Custom, Excise & Service Tax Tribunal
New Bombay Ispat Udyog (P) Ltd vs Commissioner Of Central Excise, Nashik on 25 August, 2011
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT NO.II
APPEAL NO. E/443, 502, 618 & 622/08-Mum
(Arising out of Order-in- Original No. 04/CEX/2008 dtd. 19.02.2008 & 12/CEX/2008 dtd. 29.03.2008 passed by the Commissioner of Central Excise & Customs, Nashik )
For approval and signature:
Honble Mr Ashok Jindal, Member(Judicial)
Honble Mr.Sahab Singh, Member(Technical)
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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 : seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
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New Bombay Ispat Udyog (P) Ltd.
Chetan Damji Lodaya
MITC Rolling Mills Pvt.Ltd.
Chetan Damji Lodaya
:
Appellants
VS
Commissioner of Central Excise, Nashik
Respondent
Appearance
Shri Prakash Shah, advocate for Appellants
Shri V.K.Agarwal, SDR for Respondent
CORAM:
Mr. Ashok Jindal, Member(Judicial)
Mr.Sahab Singh, Member(Technical)
Date of hearing: 25/08/11
Date of decision 25/08/11
ORDER NO.
Per : Ashok Jindal
The appellants M/s. New Bombay Ispat Udyog (P) Ltd. has filed the appeal against the order of confirmation of demand of differential duty of Rs. 1,00,65,835/- alongwith interest and penalty of equivalent amount and Shri Chetal Damji Lodaya is also in appeals against the imposition of penalties by the impugned orders. M/s. MITC Rolling Mills (Pv) Ltd. have filed the appeal for denial of Cenvat credit of duty paid by M/s. New Bombay Ispat Udyog (P)Ltd.
2. The brief facts of the case are that M/s. New Bombay Ispat Udyog Pvt.Ltd. is the manufacturer of M.S. Ingots & Billets and availing Cenvat Credit on the inputs. They after manufacturing the final product viz. M.S. Ingots cleared the same on payment of duty to independent buyers as well as to their sister concern M/s. MITC Rolling Mills Pvt Ltd. The department was of the view that the clearance made by the appellants to their sister concern i.e. M/s, MITC Rolling Mills Pvt.Ltd. should have been as per Rule 9 read with Rule 8 of the Central Excise Valuation Rules 2000. Therefore, show-cause notice was issued for demand of differential duty as per the assessable value arrived at under Rule 9 read with Rule 8 of the Valuation Rules, 2000. The show-cause notice was adjudicated and after considering the submissions of the appellants and going through the records, the impugned orders were passed for demanding the differential duty along with interest and imposing equivalent amount of penalty on the appellant firm and 2 penalties on the Director and for denial of Cenvat credit to M/s. MITC Rolling Mills (P)Ltd.. Therefore, all the appellants are in appeals before us.
3. Shri Prakash Shah, the ld.advocate appearing on behalf of all the appellants, submitted that the allegation of the department for undervaluation of M.S.Ingots is not sustainable as the appellants are clearing their finished goods to their sister concern as well as to the independent buyers. He has also submitted that they have cleared the goods to their sister concern on a price at which they have cleared the goods to the independent buyers. Therefore, the provisions of Rule 9 read with Rule 8 are not applicable to their goods. In fact, the transaction value as per Rule 4 is applicable to their case. To support this contention, he placed reliance on the decision of the Larger Bench of the Tribunal in the case of Ispat Industries Ltd. vs Commissioner of C.Ex. Raigad reported in 2007 (209) E.L.T. 185 (Tri-LB). He, therefore, submitted that the impugned orders are to be set aside.
4. On the other hand, Shri V.K.Agarwal, the ld.SDR appearing on behalf of the Revenue, submitted that the Board has clarified through Circular No. 643/34/2002 C.E. dated 1.7.2002 how to arrive at the assessable value for clearance made to sister unit for captive consumption. As per that circular, the goods cleared to sister unit for captive consumption the assessable value to be arrived at 115% of the cost of production of the goods. Therefore, the adjudicating authority has relied on the Boards circular and passed the impugned orders which is the correct method of valuation for captively consumed goods. He further submitted that the Director of the firm has also admitted in his statement that they have to pay duty as per the CAS- 4. Therefore, the appeals be dismissed and the impugned orders are to be upheld.
5. Heard both sides. After considering the submissions made by both sides, we find that the short issue in this case is, what should be the assessable value in case the goods are cleared to sister unit for captive consumption in a case where the goods are also sold to independent buyers. The said question has been answered by the Larger Bench of this Tribunal in the case of Ispat Industries Ltd. (supra) in para 8 & 9 which are reproduced below:-
8. The conclusion that we are drawing in the present case would lead to determination of a value which, in our view, will not only be reasonable but also consistent with the provisions of Section 4 of the Central Excise Act. We would, at this stage, draw support from the judgment of the Supreme Court in the assessees own case, as reported in 2006 (202) E.L.T. 561, wherein the Court applied The Gunapradhan Principle in interpreting the Customs Valuation Rules. Wehave kept in mind the following observations of the Court in coming to our above conclusion:
26.?In our opinion if there are two possible interpretations of a rule, one which subserves the object of a provision in the parent statute and the other which does not, we have to adopt the former, because adopting the latter will make the rule ultra vires the Act.
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36. In our opinion, the Gunapradhan principle is fully applicable to the interpretation of Rule 9(2). Rule 9(2) is subservient to Section 14. We must, therefore, interpret it in such a way as to make it in accordance with the main object that is contained in Section 14 of the Customs Act. It may be that in isolation Rule 9(2) conveys some other meaning, but when it is read along with Section 14 of the Act, it must be given a meaning which is in accordance with the object of Section 14. The object of Section 14 is primary whereas the conditions in Rule 9 (2) are the accessories. The accessory must, therefore, serve the primary.
9.?In view of what we have observed above, we answer the reference in the following terms :
(a) the provisions of Rule 8 of the Valuation Rules will not apply in a case where some part of the production is cleared to independent buyers;
(b) the provisions of Rule 4 are in any case to be preferred over the provisions of Rule 8 not only for the reason that they occur first in the sequential order of the Valuation Rules but also for the reason that in a case where both the rules are applicable, the application of Rule 4 will lead to a determination of a value which will be more consistent and in accordance with the parent statutory provisions of Section 4 of the Central Excise Act, 1944. Therefore, the issue has attained finality and following the decision of Ispat Industries Ltd. , we find that the provisions of Rule 9 read with Rule 8 of the Valuation Rules 2000 are not applicable to the facts of this case.
6. In view of the above observations, the impugned orders are set aside and the appeals are allowed with consequential relief, if any.
( Pronounced in court) Sahab Singh Member(Technical) Ashok Jindal Member(Judicial) pv 6