Custom, Excise & Service Tax Tribunal
M/S. Sterlite Industries (I) Ltd vs Cce, Tirunelveli on 26 August, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH AT CHENNAI E/MISC/40439/15, E/MISC/40440/15 E/MISC/40441/2015 E/MISC/40811/13, E/MISC/40810/2013 in E/295/2009 E/MISC/40442/15, E/MISC/40443/15 in E/406/2010 E/MISC/40436/15, E/MISC/40437/15 in E/412/2010 (Arising out of Order-in-Original No.2,3,4 & 5/Commr./CE/2009 dated 15.04.2009, passed by the Commissioner of Central Excise, Tirunelveli, and Order in Appeal No. 89/2010 dated 24.03.2010, passed by the Commissioner of Central Excise (Appeals), Madurai. M/s. Sterlite Industries (I) Ltd. : Appellant/Respondent
Vs. CCE, Tirunelveli : Respondent/ Appellant Appearance Shri Natarajan Sr. counsel.
Shri T.S. Balasubramanian, Adv., Shri G. Krishnamoorthy, Adv., For the appellants Shri N. Rajagopalan, Spl. Counsel For the respondent CORAM Honble Shri R. PERIASAMI, Technical Member Honble Shri P.K. CHOUDHARY, Judicial Member FINAL ORDER No. 40192-40194 Date of Hearing : 14.8.2015 26.08.2015/27.08.2015 Date of pronouncement : 04.02.2016 Per: R. Periasami Appellant filed seven miscellaneous applications in respect of all the three appeals viz., E/MISC/40439/15, E/MISC/40440/15 E/MISC/40441/2015 in E/295/2009, E/MISC/40442/15, E/MISC/40443/15 in E/406/2010, E/MISC/40436/15, E/MISC/40437/15 in E/412/2010 requesting for change of cause title from M/s. Sterlite Industries (I) Ltd. to M/s. Sesa Sterlite Limited and from M/s. Sesa Sterlite Limited to M/s. Vedanta Limited. It is submitted that M/s. Sterlite Industries Ltd. has been merged with M/s. Sesa Sterlite Limited and it was approved by the Honble High Court of Goa and Madras and submitted the Certificate of incorporation dated 18.09.2013 issued by ROC, Goa. Subsequently, the name of the Company M/s. Sesa Sterlite Ltd. has been renamed as M/s. Vedanta Ltd. and the appellants submitted the Certificate of incorporation dated 21.04.2015 from ROC, Goa. Accordingly, change of cause title from M/s. Sterlite Industries Ltd. to M/s. Sesa Sterlite Ltd., to M/s. Vedanta Ltd., is allowed. All the seven miscellaneous applications for change of cause title from M/s. Sterlite Industries Ltd., to M/s. Sesa Sterlite Ltd. and from M/s. Sesa Sterlite Ltd. to M/s. Vedanta Ltd. are disposed of.
2. There are two assessees appeals and one revenue appeal and all the appeal up are taken up together for disposal as the issues involved are identical and related to valuation of copper anode manufactured and cleaned to their sister units.
3. Appeal No. E/295/2009 was filed by the appellant assessee against the Commissioners Order dated 15.04.2009. Appeal No. E/412/2010 was filed by the appellant against the Commissioner (Appeals) Order No. 89/2010 dated 24.03.2010. Appeal No. E/406/2010 was filed by the Revenue against the Order of the Commissioner (Appeals) dated 24.03.2010.
Appeal No. E/295/2009
4. The brief facts of the care are that the appellants are engaged in the manufacture of Copper Anode, Copper Cathode and Continuous Cast Copper Wire Rods which are falling under Chapter 74 of the First Schedule to the Central Excise Tariff Act, 1985. The copper anodes were not sold but were cleared to their sister units located at Chinchpada and Piparia at Silvassa for the manufacture of copper cathodes/continuous copper wire rods. Since the goods were not sold but cleared to their own sister units for manufacture of copper cathodes/continuous copper wire rods, the assessees were filing price declarations to the Department regularly adopting cost construction method for determining the assessable value for payment of duty under the Central Excise valuation Rules. The accounts of the appellants unit was subjected to cost audit under Section 14A of the Central Excise Act, 1944 and the Cost Auditor was nominated for this purpose and he carried out cost audit for the purpose of arriving the cost for the period 1996-97 (July 96 June 97) and 1997 (July-Dec.97) and submitted his report based on the cost, determined by cost Audit proceedings were initiated for the recovery of differential duty. The Commissioner in his OIOs No. 9/2000 dated 20.12.2000 and No. 01/2001 dated 20.04.2001, covering the period from September, 1996 to March, 2000 confirmed the demand of Rs. 1.21 Crores and Rs.85.67 Crores respectively. The said orders were appealed before the Tribunal and the Revenue was also in appeal before the Tribunal. the Tribunal had set aside the impugned order vide final order No. 285 to 288/09 dated 24.03.2009 with the direction to arrive the cost as per CAS-4. During pendency of appeal before Tribunal the Dy. Commissioner also confirmed the demand of differential duty by following for the period 01.07.2001 to 31.07.2001, the assesee challenged the Order in Originals and the Commissioner (Appeals) rejected their appeal and on appeal, the Tribunal in its Final Order No. 1111-1115/2005 dated 09.08.2005 set aside the impugned order and directed the LA to determine the cost as per CAS-4 formula. During pendency of appeal before Tribunal, the department issued SCNs dated 26.07.2002, 02.05.2003, 05.08.2003 and 29.07.2003 demanding differential duty. The appellant submitted Cost Certificate issued by the Cost Accountant arriving cost as per CAS-4 standard. The Commissioner referred the issue to Dy. Director (Cost) who in turn after examining the records submitted his report and the same was given to the assesse. Assesse filed submission and contested Dy. Director (Cost) report after following the principle of natural justice and hearing the appellants. The Commissioner of central Excise in his order dated 15.04.2009 confirmed the demand of deferential of Rs.13,98,95,414/- and imposed a penalty of Rs.2 5,00,000/- under Rule 25 of CER, 2001 and dropped penalty under Section 11 AC of Central Excise Act. Hence the present appeal.
5. Appeal No. E/412/2010 and E/406/2010 The Assistant Commissioner has confirmed the demand of differential duty Rs. 6,19,52,363/- for the subsequent period and also imposed a penalty of Rs. 10,00,000/- under Rule 25 of CER, 2001. on appeal the Commissioner (Appeals) in his order dated 29.03.2010, partly allowed the appeal and reduced the assessable value of copper anodes from Rs. 99,742 per MT to Rs.97,302 per MT and demand reduced to Rs.4,76,07,671/- and set aside the penalty. Against this OIA both the assessee and Revenue filed appeal in E/412/2010 and E/406/2010 respectively.
6. Heard both sides. Senior Advocate Shri C. Natarajan, appearing on behalf of the assesse advanced his submission based on 7 volumes of paper books as under:-
Volume 1 - Appeal papers in E/295/2009 Volume 2 - documents in respect of E/295/09 Volume 3 - Appeal and documents in respect of E/412/2010 Volume 4 - CAS guide lines and CA institute guidelines Volume 5 - Addl. Evidences and citations Volume 6 - Additional grounds and citations Volume 7 - Revenue appeal and counter in respect of E/295/09 and E/412/2010 Synopsis in respect of E/295/09 and E/412/2010 He also submitted additional documents of three volumes and also relied on the synopsis submitted on 13.01.2014 and explained the sequence of dates with reference to provisional assessment dated 01.11.99. Based on the submissions as per the tabulation sheet submitted in annexure-1 at page-39, he submitted that their appeal contesting valuation on the foreign exchange fluctuation, power and fuel charges, analysis charges, Sale value of sulphuric acid in excess of P&L, duty drawback and LC charges etc. He further submits that out of 9 issues which are against the assesee they are contesting only on the eight issues as per this list appended is page 39 & 40 of the type set dated 10.01.14 and in respect of the eighth item ISO-TQM charges they are not contesting. From the synopsis, he drew the attention to page 71, 76 of their written submission dated 19.07.2009 in volume I and submits that he relied OIO at page 124, where the Commissioner held that the no provisional assessment for the period from July 2001 to October 2002 covering in four SCNs prior to 01.11.2002 is valid since provisional assessment was ordered with effect from 01.11.2002 and he was explaining the date of events stated in page1 of the synopsis, where he submitted that provisional assessment was initially ordered on 01.11.99. He drew attention to the bank guarantee dated on 04.12.2000 and bank guarantee submitted on 21.02.2001 and their letter dated 17.07.2002 requesting the Asst. Commissioner to continue the provisional assessment through their letter dated 16.10.2002. In response to DCs letter dated 12.08.2002 bank guarantee was reviewed for the period of one year. He relied n the letter dated 21.02.2012, 28.10.2012, 01.11.2012 and submitted that provisional assessment continued for the entire period whereas the Commissioner has taken as provisional assessment from 01.11.202 and not from 01.11.1999.
7. On the issue of foreign exchange fluctuation, he submitted additional evidence and citations. On the merits of the case, he submits that the Commissioner has enhanced the value as per the cost audit submitted by Dy. Director (Cost). He further submits that no notice was issued except by letter dated 05.12.2008 enclosing the DD cost on the foreign exchange fluctuations. He drew the attention of the Bench by relying page 126 of volume I of their submission that they have clearly submitted before the Commissioner that the foreign exchange fluctuation which is not addable to the cost as the fluctuations are speculative in nature. To this he relied on the guidelines issued by the Institute of Cost Accountant annexed to volume-2 at page 102 & 105, wherein it has been clarified that the difference between the actual payment and the amount taken n material cost, the same is taken to the final amount. He further submits that as per the above guidelines it is clarified that loss or gain of foreign exchange of purchase of materials are in other transactions involving foreign exchange is not part of the material cost or other transactions. However, he relied on the illustration annexure-5 at para 5.17, where it is clarified that the foreign exchange conversion any change in the exchange rate till payment or otherwise there are not form part of the cost and he drew attention to annexure-5 illustration and the Commissioners findings at para 16 of volume-I at page 126, where he has relied on para 5.1 of CAS-IV and not para5.16. He also submits that for the year 02-03, there was no foreign exchange, no deductions made as per CAS-IV. He submits that entire issue of addition of value on the cost of the raw material as per CAS-IV was purely based on the notes of the Director cost. The appellants were not even given any chance to counter or to argue against the proposed conditions made by the Commissioner. Had the department is given opportunity they could have explained before the Commissioner each and every issue. Therefore, he submits that the entire value adopted not in conformity in the law. With reference to forex and other issues, he submits that as per their written submissions, synopsis dated 31.02.14, they have countered all the issues. He also submits that the Commissioner fixed the value as Rs.94,446/- for the period July-2001 to 31.03.2002 and Rs.94,594/- for the period 01.4.2002 to 31.10.2002. He relied on the Honble Supreme Court order in the case of Commissioner of Income Tax, Delhi Vs. Woodward Governor India Private Limited - 2009 (13) SCC 1.
8. The Ld. Advocate submitted additional evidence that as per CESTAT procedural rules and Regulations, 1982, 223 of the Rules the Tribunal is empowered to accept the additional evidence and he explained the individual additional evidence which they proposed to rely are as under:-
1. CA certificate (annx-1 vol 5) dt 06.05.2013.
2. Statement of Cenvat & PLA Balance of Tuticorin unit-
Annex II
3. Note on accounting of foreign exchange fluctuation.
4. Certificate dt 28.05.2013 by cost Accountant
5. Method of accounting adopted by the Dy. Dir (cost).
Time taken for conversion from anode to cathode at their Silvasa unit. However, he submits that these evidences should be looked into by the adjudicating authority in support of his additional evidence, he relied on the following case laws:-
1. Excel Rubber Ltd. Vs. CCE, Hyderabad 2011-TIOL-536
2. Toyota Kirloskar Auto Parts PVt. Ltd. Vs. CCE 2012 (276) ELT 332 (Kar.)
3. ITC Bhadrachalam Paperboards Ltd. Vs. CCE, HYD 2000 (115) ELT 527 (Tri.)
4. S.L. Kapoor Vs. Jagmohan & Others 1980 (4) SCC 379
9. Ld. Advocate submits that in view of their application filing for additional evidence they pleaded for allowing their additional grounds in the memorandum of appeal. The additional grounds were enclosed in volume -6 of the paper book. In support of these additional grounds, they have relied on the following citations.
1. M/s. Excel Rubber Ltd. Vs. CCE (supra)
2. J.K. Steel Ltd. Vs. UOI- 1969 (2) SCR 481
3. S.L. Kapoor Vs. Jagmohan & others (supra)
4. Toyota Kirloskar Auto Parts Pvt. Ltd. Vs. CCE, LTU, Bangalore 2012 (276) ELT 332 (Kar.)
10. Regarding their second appeal filed against the OIA in E/412/2010 (vol-3) he drew the attention to the findings of the OIO passed by the adjudicating authority for the period from 01.07.2000 to 30.06.2001. He confirmed the demand of Rs.6,19,52,364/-. They filed appeal before the Commissioner (appeals) and he partly allowed the appeal and held that they are entitled to adjustment of the excess duty paid by them in respect of analysis charges and sulphuric acid supplied to phosphoric acid plant, TQM charges, part of the professional fees are not to be included in the cost of production. The Commissioner (Appeals) has also allowed the expenses on account of foreign fluctuations not to be added to the cost of production. He submits that they have filed the present appeal only on limited grounds. The Commissioner (Appeals) has not given 100% reduction on account of drawback received on copper cathode. He drew attention to page 162 of Volume-I SION Norms for copper cathodes which is fixed as 1.06 MT of copper content in the export product. Whereas, the department fixed 1.02 MT of copper in the concentrate per MT of copper in the copper anodes.
11. The Ld. Advocate submits that whatever duty paid at Silvassa unit they are entitled for credit and further submits that since the assessments are provisional, wherever excess payment should be adjusted to the short payments made. He relied on the Honble Supreme Court decision in the case of Toyota Kirloskar Auto Parts Pvt. Ltd. (supra). He submits that all his submissions are in the records submitted in Annexure-I to VII to be taken into consideration and submits that since it requires to reconsider all the documents, he pleaded for remand of the case to the adjudicating authority based on the additional evidence and additional grounds.
12. Shri. Rajagopalan, Ld. Special Counsel on behalf of the Revenue submitted their comments on the synopsis filed by the appellants. He submits that the entire valuation was done in accordance with CAS 4 guidelines since the copper anode is captively consumed by the appellants unit at Silvassa. He briefly discussed the manufacture and how the adjudicating authority arrived his findings. He submitted a paper book containing brief submissions of balance sheets plus work sheets, control plans, copies of cash drawn statements and extracts of balance sheets. He submits that the adjudicating authority has dealt the issue in detail. Regarding the appellants submission for remand, he submits that there is no ground for remanding the case to the adjudicating authority as the adjudication order was passed after 15 years. Regarding DD cost report he submits that the appellants were given sufficient opportunity by the Commissioner before adjudication by forwarding the DD cost note with the direction that appellant to meet DD cost and expenditure and clarify the points whereas they have not submitted the figures. Therefore the appellants submissions that no notice was given on the DD cost report is not maintainable. He also submits that if the case is remanded, all issues should be kept open. He made his submissions on the following issues:-
a. On the contentions of the appellants whether the assessment is provisional during the disputed period he submits that the entire period of assessment is not covered under the provisional assessment. Even though they have filed the letter dated 01.11.99 for the provisional assessment, they executed bond on 04.12.2000 and they requested again to withdraw the provisional assessment on 04.05.2002. Again they requested to continue provisional assessment and it was again resumed on 01.11.2002. He further submits that as per Rule 7 of CER only the bond and bank guarantee executed provisional assessment commenced from the date of execution. Therefore, he submits that the Commissioner has rightly held that there was no provisional assessment prior to 01.11.2002. He also submits that in even if its treated as the case of provisional assessment the excess payment cannot be adjusted against short payment as, the appellants have availed cenvat credit on the excess payment and the same was passed on to their Silvassa unit. There is no adjustment possible on provisional assessment under Rule 7. Further, he submits that the appellants in a letter submitted to the AC that they will not claim refund on excess payment. He referred to Volume 4 of the paper book and written submissions before the adjudicating authority. He relied on the Tribunals LB decisions in the case of Excel Rubber Ltd. Vs. CCE, Hyderabad 2011 (268) ELT 419 (Tri.-LB), in the case of BSL Ltd. Vs. CCE, Jaipur 2008 (227) ELT 485 (Tri.-LB), in the case of Jay Yuhshin Ltd. Vs. CCE, New Delhi 2000 (119) ELT 718 (Tri.-LB). He further submits that the appellant relying on Toyota Kirlosker case in not applicable in this case.
b. On the additional evidence and additional grounds raised by the appellants, special counsel submits that it cannot be taken as a matter of routine. He explained that as per Rule 23 of CESTAT Procedural Rules and Regulation, unless there is sufficient cause and the assessees can prove then only the Tribunal can accept the additional grounds. Further he strongly objected whether the additional evidence is required for the present appeals if is a strong evidence why they failed to submit before the Commissioner at the time of adjudication. As regards the additional evidence of the CA certificate, which was obtained later on after four years of OIO issued that cannot be taken as additional evidence now. Regarding PLA account pertaining to Silvassa to be taken as evidence, he submits that it is not relevant for the present appeal. Regarding CA certificate produced as additional evidence, explaining not on accounting of forex may not be accepted as additional evidence. He further submits that no evidence was produced before the Commissioner either during the adjudication or after the issue of SCN. He also submits that on the other additional grounds and additional evidences, there was no valid reason to submit by the appellant as to why they could not raise these before the Commissioner particularly when they took sufficient time to reply to the SCN. When Mr. Kannan, Cost Accountant has already submitted that cash flow report which they enclosed at page 34A & C of paper book, there was no justification to produce clarification and this cannot be accepted as additional evidence or additional grounds. He also submitted that the case laws relied upon the following case law:-
1. K.R. Engg. Works Vs. CCE, Bangalore 2000 (125) ELT 1218 (T)
2. Kneader House Vs. CCE, Delhi-I 2013 (290) ELT 248 (Tri.-Del)
3. Bhola Plastic Industries Pvt. LTd. Vs. CCE 2011 (269) ELT 411 (Tri.-Del.)
4. Hero Honda Motors Ltd. Vs. CCE, N.Delhi 2000 (124) ELT 552 (Tri.)
5. New India Dyeing & Finishing Mills Vs. CCE 2004 (165) ELT 316 (Tri.-Del.) c. Counter on the forex fluctuations he submits that the adjudicating authority has correctly held forex fluctuations addable as there is difference in provisional invoice and the final invoice and at the time of issue of final invoice cost difference indicates change and the LMA rate is taken at the time of final assessment. He submits that the price includes differential amount to be paid by the buyer at the current rate. He drew the attention of the Bench to the final invoice date 14.11.2000 to be compared with provisional commercial invoice dated 27.06.2000. He further submits that the appellant never submitted any contract before the adjudicating authority. He relied on the statement of facts included in the SCN at page 3 of volume-I of the paper book of the appellants. It clearly shows that there is no fluctuation in the price of the raw materials and submits that fluctuation in forex directly flows to the cost of production and not to PLA account as expenses. The income tax case law relied on by the appellant in the case of Commissioner of Income Tax, Delhi Vs. Woodward Governor India Pvt. Ltd. 2009 (13) SCC 1 is not applicable in central excise law in respect of this he relied on the case Sneh Enterprises Vs. CC, New Delhi - 2006 (202) ELT 7 (S.C.).
d. He further submits that the guidelines note, of institute of cost accounting relied by the appellants relates to CAS-6, whereas for CAS-4 para 5.1 of guidelines note is applicable. CAS-6 is not relevant to arrive the cost CAS-4. Para 5.1 CAS-4 is rightly applied by the adjudicating authority. He explained para 5.1 of CAS-4 which is enclosed at page 52 of volume IV of the appellants and also submits that para 5.16 is only exchange foreign fluctuations relates to appellants bank.
e. Regarding analysis charges, he drew the attention to para 5.5 quality control cost of volume 4 of the paper book of the appellants (page 16), they claimed that analysis charges already included in the cost, but it is not supported by evidence. Therefore, para 5.5 testing and analysis charges to be shown separately in the cost sheet. He submits that copper anodes, is the final product in the appellants unit at Tuticorin, which is treated as deemed export whereas the copper cathodes is exported from their unit at Silvassa. The adjudicating authority has correctly worked out as per the SION norms available for copper anodes. He referred to para 25 at page 128 of volume-I. he also submits that norms for blister copper is 1.04 is not relevant.
f. He further submits that on the difference between PLA account and the trial balance, the Commissioner has correctly added the differential value of 4.92 crores (page 2 of the paper book). He also relied on the trial balance at page 9 A/C. No. 74101, 74201, 74203, 74301 and submits that they have taken power charges as per TNEB rates is not supported with any evidence as the trial balance itself shows clearly the power charges. He submits that the sale of sulphuric acid deducted twice whereas deduction is allowed once only. He drew the attention of the Bench to page 13 of the paper book and page 34B and 34E in this regard, where the figure of Rs.70,93,398.30 is arrived after deduction of consumption of sulphuric acid. The amount of Rs. 14,58,07,640 which is shown as consumption of sulphuric acid as well as it was deducted twice.
g. The professional fees and testing charges, which is correctly added to the cost of production. He refers to page 10, 11 of the paper book and submits that these charges are directly attributable to the procurement of raw materials and has been correctly added as per para 5.1 of cash flow sheet referred to page 122 & 129 of volume I of the appellants paper book. He refers para -26 of appellants claim that these charges and CC charges are not related to procurements and the appellants should prove. He further submits that when the forex fluctuation for the year 2003 which has reduction in the cost of raw material, the same analogy when there is forex loss is to be added in the cost of raw materials (at page 24 of the paper book). He also submits that there is a difference in figures in PLA and trial balance for the year 2002 03 to the tune of Rs.5.10 crores, Rs. 3.85 crores, on customs duty and difference in premium paid on central excise, expenditure by the assessee which is straight away to be added. He also submits that the trial balance shows power is deducted, the same cannot be deducted to be added to the cost of raw material. He also submits that sale of scrape; an amount of Rs. 81,657 has been deducted wrongly at page26 as it pertains to scrape of PAPs. He drew the attention to the contract.
h. He submits that his above submission is applicable for the period 2002 2003. On the Revenue appeal E/406/2010 he reiterated the grounds of appeal and submits that all the deductions allowed by the Commissioner (Appeal) is not assessable in view of him submission made against the assesee appeal against OLO panel by commissioner the counsel for the assesse is him rejoinder countered the agreement of Revenue Regarding additional grounds, ground no. 10 and ground no. 13, he submits that this was already before the Commissioner, and he has not addressed the issue in his findings. He submits that they have given a detailed written submission in reply to the SCN explaining all the issues including power charges, forex fluctuations and other charges which was not accepted by the adjudicating authority. He also submits that immediately after receiving the DD cost report they have submitted their written submission on 19.11.2009 particularly with reference to objections of DD cost figure, but the same has not been considered by the Commissioner. He relied on Automotive Tyre manufacturers Association Vs. Designated Authority and Ors. 2011 (263) ELT 481.
13. We have carefully considered the submissions made by both sides and also examined all the relevant records and examined the grounds of appeal. We find the appellants also filed two miscellaneous applications No. E/MISC/40811/2013 and No. E/MISC/40810/2013 in E/295/2009 seeking submission of additional evidences and additional grounds. Appellants contended that these evidences are essential and therefore prayed to take them on record under Section 35C and under Rule 23 of Cestat Procedural Rules. The additional evidences are as follows:
a) First evidence is the CA Certificate dated 6.5.2013 issued by M/s. Ramakrishna & Co., Chartered Accountants, along with details of Cenvat credit position and data of PLA payment ascertained from the statutory PLA & Cenvat register maintained under the Central Excise and CCR forte licensed units for the period April 2000 to October, 2000.
b) The second evidence is Annexure-2 consisting of statement of cenvat and PLA balances of Tuticorin unit for the disputed period certified by the CA.
c) Third evidence is annexure-3 relying certificate dated 6.5.13 issued by the same CA styled Note on accounting of foreign exchange fluctuation in Sterlite industries (India) Limited along with Trial balance for the period 2000-01, 2001-02 and 2002-03.
d) The fourth evidence is annexure-IV dated 28.5.13 issued by Shri.M. Kannan, Cost Accountant clarifying his CAS4 certificate dated 23.12.2005.
e) Last evidence in annexure-V is proceedings of the Dy. Commissioner of CE, Tuticorin regarding dispatch of copper anodes from Tuticorin and received at Silvasa.
14. On careful examination, we find that all these evidences were neither submitted before the adjudicating authority nor before the LAA and most of these documents were in the form of certificates signed by the CA or Cost Accountant after adjudication and issue of OIO. On perusal of the proceedings we find that the dispute on valuation of the copper anodes manufactured and cleared to their sister unit. This dispute started in the year 1996 97 onwards resulting issue of several SCNs and OIOs dated 09/2000 and 1/2001 dated 20/04/2001 by the Commissioner in the year 2000-01. Different orders were also passed by ACs/DCs and upheld by the Commissioner (Appeals) and these appeals were before the Tribunal and the Tribunal disposed these appeals vide two of its Final orders No. 285 288/2009 dated 24.3.2009 and Final Order No. 1111 1115/2005 dated 9.8.2005, by way of remand with the direction to determine the cost as per CAS-4 formula. We also find subsequently that a series of SCNs were issued from 2002 -2003. We find that the adjudicating authority during personal hearing on 1.8.2008, given the working notes of the Dy. Director (Cost) report to the assesse and again the appellants appeared for the second hearing before the adjudicating authority and placed their written submissions covering 4 SCNs. We also find that the appellants had taken sufficient time to file the reply or clarification to the Dy. Director (Cost). Now the appellants are seeking to bring all the documents referred above as additional evidences after the issue of OIO dated 15.04.2009. We find that the CA certificate issued by M/s. Ramakrishna & Co. dated 06.05.2013 and another certificate issued by Shri M. Kannan, Cost Auditor dated 28.05.2013 are in the nature of explanation on the scope of CAS-4 certificate dated 23.12.2005. The Cost Accountant issued CAS-4 certificate in the year 2005 and again in 28.05.2013 he had choose to issue clarification. We find when the same Cost Accountant who was also present during the personal hearing proceedings before the Commissioner of Central Excise and assisted the appellants through explanation in the form of certificates has no relevance at all and these cannot be considered as additional evidence, since the issue was well known to the appellant from 1997 to 2009, till passing of the adjudication order as well as Commissioner (Appeals) order, all the documents and evidences relied before the lower authorities below are full and complete. In this regard citations relied by the appellants in the case of Excel Rubber Ltd. Vs. CCE, Hyderabad (supra), Toyota Kirloskar Auto Parts PVt. Ltd. Vs. CCE(supra), ITC Bhadrachalam Paperboards Ltd. Vs. CCE, HYD(supra), and other citations are clearly distinguishable and not applicable to the present case. We rely on the case of K.R. Engg. Works Vs. CCE, Bangalore 2000 (125) ELT 1218 (Tri.) and Kneader House Vs. CCE, Delhi 2013 (290) ELT 249 (Tri.-Del.), wherein the Principal Bench dismissed the additional evidences under Rule 23 of CESTAT (Procedure) Rules, 1982. The relevant portion of the said decision is reproduced as under:-
8.?It is also submitted that the un-relied documents came in possession of the appellants on 13-9-2007 just before passing of the impugned order. It is pertinent to note that proceedings were initiated not only against the appellants but also against the Prop. of M/s. New Vision and it was party to the adjudication proceedings. No explanation is forthcoming as to why the documents now sought to be relied upon were not produced during the adjudication proceedings either by the appellants through the Prop. of M/s. New Vision or by the Prop. of M/s. New Vision. It is also pertinent to note that the Prop. of M/s. New Vision had been penalized but no appeal has been filed against such order.
9.?As rightly pointed out by the DR, the application did not disclose any justification for non-production of the said documents before the adjudicating authority or even before the Commissioner (Appeals). Apparently, the attempt is purely after thought.
10.?There is no explanation forthcoming as to what prevented the appellants from seeking assistance of the adjudicating authority for issuance of a summons to the Proprietor of the said firm to produce such documents if they were so relevant on the point in relation to the appellants case.
11.?For the reasons stated above, in the absence of sufficient cause being shown for non-production of the document in question either before the adjudicating authority or even before the lower appellate authority, and no sufficient cause being shown for delay in production of the documents, nor relevancy established, the application is hereby dismissed. The above Tribunal decision squarely applicable to the present case. Therefore, we hold all the five additional evidences does not merit consideration as these are of fresh reports or documents created after adjudication and issue of orders so as to cover their plea. Accordingly we reject both the miscellaneous applications seeking submission of additional evidence and submission of additional grounds.
15. Now we proceed to discuss the issues on merits. We find that the present appeals are the second round of litigation before this Tribunal. The appellant unit started manufacturing copper anodes, we find that the dispute started in the year 1996-97 and the Commissioner of Central Excise ordered cost audit under Section 14 A. The Cost Auditor computed the cost of production as Rs.1,30,802.38 and Rs. 1,32,738.80 per MT for the period July 1996-97 and July 1997 December, 1997 respectively. Based on the Cost Audit Report, the adjudicating authority determined and finalized the value at Rs. 94,416.45 per MT for the period July 1997 to December 1997 and confirmed the differential duty. On appeal filed by both assesse and Revenue before the Tribunal, the Tribunal in its Final Order No. 285-288/2009 dated 24.03/2009 set aside the order and directed the authority to determine the value as per CAS-4 as per the Boards Circular. In other round of litigation arising out of ACs order, the adjudicating authority has confirmed the demand of differential duty for the period 0.07.2000 to 30.06.2001 by relying Cost Audit Report and Commissioners order above. On appeal, the Commissioner (Appeals) upheld the order and on appeal this Tribunal in its order No. 1111-1115/2005 dated 09.08.2005 set aside the impugned order and directed the authority to determine the value as per CAS4. During the pendency of the appeal before the Tribunal, periodical SCNs were also issued demanding differential duty of Rs.128,38,41,203/- for the period July 2001 to March, 2002 and another 3 SNCs demanding Rs.46,211,751/- Rs.38,62,71,007/- and Rs. 39,96,49,677/- for the period April, 2002 to October, 2002. We find from the records that as directed by the Tribunal in the above orders, the assesse submitted CAS-4 certificate dated 23.12.2005 issued by Cost Accountant for the period July 2001 to March 2002 and for the year 2002 2003. As per the Cost certificate, the cost arrived on copper anodes is Rs. 88,091.15 per MT for the period July 2001 to March 2002 and Rs. 87,393/- per MT for the period April 2002 to October 2002. We find that this cost certificate was referred to the Dy. Director (Cost) by the adjudicating authority and the Dy. Dir. (Cost) submitted his report in his working notes annexure-1 and annexure-2 arrived the cost as Rs. 109962/- per MT for the period March 2001 to 2002 and Rs. 107488 per MT for the period April 2002 to October, 2002. The adjudicating authority in his order after taking into consideration of assessees contention on each issue determined the value as Rs. 94,446/- per MT for the period July 2001 to March 2002 and Rs. 94,594/- per MT for the period April 2002 to October, 2002, confirmed the differential duty of Rs. 13,98,95,514/- as demand proposed in 4 SCNs of Rs. (1,28,38,41,203/-+4,62,11,751/- + 38,62,71,007/- + 39,96,49,677/-) and also imposed penalty under Rule 25 of CER.
16. On perusal of findings of adjudicating authority we also find that out of 16 issues wherein the DY. Director (Cost) proposed for addition of value on various heads in respect of 6 issues, he did not accept the Dy. Dir. (Cost ) report and allowed the deductions in favour of the assesse and in respect of the remaining 10 issues, he proposed addition of cost, which are before the Tribunal now. These 10 issues are as under.
1. Foreign Exchange Fluctuation
2. Difference in CC consumption
3. Power and Fuel charges
4. ISO-TQM charges
5. Sale value of sulphuric acid in excess of P & L
6. Professional fee and testing charges
7. Duty drawback
8. LC Charges
8. Excess sale value of sulphuric acid shown in P & L
10. Difference 1n RM consumption Out of the above, the appellants are not contesting ISO-TQM charges, Professional fee and testing charges and Excess sale value of sulphuric acid shown in P & L account.
17. On the second appeal No. E/412/2010, the appellant before this Tribunal against the Commissioner (Appeals) order only on the limited ground of not allowing the adjustment of excess duty paid as against the shortage during the relevant period. Whereas, the Revenue is on appeal against the Commissioner (Appeals) order, wherein he has allowed certain deductions in respect of foreign Exchange fluctuation, ISO-TQM charges, analysis charges and sale value of sulphuric acid shown in P & L account etc.
1. From the above background the issue before the Tribunal is whether the additions made by the adjudicating authority on various heads in CAS4 for determining the cost of production and for determining the value under Rule 8 of CVR is correct or otherwise;
2. Whether the value determined by the adjudicating authority of Rs. 94,446/- per MT for the period Jul 2001 March, 2002 and Rs. 94,594/- per MT for the period April 2002 to October, 2002 is correct or otherwise,
3. Whether the penalty imposed by the adjudicating authority is sustainable or otherwise.
18. In appeal E/412/2010 and E/406/2010, the issue before the Tribunal is Whether LAA disallowing the adjustment of excess duty paid against the shortage of duty allowing certain deductions in respect of five issues and reduction of the value from Rs. 99742/- to Rs. 97302/- per MT is correct or otherwise. We propose to examine each issue as under:-
19. On the provisional assessment issue the adjudicating authority in his impugned order held that there is no provisional assessment during the period from July 2001 to October 2002, as the provisional assessment was ordered only w.e.f. 01.11.2002. The assesse contended that the provisional assessment was w.e.f. 01.11.1999. On perusal of the findings of the adjudicating authority and various correspondences relied by the assesse, we find that since the valuation dispute is on copper anodes started in the year 1997 and went through series of litigations from that period resulting Tribunal two Final orders wherein the Tribunals set aside the orders and remand the matter to the original authority to determine the cost as per CAS-4 formula, which resulted in the present demand.
20. On perusal of the records we find that there was no provisional assessment prior to this period and the adjudicating authority in his findings at para-13 clearly discussed the issue in detail and the present proceedings were started when the issue of 4 SCNs issued for the period July, 2001 onwards, but the provisional assessment takes into effect from 01.11.2002, after necessary execution of B2 bond. Therefore, the appellants claim that the demand issued under Section 11A is not justified as SCN notices were issued rightly invoking Section 11A of CEA of the assessment order. Even in the past cases, we find that after issue of SCN, the adjudicating authority in his orders decided the exclusion and inclusion of various cost elements for determining the cost of production of copper anodes and confirmed the consequent demands. Therefore, we hold that the commissioners findings on this issue is justified and there is no provisional assessment during the relevant period. The assessment and decision on exclusion or inclusion of cost element in the adjudication proceedings does not fall under the category of finalization of provisional assessment.
I. On foreign Exchange fluctuation, the inclusion of Rs.1,19,24,360/- is attributable to procurement of imported raw materials, we find that the appellants contended that this amount is on account of fluctuation in foreign exchange as the raw material copper concentrate was imported and the international price of copper is based on LME price and also at the time of shipment the price was provisional and at the time of final settlement, the exchange fluctuation on the date of payment varies and this resulted in difference in price. It is pertinent to see that as per para-4 of CAS-4 the cost of production shall constitute cost of material consumed and all other expenses. The appellant relied guidance note on cost accounting CAS-6 para-5.17 and illustration thereof. In the present case we find that when the appellant procured/imported copper concentrate from overseas and the goods were accompanied with provisional invoices and subsequently on receipt of the final invoices the bills were settled accordingly. On perusal of the provisional invoices No. HWY14/011 (page 48) of Vol-II dated 07.06.2001 issued by M/s. Thalanga Copper mines, Australia, for the supply of highway copper concentrate, it is sen that the terms of contract is based on the % of copper and moisture the quantity shipped was 8738.069 DMT and as per the LME price of copper and based on the % content of copper in copper concentrate and after allowing deductions the provisional value per DMT has been shown as US$ 31.51, the percentage of copper content is 27.000%, moisture 8.9500 based on this workings, the provisional value for the shipment at 100% on the total quantity of 8738.069 DMT has been shownat US$ 2,71,995.72. On perusal of the final commercial invoices dated 19.10.2001 issued by the supplier for the above shipment, we find that there is a change of parameters as against in the provisional invoices as under:-
a. Percentage of Copper as per ASSAYs is 27.392% as against 27.000% in provisional invoices b. Percentage of moisture is 8.316% as against 8.9500 % in provisional invoices.
c. WMT gross verified at wet 9,598.590 as against 9,5,97.000 d. The amount shown as USD 443.97 as against USD 437.37 in provisional invoices.
e. After allowing deductions the price is indicated as US$ 325.50 as against US$ 311.51 and the final price for the total quantity is US$ 2,864536.06 as against US$ 2721995.72. The above factual figures clearly shows that the difference in amounts is not purely on account of foreign exchange fluctuation. The price indicated in the final invoices is the amount which is to be paid by the appellant for supply of the said goods. Therefore, it is fully within the guidelines of CAS-4 (para 5.1) of CAS-4. Appellants relying on para 5.16 and other paras of the guidelines note is of no relevance. Therefore, as per CAS-4 the procurement of raw materials payment as per the final invoices is directly accrued to the supply of raw materials. In view of the above, we hold that inclusion of the amount of Rs.11,92,43,601/- shall form part of the value of copper anodes and is not related to any financial charges as claimed by the appellants. We also find from the final invoices and provisional invoices, the LME price of copper remains same. Accordingly, we uphold the findings of the adjudicating authority on this issue.
II. Difference between P&L and TB and power and fuel charges: The adjudicating authority added the amount of Rs.4,92,42, 218/- which is the cost of fuel, power and water charges incurred. Based on the figures available from the TB, the appellants contented that the figures could be as per P & L account. The appellant failed to give any justification for the amount shown in the TB. TB is prepared for each unit where the cost of each product of the plant has been worked out separately and it is the basic background for compiling final P & L account. In the absence of any evidence we hold that the adjudicating authority has rightly added the above amount as per CAS-4 and as per DD (Cost) report. Hence we uphold the findings of the adjudicating authority on this account.
III. Analysis charges: As regards the analysis charges and the expenses regarding demurrage and other charges and differential customs duty and promotion of DEPB and deduction of sale value of sulphuric acid as shown in P & L account (sl.No. 9 & 15) and 14 & 15 of the list above, the adjudicating authoritys findings has clearly brought out and as per DD (Cost) report and as per CAS-4 all these charges are liable to be included for determining the cost of the raw materials. The appellants contention that these charges were already included in the cost of raw materials is not justified for the reason that if it is already included in the cost of raw materials, then there was no further requirement to account these charges under separate head in their P & L account. This clearly shows that these charges were not included elsewhere in the other head. Therefore, the adjudicating authority has rightly added these expenses to the cost as per CAS-4. In the case of deduction of sale value of Sulphuric acid, we find that when the assesse transfer the sulphuric acid of phosphoric acid plant, and cost for each plant he separately worked out to each unit of smelter plant and other plants. Once the cost arrived separately, the question of deducting the sale value of sulphuic acid transfer to phosphoric acid plant is not justified. Therefore, we uphold the adjudicating authoritys addition of the amount to the cost of these heads to the cost of copper anodes.
IV. To the exclusion of duty drawback amount claimed by the assesse on copper anodes and continuous wire rods manufactured out of copper anodes and exported from their Silvasa unit; even though DD (Cost) in his report proposed for disallowance of deduction of Rs. 70,69,14,974/- the adjudicating authority in his findings at para 25 had discussed the issue in detail and arrived the amount as per the SION norms fixed for the copper anodes and continuous wire rods manufactured and exported by the appellant and allowed after taking into account SION norms of 1.02 MT of copper in copper concentrate, for every MT of copper cathode/ continuous wire rods exported. He has allowed the deduction of Rs. 69,89,47,034/- and only included an amount of Rs. 79,67,940/- to the cost as per CAS-4. The appellants main contention is that the SION norms for copper cathode is 1.06 MT, the same norm is not applicable to the appellant for the very reason that the appellant themselves made an application to the DGFT and the DGFT has fixed the norms as 1.02 MT for copper anode, as per the DGFT letter dated 9.8.2007. Since, the norms for copper anodes manufactured by the appellant was fixed by the DGFT, the Revenue has no say on the norms. Accordingly, the adjudicating authority has rightly calculated the eligible deduction by taking the norms as 1.2 MT of copper in copper concentrate for every MT of copper anode. When SION norms is available for copper anodes, and the appellant is the only manufacturer of copper anodes at Tuticorin, the adjudicating authority has rightly allowed the deduction and included the differential amount in the cost. Therefore, we do not find any merit in the appellants contention. Accordingly, we uphold the addition of cost as per CAS-4.
21. Having discussed all the issues of addition of cost as per CAS-4 formula, we hold that the adjudicating authority has correctly determined the cost of production of copper anodes manufactured by the appellants. We find that the adjudicating authority has not merely or plainly adopted the DD (Cost) report for addition of the cost elements under CAS-4 and the very fact that the adjudicating authority has over ruled on six items for disallowing the addition proposed by the DD (Cost) and allowed the addition clearly shows that he has applied his mind and the direction of this Tribunal orders and correctly determined the cost as per CAS-4 for copper anodes as Rs. 94,446/- and Rs.94,594 per MT as against the DD (Cost) proposal of Rs.1,30,802.38 and Rs.1,32,738.80 per MT. We also find that during the proceedings the appellants cost auditor was also represented and submitted cost certificate. Considering the period of dispute and taking into the original demands as proposed in the four SCNs the demand amount of Rs. 251 Crores has been scaled down on account of the directions by this Tribunals Two Final orders, and the original demand reduced to Rs.13.98 Crores. Therefore, we hold that the appellants contention for remanding the case to the adjudicating authority is not justifiable except to delay the proceedings without any valid grounds. The appellants pleading for Revenue neutrality is also not justified and we find all along they never claimed this aspect in the initial proceedings when the demand was confirmed by the Commissioner and when the case was before this Tribunal twice. Therefore, we hold that there is no justification for their claim on Revenue neutrality. Therefore, taking into account all the above facts, we uphold the impugned order in determining the cost of copper anodes for the period July 2001 to March 2002 as RS. 94,446/- per MT and Rs.94,594/- per MT for the period April 2002 to October 2002. Consequently, the demand of Rs. 13,98,95,514/- and interest thereof is liable to be upheld.
22. As regards the assessees second appeal in E/412/2010, the appellants only prayer is to set aside that portion of the impugned order in appeal dated 24.03.2010 disallowing the adjustment of excess duty paid. It is contended that since the assessment is provisional while finalizing provisional assessment, the LA ought to have taken into account the excess duty paid on copper anodes and adjust the same against the total duty payment before arriving the differential duty. We find that the adjustment was denied by the LAA and held that the appellants had passed on the duty element to their other unit at Silvasa, who in turn availed the Cenvat credit for the central excise duty paid by the appellant. The appellant relied on the Honble High Court of Karnataka in the case of Toyota Kirlosker (supra). In this regard, we find that the above case law is not applicable to the present case, as already discussed in the preceding paragraphs, the assessment and determination of value of cost of production of copper anodes and consequent demand of differential duty were confirmed under Section 11A of CEA and this is not the case of finalization of provisional assessment under Rule 7 of CER, 2002. This case relates to issue of SCNs on the determination of cost of production of copper anodes supplied to sister unit as per CAS-4 formula and consequential demand of differential duty. Further, we find that since the facts have already been admitted before the adjudicating authority and LAA, they have admitted that they have already availed cenvat credit on the duty paid on copper anodes at their unit at Silvasa and they have also admitted before LA that they will not claim any refund on this account. Therefore, in view of the above factual position, the appellants claim for adjustment and claiming automatic set off excess duty paid does not arise. Accordingly, we uphold the order of the Commissioner Appeals) to that extent.
23. As regards the Revenue appeal No. E/406/2010 is concerned, the adjudicating authority in his OIO dated 14.05.2009 while determining the cost of copper anodes, he has added various cost elements as per DD (Cost) Report and the Cost certificate produced by the appellants as per CAS-4 and determined the value as Rs. 99742 per MT andconfirmed the differential duty. Whereas, the LAA in the impugned order allowed deductions from cost in respect of foreign exchange fluctuation, analysis charges, ISO-TQM charges and deduction of sale value of sulphuric acid etc., and held that the amount not to be added. As we have already given our findings on all these issues in the preceding paragraphs in appeal No. E/295/2009 and held that these amounts are to be added to the cost of copper anodes, we hold that the Commissioner (Appeals) order to that extent allowing deductions on 5 items is liable to be set aside and the OIO passed by the adjudicating authority is liable to be upheld. Consequently, the determination of value is restored to Rs. 99,742 per MT as per OIO and the original demand confirmed of Rs. 6,20,14,457 in OIO is upheld. The impugned order is set aside and the Revenue appeal is allowed to that extent.
24. As regards penalty of Rs.25 lakhs imposed under Rule 25, we find that the adjudicating authority has already dropped Section 11AC penalty and taking into overall facts and circumstances of the case and taking into consideration that the issue is being debated from 1997 onwards, and also considering the Tribunals two remand orders, the penalty under Rule 25 is not imposable. Accordingly, we waive penalty of Rs. 25 lakhs imposed under Rule 25 of CER.
25. In view of the foregoing discussions as above,
(i) In respect of appeal E/295/05 we uphold the order of the adjudicating authority in determining the cost of production as per CAS-4 and the differential duty demand of Rs.13,98,95,514/- and interest. We set aside the penalty under Rule 25 of the Central Excise Rule, 1944. The appeal is partly allowed.
(ii) As regards appeal No. E/412/05, impugned order is upheld and the appeal is rejected.
(iii) In respect of appeal No. E/406/05, the impugned order is set aside to the extent and OIO is restored to the extent of addition of the amount to the cost and the value of Rs.99,742/- per MT. Consequential demand confirmed by the adjudicating authority is also restored and the Revenue appeal is allowed.
26. All the three appeals are disposed of in the above terms and all the miscellaneous applications are also disposed of.
(Order pronounced in the open Court on 04.02.2016)
(P.K. CHOUDHARY) (R. PERIASAMI)
JUDICIAL MEMBER TECHNICAL MEMBER
BB
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