Gujarat High Court
Cce Bhavnagar vs Ultratech Cement Pvt. ... on 22 January, 2014
Author: Sonia Gokani
Bench: Akil Kureshi, Sonia Gokani
O/TAXAP/823/2013 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 823 of 2013
With
TAX APPEAL NO. 824 of 2013
With
TAX APPEAL NO. 825 of 2013
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CCE BHAVNAGAR....Appellant(s)
Versus
ULTRATECH CEMENT PVT. LTD....Opponent(s)
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Appearance:
MR YN RAVANI, ADVOCATE for the Appellant(s) No. 1
MR ANAND NAINAWATI, ADVOCATE for the Opponent(s) No. 1
NOTICE SERVED for the Opponent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MS JUSTICE SONIA GOKANI
Date : 22/01/2014
ORAL ORDER
(PER : HONOURABLE MS JUSTICE SONIA GOKANI)
1. Since common questions of law arise in the present group of Tax Appeals, the facts given in Tax Appeal No.823 of 2013 are considered for deciding the issues.
2. Following are the substantial questions of law raised by the Revenue in the present Tax Appeal referred to in section 35G of the Central Excise Act, 1944 (hereinafter referred as "the Act) for our consideration:-
Page 1 of 9O/TAXAP/823/2013 ORDER "(1) Whether in the facts and circumstances of the case, the Tribunal was correct in setting aside the demand of duty prior to the period of one year from the date of issuance of Show cause Notice dated 09.11.2009 as being hit by limitation?
(2) Whether in the facts and circumstances of the case, the Tribunal was justifiable in holding the differential duty demanded and confirmed by CCE, Bhavnagar, as an Adjudicating authority, on clearances made from NCMU unit without jurisdiction vide Order-in-Original Nos.1 to 4/BVR/Commissioner/2011 dt.22.03.2011,Order-in-Original No.39/BVR/ Commissioner/2011 dt.21.09.2011 and Order-in- Original No.3/BVR/Commissioner/2012 dt.01.02.2012?"
3. Brief facts arising in Tax Appeal No.823 of 2013 are as follows:-
3.1 The respondent authority is manufacturer of cement discharging the central excise duty on the cement cleared by them. Revenue believed that in the clearances effected by the appellant to their own units, the respondent had undervalued the clearances by resorting to valuation under Rule 8 read with Rule 9 of the Central Excise Valuation Rules, 2000.
4. On due investigation, the show cause notice had been issued. The adjudicating authority in order-in- original confirmed the demand in respect of four show cause notices and had levied the interest and penalty.
5. This was when carried to the Customs Excise & Service Tax Appellate Tribunal ("CESTAT" for short), it had noticed that the show cause notice dated 9.11.2009 demanded the duty liability for the period from March, 2008 to May, 2009, which included the Page 2 of 9 O/TAXAP/823/2013 ORDER period of one year prior to the date of issuance of the show cause notice. Considering the fact that the respondent had filed regular monthly returns from March, 2008 onwards and also considering the plea of the respondent that guided by their bona fide belief that the Board circular dated 1.7.2000 shall apply, the demand raised vide show cause notice dated 9.11.2009 was held to be barred by limitation.
6. Therefore, the present appeals proposing the aforementioned questions of law.
7. We have heard learned counsel Mr.Y.N.Ravani for the Revenue and learned counsel Mr.Anand Nainawati for the respondent assessee who have fervently supported the rival claims of respective parties. The short question of controversy would be whether the appellant can be subjected to the rigors of extended period of limitation because of undervaluation of alleged clearance to their units, terming the same as deliberate act of undervaluation when in fact the appellant followed the circular of the department, which otherwise is binding to the department itself.
8. At the outset, circular dated 1.7.2002 No:643/34/2002-CX is to be referred to and relevant portion of the same requires to be reproduced hereunder:-
Page 3 of 9 O/TAXAP/823/2013 ORDER
Sl. Point of doubt Clarification
No.
How will valuation be done in For captive
cases of captive consumption consumption in
(i.e. consumed within the same one's own factory,
factory) including transfer to a valuation would be
sister unit or another factory of done as per rule 8
the same company/firm for further of the Valuation
use in the manufacture of goods? Rules i.e. the
assessable value
will be 115% of
the "cost of
production" of the
goods.
If the same goods
are partly sold by
the assessee and
partly consumed
captively, the
goods sold would be
assessed on the
basis of
"transaction value"
[provided they meet
the conditions of
Sec.4(1)(a)] and
the goods captively
consumed would be
valued as per Rule
8 of the Valuation
Rules. This is
because, as per new
Section 4,
transaction value
has to be
determined for each
removal.
Where goods are
transferred to a
sister unit or
another unit of the
same company
valuation will be
done as per the
proviso to Rule 9.
9. This circular was introduced for providing
clarifications in respect of various challenges and
issues which arose when the new Valuation Rules came into effect from 1.7.2000. Clause 5 of the said Page 4 of 9 O/TAXAP/823/2013 ORDER circular addressed the issue as to how the captive consumption of manufacture of goods is required to be evaluated which also includes transfer of the same to sister concern or to the units of another factory of same company for further use in the manufacture of goods.
10. This circular specifies that in case of the captive consumption in one's own factory, the valuation would be done as per rule 8 of the Valuation Rules. It should mean that the assessable value of the goods to be assumed at 115% of the cost of production of the goods. And, if the same goods are partly sold by the assessee and partly consumed captively, the goods sold would be assessed on the basis of transaction value.
11. Details of section 4, which speaks of the transaction value after substitution by section 94 of the Finance Act, 2000, has come into effect from 1.7.2000, which runs as follows:-
"4.(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."Page 5 of 9
O/TAXAP/823/2013 ORDER
12. Details of rule 8, at this stage, may not be necessary to be reproduced.
13. In the instant case, the Tribunal has relied on the decision of larger Bench in the case of Ispat Industries Ltd. vs. Commissioner of C.Ex.Raigad reported in 2007(209) E.L.T. 185 (Tri.LB) where it is held that if the transfer of part of production is to another plant of the same assessee and balance production is sold to independent buyers, the provision of rule 8 of Valuation Rules will not apply. In this decision, the issue that was before the larger Bench was "Whether assessable value in respect of the goods which are transferred to another plant of the same is required to be determined as per rule 4 of the Central Excise Rules, 2000 (as claimed by the appellant) or as per rule 8 of the said rule, (as claimed by the Revenue)in a case where the same goods are also sold to the independent buyers?" the Tribunal answered the said reference in the following manner:-
"9. In view of what we have observed above, we answer the reference in the following terms:
(a) the provisions of Rule 8 of the Valuation Rules will not apply in a case where some part of the production is cleared to independent buyers;
(b) the provisions of Rule 4 are in any case to be preferred over the provisions of Rule 8 not only for the reason that they occur first in the sequential order of the Valuation Rules but also for the reasons that in a case where both the rules are applicable, the application of Rule 4 will lead to a determination of a value which will be more consistent and in accordance with the parent statutory provisions of Section 4 of the Central Excise Act, 1944."Page 6 of 9
O/TAXAP/823/2013 ORDER
14. It could be noticed from the material on the record that the larger Bench had concluded that the provision of rule 8 of the Valuation Rules would not apply in a case where some part of the production of goods were cleared to the independent buyers.
Admittedly, in the instant case, there is a sale of loose cement to the independent buyers at a value higher than arrived at by the respondent for the discharge of the duty liability of the cement. Noticing the fact that regular monthly returns were being filed by the respondent from March, 2008 onwards, which were accepted by the authorities without any murmur, while fixing the higher value at which the sale was made to the independent buyers being the assessable value of goods transferred to another plant, extended period of limitation was not sustained by the Tribunal.
15. The respondent had sought to depend upon the Board's circular which had binding effect till the decision of larger Bench in case of Ispat Industries Ltd. vs. Commissioner of C.Ex.Raigad (supra) and also urged further that the extended period of limitation would not be available to the department in wake of undisputed facts.
16. Catena of decisions categorically hold that the circulars issued by CBEC under section 37B of the Central Excise Act or by CBDT under the Income Tax Act,1961 primarily on the basis of the statutory provisions, to give uniformity across the country in levying of tax and duty, would be binding on the department.
Page 7 of 9 O/TAXAP/823/2013 ORDER
17. Apex Court in the case of Commissioner of
Customs, Calcutta vs. Indian Oil Corporation Ltd.
reported in 2004 (165) E.L.T.257(S.C.) held that
although a circular is not binding on a Court or on an assessee, Revenue cannot raise contention contrary to binding circular by Board and till the circular remains in operation, Revenue is bound by it and cannot be allowed to plea that it is not valid nor that it is contrary to the terms of statute. So as not to burden this order, other decisions on the very point are not discussed.
18. In the case of Coaltar Chemicals Manufacturing Co. vs. Union of India reported in 2003(158) E.L.T.402(S.C.), the Apex Court has held that the manufacturer or the producer whenever is to be saddled with any liability, the question that would arise is as to whether there was any deliberate act of suppression of the information, which the manufacturer knew otherwise and in every case that question of fact needs to be established.
19. Thus on both the counts, firstly that there came a decision explaining and clearing the doubts as to in what manner the valuation requires to be done in the event of captive consumption of goods as also in case of goods transferred to sister concern or to another factory of the same assessee and till then, board circular governed the field. And, also because from March, 2008 onwards. On regular basis, the monthly returns have been filed by the assessee respondent indicating all possible details. Thus, the Tribunal Page 8 of 9 O/TAXAP/823/2013 ORDER rightly turned down the demand of duty prior to the period of one year from the date of issuance of show cause notice dated 9.11.2009, holding the same to have been hit by the law of limitation.
20. In the instant case, we are in complete agreement with the findings of CESTAT, which rightly has concluded from the gamut of facts and evidence that all the materials were available with the Department, which could have been questioned and at no point of time any issue was raised questioning any credential of the respondent with regard to such transfer, the extended period of limitation in the demand notice could not have been sustained. Question of law is appropriately answered by the Tribunal.
21. Tax Appeals, resultantly, deserve no consideration further and the same are dismissed.
(AKIL KURESHI, J.) (MS SONIA GOKANI, J.) SUDHIR Page 9 of 9