Custom, Excise & Service Tax Tribunal
Rallis (India) Ltd vs Commissioner Of Central Excise, ... on 10 June, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No. E/3438/05-Mum (Arising out of Order-in-Original No. 09/Commr/05-06 dated 25.5.2005 passed by Commissioner of Central Excise & Customs, Belapur) For approval and signature: Honble Mr. M.V. Ravindran, Member (Judicial) and Honble Mr. Raju, Member (Technical) ======================================================
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 : No 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?
====================================================== Rallis (India) Ltd. Appellant Vs. Commissioner of Central Excise, Belapur Respondent Appearance: Shri Rajesh Ostwal, Advocate, for appellant Shri Ajay Kumar, Jt. Commissioner (AR), for respondent CORAM: Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. Raju, Member (Technical) Date of Hearing: 10.6.2016 Date of Decision: 10.6.2016 ORDER NO Per: M.V. Ravindran
This appeal is directed against order in original No. 09/Commr/05-06 dated 25.5.2005.
2. The relevant facts that arise for consideration are the appellant herein is a manufacturer of chemicals and is clearing the same for home consumption on payment of duty as well as their own sister concern on payment of duty. While clearing the chemicals to independent buyers, they are discharging the duty liability based on the transaction value or the normal price as the case may be, while clearing the goods to the sister concern they are discharging the duty on the same price. It is a case of the Revenue that while clearing the goods to the sister concern, it is not a sale, hence appellant is required to discharge the duty liability on the value arrived at by considering the cost of production and profit margin. The period in dispute is from April 1999 to March 2003, hence the provisions of Section 4 of the Central Excise Act, 1944 as applicable for pre-and post 1.7.2000 needs to be considered, accordingly the Revenue authorities came to a conclusion that for captive consumption of the chemicals by a appellants sister concern, it needs to be valued in accordance with the Valuation Rules which is based on the cost of raw materials plus the profit margin as per old Valuation Rules and the new Rules. It is the case of the Revenue that as per cost of production method, the assessable value of the goods cleared to their own sister concern were undervalued, accordingly show cause notice was issued for the demand of differential duty on the clearances made to sister concern and interest was also demanded with the proposal for imposition of penalties. The adjudicating authority after following the due process of law confirmed the demands as proposed, and also demanded and confirmed the interest payable on such amounts for the imposed penalties under Section 11AC of the Central Excise Act, 1944.
3. Learned counsel draws our attention to the facts of the case and submits that there is no dispute as to the fact that the goods cleared to independent buyers were valued at a particular price and the said assessable value was accepted by the department. He would submit that the appellants as per their understanding of the law, discharged central excise duty on the goods cleared to their sister concern, as per the value considered for the sale of the goods to independent buyers. He would submit a chart of the products in question and the period thereof and amount of duty liability, the same is reproduced.
Sl. No Product Period Demand (Rs.) Amount paid (Rs.) 1 Metribuzin Technical April 1999 to March 2001 10,07,795 10,07,795 2 Pendimethalin 33% April 1999 to March 2000 27,444
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April 2002 to March 2003 2,98,112 2,98,112 3 4DN July 2000 to March 2001 1,80,503 1,80,503 4 Pendimethalin 30% April 2001 to March 2002 9,900
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April 2002 to March 2003 5,82,790 5,82,790 5 Imidachlorprid Tech April 2002 to March 2003 1,53,395 1,53,395 6 Ethion Technical April 1999 to March 2003 66,63,671
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Total 89,23,610 22,22,531 He would submit that the appellant is not contesting the duty liability on the products as indicated at serial number 1 to 5, as they have paid the duty along with interest. They are contesting only the imposition of penalty on these 5 products for which he would submit that the discharge of duty liability based upon the assessable value of the goods cleared to independent buyers was an understanding of the appellants which was in accordance with the law. As regards the product at serial number 6 above chart, he would submit that period in dispute is from April 1999 to March 2003 and the demand is made by a show cause notice dated March 2004 is blatantly time barred. It is also his submission that the entire demand on this item needs to be set aside as there is no intention to evade the duty as the goods cleared to their own sister concern is for captive consumption hence there cannot be any intention to evade duty. Further the duty paid on such goods will be taken as cenvat credit by their sister concern. He would submit that when the goods are cleared to their own concern, the question of revenue neutrality arises and the entire demand needs to be set aside is the law settled by the Honble Supreme Court in the case of Special Steel Ltd 2016 (334) ELT A123. He would submit that the Larger Bench decision of the Tribunal in the case of Ispat industries Ltd 2007 (209) ELT 185 was also holding a view that once there is factory gate sale value and transaction value of any products, the same should be applied for the clearances made to their own sister concern for discharge of duty liability, hence penalties imposed on them needs to be set aside.
4. Learned departmental representative, while reiterating the findings recorded by the adjudicating authority, would submit that the cost of production of the goods were more than the value applied to independent buyers. It is his submission that this factual aspect is not disputed by the appellants. He would submit that there is evasion of duty hence penalty was correctly imposed.
5. Heard both sides and perused the records.
6. The dispute that has arisen for our consideration is whether the assessable value which has been considered by the appellants for the clearances made to their sister concern is correct or otherwise and whether the demand is untenable due to the revenue neutrality of the issue involved or otherwise.
7. As conceded by the learned Counsel, the amount of duty payable on the products at serial number 1 to 5 (as per the table reproduced herein before in paragraph 3) is upheld along with interest.
8. As regards the clearances of the product Ethion Technical, we find that the main argument of the learned counsel is that the period involved is from April 1999 to March 2002 and the demand has arisen on the ground of undervaluation of the products cleared to sister concern. It is undisputed that the goods/products cleared to independent buyers are not in dispute nor is the valuation thereof. The dispute is undervaluation of the products cleared to sister concern. The entire controversy and the demand can be decided by only one question as to whether the demands raised on this product is of revenue neutral nature and accordingly, the extended period for demand of the duty liability can be invoked or otherwise. It is undisputed that the product in question is cleared to their own sister concern and the sister concern is eligible to avail the cenvat credit of the duty paid by the appellant. If that be so, there cannot be any mens-rea attached to the clearances made by the appellants to the sister concern and discharge of duty by adopting a particular assessable value. The law is fairly settled on this issue inasmuch that if the clearances are made to their own sister concern and if other unit is eligible to avail cenvat credit, there cannot be any intent to evade central excise duty. As correctly pointed out by the learned Counsel, the issue is now covered by the judgment of the apex court in the case of Special Steel Ltd (supra) by dismissal of Revenues civil appeal against Tribunals order. In view of the revenue neutral situation, in the facts and circumstances of this case, it is held that the demand and the interest liability is unsustainable in respect of the product in question Ethion Technical. Accordingly the demand and interest liability is set aside.
9. As regards the penalty imposed by the adjudicating authority, we are of the view that appellant could have entertained a bone fide belief that they have to discharge the duty liability of the goods cleared to their sister concern, on the value of the clearances made to independent buyers. This bona fide view may have been entertained, as the Larger Bench of the Tribunal in the case of Ispat industries Ltd had held so. Since the issue is of interpretation, we find that there is no necessity to visit the appellants with penalty for the duty liability discharged by them as recorded hereinabove.
10. In view of the facts and circumstances of the case in hand, the appeal is disposed of as indicated hereinabove.
(Operative part of order pronounced in Court) (Raju) Member (Technical) (M.V. Ravindran) Member (Judicial) tvu 1 8 E/3438/05