Custom, Excise & Service Tax Tribunal
The Commissioner Of Central Excise vs Special Steel Ltd on 4 August, 2010
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No.I APPEAL No.E/389/03 (Arising out of Order-in-Appeal No.PKA/423 to 424/M-III & NGP/2002 dated 31/10/2002 passed by Commissioner of Central Excise (Appeals), Mumbai) For approval and signature: Honble Mr.P.G.Chacko, Member (Judicial) Honble Mr.S.K. Gaule, 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 : CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy :
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
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The Commissioner of Central Excise,
Mumbai Appellants
Vs.
Special Steel Ltd., Respondents
Appearance:
Shri.R.K.Mahajan, Jt. CDR for the Appellants
Shri.Gajendra Jain, Advocate for the Respondents
CORAM:
Mr.P.G. Chacko, Member (Judicial)
Mr.S.K. Gaule, Member (Technical)
Date of hearing : 04/08/2010
Date of decision : 04/08/2010
O R D E R No:..
Per: P.G. Chacko
1. A valuation dispute is involved in this appeal of the Revenue. During the period of dispute (from October 1994 to June 2000), the respondent had cleared wire rods (both mild steel & high carbon) to their sister units at Tarapur and Borivli at lower rates when compared to the price charged to independent buyers in respect of identical goods. The department therefore issued periodical show-cause notices, 15 in number covering the above period, to the respondent seeking to recover differential duty of over Rs.25 crores. In each of the show-cause notices, the maximum rate charged to independent buyers during the relevant period was adopted as basis for determination of the assessable value of the goods transferred to the sister units in the same period, an exercise done in terms of Rule 6 (b) (i) of the Central Excise Valuation Rules, 1975. The respondent contested the demand of duty on numerous grounds. They submitted that they had given various discounts to independent buyers, which required to be abated from the invoice value and the net value charged to independent buyer should have been taken as the basis for assessing the goods cleared to sister unit, under Rule 6 (b) (i). In support of the submission, the respondent produced various documents including the copies of credit notes issued to independent buyers. After following the principles of natural justice, original authority confirmed demand of duty to the extent of Rs.16,69,98,005/- against the assessee. In arriving at this amount of duty, the Deputy Commissioner adopted the average of the rates charged to the independent buyers. For the initial part of the period of dispute, such average was adopted for a period of six months and, for the rest of the period of dispute, averaging was done for each month. The goods cleared to sister units during the period of six months or during a given month, as the case may be, were assessed to duty on the assessable value determined on the basis of the said average. Hence the demand of duty of over Rs.16.69 crores confirmed by the adjudicating authority. Against the order-in-original, both sides preferred appeals to the Commissioner (Appeals), the Revenue questioning the reduced demand of duty and the assessee challenging the entire demand. Disposing of both the appeals by a common order, ld. Commissioner (Appeals) set aside the order-in-original and held the duty payments made by the assessee to be in order. In other words, the decision of the lower appellate authority went against the Revenue. Hence the present appeal of the Revenue.
2. We have heard the ld. JCDR for the appellant and the ld. Counsel for the respondent and have considered their submissions.
3. It is not in dispute that, on the facts of this case, the valuation of the goods is governed by the provisions of Rule 6 (b) (i) ibid. It is, again, not in dispute that clause (ii) of Rule 6 (b) is not applicable inasmuch as, in this case, there was no exclusive clearance to sister units during any part of the period of dispute. During the period of dispute, the goods were partly cleared to sister units and partly to independent buyers, and the rates at which the goods were transferred to sister units were, by and large, higher than those at which the goods were sold to independent buyers. In this scenario, the adjudicating authority applied, and rightly so, Rule 6 (b) (i). The dispute before that authority was in relation to application of the proviso to Rule 6 (b) (i). This proviso reads as follows:
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.
4. In applying the above proviso to the clearances in question, the adjudicating authority took the average of rates charged to independent buyers in a given period ( = year, for the earlier part of the period of dispute, or a calendar month, for the rest of the period of dispute) and after allowing certain abatements, worked out the comparable prices, on the basis of which the value of identical goods cleared to sister units was determined. When the matter came up before the Commissioner (Appeals), the appellate authority found, mainly, two infirmities in the order of adjudication. The appellate authority held that all the relevant factors had not been considered by the lower authority while comparing the goods cleared to sister units and those cleared to independent buyers by the assessee. It was particularly held that the difference in material characteristics of the goods had not been taken into account while applying the proviso to Rule 6 (b) (i). The ld. Commissioner (Appeals) further observed that the lower authority had not abated the appropriate quantity discount, sales tax, loyalty discount and octroi from the prices charged to independent buyers so as to obtain the comparable price for the assessment of the goods cleared to sister units. These findings of the ld. Commissioner (Appeals) are under serious challenge in the present appeal. The ld. JCDR has submitted that the above findings recorded by the ld. Commissioner (Appeals) are not factually correct. It is submitted that, at least, loyalty discount was abated from the average prices charged to the independent buyers before the original authority determined the assessable value of the goods cleared to sister units under Rule 6 (b) (i). After a perusal of the order-in-original, we have found the submission of the ld. JCDR to be correct. However, a grievance has been raised against the averaging done by the original authority. In this connection, the ld. JCDR has relied on the Tribunals decision in Crompton Greaves Ltd., Vs. CCE, Aurangabad. (2004 (177) ELT 1032 (Tri-Mumbai). On going through this judgement of the Tribunal, we find that the Tribunal was considering a similar set of facts for a similar period (October 96 to June 2000). The assessee in that case was clearing excisable goods to their own unit at Nasik and were also clearing identical goods to independent buyers during the above period, the prices charged to independent buyers being higher than the price on the basis of which duty was paid by the assessee in respect of the clearances made to the sister unit. The Tribunal approved the method of valuation done under Rule 6 (b) (i) and also upheld the adoption of maximum price at which the goods were sold to independent buyers as basis for assessing the goods sold to the sister unit. The ld. JCDR has heavily relied on this decision of the Tribunal. It is also pointed out that, though the civil appeal filed by Crompton Greaves Ltd. was admitted by the Honble Supreme Court, no stay of operation of the Tribunal order was granted vide Crompton Greaves Ltd..CCE (2005 (181) ELT A128 (SC).
5. The ld. Counsel, on the other hand, has suggested that the case could be disposed of on the sole ground of revenue neutrality. It is submitted that whatever differential amount of duty paid by the respondent for the period of dispute would be available as CENVAT credit to their sister units and, therefore, a typical revenue neutral situation exists. In this connection, the ld. Counsel has relied on the following judgements:
a) CCE, Pune Vs Coca-Cola India Pvt. Ltd., (2007 (213) ELT 490 (SC)
b) India Pistons Ltd., Vs. CCE (2008 (2210) ELT 295 Tri-Chennai)
6. In the case of Coco-Cola India Pvt Ltd., the assessee had cleared their products (non-alcoholic beverages bases/concentrates) to their bottlers who used the said materials in the manufacture of beverages. A classification dispute arose in respect of the non-alcoholic beverages bases/concentrates manufactured by the assessee. When the dispute ultimately arose before the Apex court, the Honble Court took note of a crucial plea made in the counter affidavit filed by the assessee, which was to effect that, as the duty payable by them was modvatable, the issue of classification was purely academic. Their lordships accepted this plea and dismissed the Revenues appeals leaving the question of law open. In the case of India Pistons Ltd. (supra), this Tribunal found a similar revenue neutral situation and allowed the assesses appeal, which was against the enhancement of value of excisable goods, ordered by the Commissioner (Appeals). The ld. Counsel submits that the present valuation dispute, which pertains to the period prior to 01/07/2000, is not of recurring nature and that the issue is only of academic interest inasmuch as any amount of duty which may be paid by the assessee must be available as CENVAT credit to their sister unit without any abatement, thereby giving raise to a revenue neutral situation. It is suggested that whatever questions of facts or law arising in this case could be left open. The ld. JCDR, in his rejoinder, has insisted on a decision on merits.
7. Though we have found factual errors in the impugned order, we are inclined to dispose of this case, for the ends of justice, by taking into account, the revenue neutral situation pointed out by the Counsel. The valuation dispute involved in this case is prima facie not relevant to the period from 01/07/2000. Nobody has claimed that a similar dispute between the assessee and the Revenue for any other period prior to 01/07/2000 is upcoming. Apparently the issue has no recurring effect and is only of academic interest. It is not in dispute that any amount of duty paid by the assessee will be available as CENVAT credit, without abatement, to their sister units, in which event a revenue neutral situation would emerge it. In the case of Coca-Cola India Pvt. Ltd. (supra), the Honble Supreme Court considered a similar situation and disposed of the case, leaving a question of law open. In the case of India Pistons Ltd.(supra), similar course of action was taken by the Tribunal. In the instant case, questions of facts do arise and, of course, a question of law is also in sight. Neither the questions of facts nor any anticipated question of law would have any bearing on Revenue inasmuch as any outcome of this case will not detract from the revenue neutral situation. Whatever duty paid by the assessee must be available as CENVAT credit to their sister units. The appellant neither stands to gain nor stands to loose. In this view of the matter, we dispose of this appeal without expressing any view on the questions of fact/law involved in this case.
(Dictated in Court) (S.K. Gaule) Member (Technical) (P.G.Chacko) Member (Judicial) pj 1 7 2