'94. That the sale took place when
9. When we come to the subsequent period i.e. May 94 onwards and apply the same argument as above, the appellant's plea has force. The Ac's orders cannot be justified, because, there were sales in May 94 by the appellants to the same M/s. Nataraj Ceramics at Rs.1500/- MT. The appellant have submitted that this price was arrived at on the basis of manufacturing cost plus reasonable profit. In any case there is no material on record to doubt this price, which has to be taken as the normal price under Section 4(1)(a) at the relevant time. For the reasons recorded in the previous para, it is this price that has to be considered as value of comparable goods for the supply of molasses for captive use for the period May 94 onwards. The AC was therefore in error in adopting the February price of Rs.2700/- MT for this period also. The price of Rs.1500/- MT at which actual sales took place in May 94 cannot be ignored in the absence of any evidence of the contrary. Since the period involved here 16 May 94 to January 95, I am of the view, the sale price in May 04 can be adopted under Rule 6b(i). The Ac's orders here one therefore not correct and the demands have to be recast on the above basis.
10. The appellants have pleaded for adopting the price of Rs.1000/- or Rs.1300/- MT at which molasses was sold during the period May 94 to January 95 by other manufacturers to various sugar units/distilleries including the appellant. For the reasons stated in para 8 above there is no need to go by the comparable prices of other manufacturers since value of comparable goods i.e. price of the product by the same manufacturer i.e. the appellant themselves is available. Further the price of Rs.1500/- MT though based on the cost construction molasses was not liable to duty, all the more lends more credibility to this price. In any case, in the absence of any evidence to the contrary I do not see why this price should not be taken as a normal price under Section 4(1)(a). The quantity should is also not a small quantity, as contended. It is 29.28 MT which is 293 quintals. This cannot be treated as a retail or small quantity as seen from the case law in Gangeshwar Limited - 1997 (91) ELT 496 (Commissioner) (Appeals) cited by the appellant there in also the price is quoted only per quintal. It may appear small as compared to their own supplies for captive consumption not other wise. In any case, this price cannot be ignored. As per Rule G(b), the value in such cases should first be on the comparable goods manufactured by the assessable; if this is not available, then only we look for the value of comparable goods manufactured by any other assessee. Since there were sales of molasses made by the appellant themselves in February 94 to the same class of buyers this price could be taken to be the normal price in the ordinary course of wholesale trade under Section 4(1)(a). Even as per MRF judgment vide para 26 reported in 1995 (77) ELT 433 (SC) M/s. Nataraj Ceramics fall in the same class of buyers, as an actual user is industrial consumer since they are not a wholesaler or distributor who deals in such goods for resale. The AC was therefore right in adopting this price of Rs.2700 per MT for assessment for the period of March and April 94. The Ac's order in the first appeal is therefore upheld to this extent.
method (as admitted by the appellant) is being agreed to by me not for this reason. I am adopting it only for the reason that sale has taken place the bonafide nature of which has not been questioned by the Department. I therefore reject the appellant contention to base the Valuation on Rs.1000/- or 1300/- Per MT at which other manufacturers sold the product.
11. The above view is also supported by the recent CEGAT decision in the case of CCE Bombay Vs Cromption Creaves Limited reported in 1997 (90) ELT 486 (T) wherein it is held that where comparable price is available that should form the basis for adoption and only where it is not available resort should be had to the cost construction method under rule 6(b)(ii).
12. For the above reasons, I partly allow all the appeals to the extent discussed in paras 8 and 9 above. Other wise the appeals are rejected.
5. He has therefore allowed all their appeals to the extent discussed in para-8 & 9 above.
6. We, therefore, do not find any infirmity in the order of the Commissioner (Appeals) who has not accepted the stray case of a different class of buyer. There is no evidence of their sale at the price claimed by the Revenue. We also notice that in similar appeals filed by Revenue in the case of CCE Trichy Vs. THIRU AROORAN SUGARS LTD., which had come up for final hearing on 28.8.2001 in which we have held that since they had sold at the price fixed by State Govt. at the rate of Rs.1300/- per MT for molasses used in the manufacturer of industrial alcohol and since sale was at arm's length and on principal to principal basis, and since industrial alcohol manufacturer namely distillers are one class of buyer, the price charged from them has to be accepted as the correct price for assessment purpose. The appeals of Revenues are therefore rejected. Ordered accordingly.
(Dictated and pronounced in open Court)