Custom, Excise & Service Tax Tribunal
4. Whether Order Is To Be Circulated To ... vs M/S Madhusudan Rayons P.Ltd., Shri ... on 3 November, 2009
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT AHMEDABAD
COURT:
II
Appeal No.E/868 to 870/2007
Arising out of OIO No.16/MP/2007, dt.13.04.2007.
Passed by: Commissioner of Central Excise & Customs, Surat I
For approval and signature:
Honble Mr. Ashok Jindal, Member (Judicial)
Honble Mr. B.S.V. Murthy, Member (Technical)
1. Whether Press Reporters may be allowed to see the No
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 of Seen
the order?
4. Whether order is to be circulated to the Departmental Yes
authorities?
Appellant:
M/s Madhusudan Rayons P.Ltd., Shri Shrikant Mundra,
Shri P.G. Sharma.
Respondent:
CCE Surat Represented by:
Shri S. Suriyanarayanan, Adv. for Assessee; Shri Sameer Chitkara, SDR for Revenue.
CORAM:
MR. ASHOK JINDAL, MEMBER (JUDICIAL) MR. B.S.V. MURTHY, MEMBER (TECHNICAL) Date of Hearing/Decision:03.11.09 ORDER No. /WZB/AHD/2009 Per: MR. B.S.V. Murthy:
The appellants are engaged in manufacture of air texturised yarn. Demand of duty of Rs.76,24,090/- has been confirmed for the period from 15.5.03 to March 2005 on the ground that the value cleared by them through 4 consignment agents was not determined as per the provisions of Section 4(1)(b) of Central Excise Act, 1944 read with Rule 7 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 (Valuation Rules for short). Penalty of equal amount has been imposed on the company and penalty of Rs.10 lakhs on Shri Shrikant Mundra, Director of the Company and Rs.1 lakh on Shri P.G. Sharma, authorized signatory of the company, have also been imposed.
2. Further, the appellants have also filed a miscellaneous application for including additional ground. The additional ground proposed to be included is that while determining the price of excisable goods on the basis of price prevailing at the end of consignment agent, such price should be on the basis of a date prior to the date of removal and on the basis of the price at which such goods have been sold subsequent to the date of removal.
3. Shri S. Suriyanarayanan, learned advocate appearing on behalf of the appellant submitted that only when he started preparing the case, he noticed that in the worksheet prepared by the appellant and submitted by them at the request by the departmental officer, the appellant had simply followed the direction given by the departmental officers and consequently while preparing the worksheet, the price prevailing on a date nearest to the date of removal irrespective of the fact whether such date was prior to the date of removal or subsequent to date of removal was taken. He submits that if worksheet is prepared on the basis of the price prevailing on the date prior to the date of removal, the demand would come down substantially and as per law also, this is the situation. He cited a number of decisions of the Tribunal. Since the miscellaneous application is filed for inclusion of additional ground which basically involves interpretation of provisions of Rule 7 of Valuation Rules, we find that it is in the interest of justice to allow additional ground to be included. Accordingly, the miscellaneous application for inclusion of additional ground is allowed.
4. Learned advocate on behalf of the appellant mainly argued on four issues:-
a) The process of manufacture of texturised yarn is not at all a manufacture in terms of definition of manufacture under Central Excise Act and therefore no duty is attracted.
b) Out of the total turnover of more than Rs.32 crores during the relevant period, an amount of more than Rs.28 crores turnover was from sale at factory gate and ex-factory price was available at the time of removal of the goods and therefore that price can be taken into consideration for deciding the assessable value in respect of removal to consignment agent.
c) Value for the purpose of charging duty should be based on the date of sale on a date prior to the date of removal from the factory gate in case of sales by consignment agent.
d) There was no suppression in view the fact that there was no admission that the invoices were destroyed or received by the appellant company from the consignment agent. Further, there is no legal requirement for the appellant to submit in his declaration regarding sale price, consignment agent and therefore there cannot be any suppression of the fact in absence of legal requirement.
5 As regards the contention that process of manufacture of air texturised yarn does not amount to manufacture, reliance was placed on the decision of the Tribunal in case of CCE Vs. Radhaballabh Silk Mills Pvt. Ltd. decided on 5.5.06 vide Final Order No.A/789/2006-WZB/ C-III(EB). In this case, it was held that the process of air texturised yarn is resulting in multi-folded yarn and the same is not texturised yarn. On the other hand, the learned SDR arguing for the department submitted that the decision of the Tribunal in that case has to be considered in the light of the fact and not in isolation. He submitted that in Para 15 and 16 of the said decision, it has been clearly mentioned that there was 8 test reports during the period from 1983 to 2002. Out of these 8 test reports, 6 test reports were by Departmental laboratory and 2 test reports were by SASMIRA and both of them opined that the disputed yarn is multifold and it is not texturised yarn. There was only one report which had given opinion that the yarn was texturised yarn which was discussed in detail and found to be incomplete in many aspects. It was also observed by the Tribunal that for the purpose of excisability, it is necessary that end product emerging from the process should be texturised yarn as defined in the HSN.
5.1 We have considered the submissions made by both sides. Admittedly, the appellants are selling the yarn as texturised yarn. While obtaining registration, they have obtained registration for manufacture of air texturised yarn. The appellants have not produced any evidence whatsoever in support of their contention that the process does not amount to manufacture except relying upon the decision of the Tribunal cited above. There was no test report available in this case. Further, there is no opinion whatsoever to show that from the same air texturised machine, different types of yarns cannot be produced. We also find that the appellant have submitted certificate from chartered engineer in support of their contention that the appellants process does not amount to manufacture. We find that the chartered engineers certificate starts with the sentence The process used by the company is not Draw Texturising process but it is Air Jet Texturising process for yarn manufacturing. We find that tariff heading does not differentiate between Draw texturising process and Air Jet Texturising process for categorizing a particular type of yarn as texturised yarn. Since chartered engineers certificate does not clearly say that the process undertaken by the appellant is not texturising, we do not find certificate to be supporting the case of the appellant at all. Further, we also take note of the fact that the dispute arose in the year 2004, show cause notice was issued in 2006. It is only after the show cause notice was issued, the appellants made this claim about manufacture before the Commissioner. The dispute was valuation and except for the decision of the Tribunal cited above, the appellants did not produce any other evidence before the original adjudicating authority in support of their contention that the product manufactured by them and sold by them as texturised yarn in reality is not a texturised yarn and is not acceptable as texturised yarn. As already observed above, the chartered engineers certificate also does not really support the case of the appellant. Therefore, we do not consider this claim valid.
6 Coming to the second issue, the contention of the appellant is that there was price available at the factory gate and therefore the method adopted by the department for arriving at differential duty is wrong. Before we proceed further, it would be appropriate to reproduce the relevant Valuation Rules.
Central Excise Valuation (Determination of Price of Excisable Goods), Rules, 2000:
Rule 2. In these rules, unless the context otherwise requires, -
(a)
(b) normal transaction value means the transaction value at which the greatest aggregate quantity of goods are sold Rule 7. Where the excisable goods are not sold by the assessee at the time and place of removal but are transferred to a depot, premises of a consignment agent or any other place or premises (hereinafter referred to as such other place) from where the excisable goods are to be sold after their clearance from the place of removal and where the assessee and the buyer of the said goods are not related and the price is the sole consideration for the sale, the value shall be normal transaction value of such goods sold from such other place at or about the same time and, where such goods are not sold at or about the same time, at the time nearest to the time of removal of goods under assessment.
6.1 From the above, it can be seen that Rule 7 of Valuation Rules provides that value shall be normal transaction value of such goods sold from place of removal at about the same time or at the time nearest to the time of removal of the goods under assessment. There is no discussion as to why the transaction value is not available under Section 4(1)(a) and what is the process adopted for arriving at the value under Rule 7 in the impugned order. We also find that the quantum of sales at factory gate was also not raised at the original adjudication stage. After considering all the issues which would be discussed in the subsequent paragraphs, we have come to the conclusion that the matter is required to be remanded. We consider it appropriate that during de-novo proceeding, the Commissioner to consider this aspect also and determine whether the method adopted by the Revenue for arriving at differential duty to be demanded is correct and while doing so consider the claim of availability of the price at the factory gate and its implication as also applicability of Valuation Rules.
7. Next point that was raised was the appellant had given worksheet on the basis of direction given by the officers that the price on a date nearest to the date of removal at the factory gate in respect of sales by consignment agent should be taken irrespective of the fact whether such date is prior to the date of removal from the factory gate or later. Rule 7 of Valuation Rules, 2000 provides that the value has to be determined as it exists at the time nearest to the time of removal of the goods under assessment. We do not find any support from this Rule to support the contention of the appellant that such nearest time has to be a date subsequent to the date of removal. Learned advocate also placed several decisions of the Tribunal before us in support of the contention that while arriving at the price at the factory gate, the price prevailing at the place of removal nearest to the date of removal prior to the date of removal only has to be taken. Further, the learned advocate submitted that the order of the CBEC 37B Order No.59/1/2003, dt.3.3.03 also supports this view. He also cited following decisions:
a) Castrol India Ltd. Vs. CCE New Delhi 2000 (118) ELT 35 (Tri.Del.),
b) Lipi Data Systems Ltd. Vs. CCE Jaipur-II 2001 (130) ELT 91 (Tri-Del.),
c) CCE Vadodara Vs. Lark Wires & Infotech Ltd.
Tribunals Final Order No.A/794-795A/WZB/Ahbad/2008-CII, dt.29.4.08 as reported in 2008 (04) LCX 0030.
wherein it has been held that the date of removal from the factory gate has to be based on the nearest date of sales from the premises of consignment agent prior to the date of removal from the factory. We find that these decisions and the Boards circular were not cited before the original adjudicating authority. This claim by the appellant that the worksheet has to be based on the value prevailing on earlier date and not the subsequent date, is also required to be considered by the adjudicating authority. We make it clear that opinion expressed by us that as per Rule 7, the date can be cited earlier date or the subsequent date.
8. Last contention was that no suppression could have been invoked in this case. The submission was that there is no requirement of law to intimate the sales through consignment agent. Further, it was also argued very vehemently that the observations of the Commissioner that invoices were being received by the Company from the consignment agent, was a wrong finding. We find that this is so. However, the fact remains that the appellants were getting regular monthly returns from the consignment agent giving the details of all the sales effected by them and the appellants had a system of recording the same in the computer. Therefore, the appellants were definitely aware that the goods were being sold at a higher price. With the definition of place of removal being amended from 1996 to 2003 thrice and also amendments of the Section 4 itself, on 2-3 occasions during 1996 to 2003, the appellants considering their turnover, could not have been unaware of the provisions of Section 4. The amendment of place of removal made it clear that the price at which the goods are sold at the place of removal would be the price for valuation. It has to be remembered that earlier when the sales took place from depot, the transportation cost for transporting the goods from factory gate to the depot was excluded. In view of the changes made from time to time, it was an obligation cast on the appellant to assess the goods correctly themselves or if they had entertained any doubt, seek clarification from the department. It is very difficult to accept the claim that the appellants had a bonafide belief that whatever was the duty they were paying at the factory gate in respect of the goods sold by the consignment agent, when the price of the factory gate was lower than the price charged by the consignment agent was totally without any intention to evade duty. Nevertheless, in the absence of any action on the part of the appellant, on their own, to understand the law and its implication, and also their action in continuing to pay the duty as per earlier practice, irrespective of changes in law, we come to conclusion that the department has invoked extended period correctly. As regards delay in issuing a show cause notice, we do not agree with the learned advocate that the department delayed the issue. The last statement was recorded in 2006 and the show cause notice has been issued thereafter. Therefore, we do not find any justification in the contention that there was any delay in issuance of show cause notice.
9. In view of the above discussion, the matter is remanded to the original adjudicating authority who shall decide the issues relating to the determination of assessable value and calculation of duty in terms of our observation in this order and also in the light of judicial pronouncements. Appellants shall be given opportunity to present their case before final decision is taken.
(Dictated & Pronounced in Court)
(Ashok Jindal) (B.S.V. Murthy)
Member (Judicial) Member (Technical)
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