Custom, Excise & Service Tax Tribunal
Cce, Chennai vs M/S. Ashok Leyland Ltd on 11 May, 2010
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
E/526 & 527/2004 & E/CO/105 & 106/2004
(Arising out of Order in Appeal No. 149/2003 (M-III) dated 31.12.2003, passed by the Commissioner of Central Excise (Appeals), Chennai).
For approval and signature
Honble Ms. JYOTI BALASUNDARAM, Vice President
Honble Dr. CHITTARANJAN SATAPATHY, Technical Member
_________________________________________________________
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CCE, Chennai : Appellants
Vs.
M/s. Ashok Leyland Ltd. : Respondents
Appearance Shri T.H. Rao, SDR, for the appellant Shri R. Raghavan, Adv., Shri M. Kannan, Adv., for the respondent CORAM Ms. JYOTI BALASUNDARAM, Vice President Dr. CHITTARANJAN SATAPATHY, Technical Member Date of hearing : 11.05.2010 Date of decision : 11.05.2010 Final ORDER No._____________ Per: Jyoti Balasundaram The respondents herein are manufacturers of motor vehicles, IC Engines and parts thereof falling under chapter heading No. 8708 of the Central Excise Tariff Act, 1985. They also cleared inputs and capital goods to their other units located at Ennore, Bhandra, Alwar, Ambattur, Hosur etc., and further for sale in spare parts market to independent buyers. They cleared inputs on which cenvat credit had been taken, as such, to other units by reversing the credit. They were removing the goods partly to their sister units and partly to independent buyers. For clearances to other units, they were adopting the purchase price and for clearances to independent buyers, they were adopting the spare market price for payment of duty. The case of the department is that in accordance with provisions of Rule 3(4) of Cenvat Credit Rules, 2001/2002, the assesses ought to have adopted the price at which the goods were sold to the independent buyers, in case of inter unit transfers. The adjudicating authority confirmed the demand and imposed penalty; the Commissioner (A) held that reversal of credit was sufficient and allowed the assessees appeal. Hence these appeals by the Revenue.
2. We have heard both sides. The finding of the lower appellate authority is reproduced herein below:-
I have gone through the facts of the case, the case records and the submissions made. The issue to be decided is what would be the assessable value that has to be adopted for clearances of inputs as such to other units of the notice on which cenvat credit has been taken. The case of the department is that for inter unit transfers, the notice should adopt the value at which the inputs are sold by them in their transactions with independent buyers on similar goods, in the spare parts market. The contention of the notice is that they have to adopt the purchase price of the inputs as assessable value for such clearances, in other words it is their case that it would suffice to expunge the credit that has been taken by them on such inputs when they are transferred to their other units. The appellants stand is correct in as much as in the Circular No. 643/34/2002-CX dated 01.07.2002, it has been clarified that in cases of transfer of inputs as such to sister units/another factory of the same manufacturer, though provisions of Rule 9 and Rule 8 of Valuation Rules have to be invoked, which is not possible in the instant case, in as much as the said Rules would require determination of cost of production or manufacture, since the said goods have been received by the assessee from outside suppliers and have not been produced or manufactured in the assessees factory. The Circular further provides that though Residuary Rule 11 could be invoked, it is reasonable to adopt the value shown in the invoice on the basis of which Cenvat Credit was taken by the assessee in the first place. In the first part of the circular there is no mention about adoption of transaction value in cases of transfer of inputs to another factory of the same manufacturer, whereas in the second part, it has been clearly provided that for transfer of inputs to another factory of the same manufacturer, it is enough if the cenvat credit taken by appellants is reversed (i.e.) the value as shown in the invoice is adopted as value for payment of excise duty. The lower adjudicator required the appellants to adopt the spare parts price available in the market, in respect of such transfers, which is total untenable and not correct as adoption of spare parts price will arise only in cases where there is sale transaction. Whereas in the case of appellants, the inputs which were bought from outside manufacturers are removed as such to another factory of the same manufacturer, then the question of sale transaction does not arise at all. That being the situation, adoption of spare parts price is incorrect in the instant case. The inputs were cleared to their other units/sister concerns who are also OE manufacturers. The appellant states that the impugned goods were received and duly accounted in RG 23 at recipient end. There is no allegation in the SCN that these items were not received at the respective end. In the absence of allegation that the inputs removed to their other units/sister concern were diverted to spares market there is no justification to charge duty on the impugned goods at the spares value. This view is also supported by the following case laws.
3. He has followed two decisions of the tribunal one in the case of Amalgamation Repco Ltd. Vs. CCE, Bangalore reported in 2003 (56) ELT 898 (CESTAT-Bang.) and other in the case of G.K.N. Drive Shafts (I) Ltd. Vs. CCE, Delhi-II reported in 2003 (154) ELT 177 (Tri.-Del.).
4. We find that the issue stands settled by the decisions of Larger Bench of the Tribunal in Eicher Tractors Vs. CCE, Jaipur reported in 2005 (189) ELT 131 (Tri.-LB), holding that when inputs or capital goods on which cenvat credit has been availed are removed as such, the provisions of Rule 3 (5) of Cenvat Credit Rules, 2002, which stipulates that in the case of clearances of inputs or capital goods on which credit has been taken, the manufacturer of the final products shall pay an amount equal to the credit availed in respect of such inputs or capital goods, would apply. The Larger Bench has held that the Revenue is bound by its Circular No. 813/10/2005-CX dated 25.04.05, setting out that it is Rule 3 (5) of the Cenvat Credit Rules, which is required to be followed in such cases.
5. Following the ratio of the Larger Bench decision cited supra, we uphold the impugned order and reject the appeals.
6. The Cross-objections are only in the nature of comments upon/reply to the Revenues appeals and are therefore dismissed.
(Order dictated and pronounced in the open Court)
(Dr. CHITTARANJAN SATAPATHY) (JYOTI BALASUNDARAM)
TECHNICAL MEMBER VICE PRESIDENT
BB
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