Customs, Excise and Gold Tribunal - Bangalore
Goetze (India) Ltd. vs Commissioner Of Central Excise on 22 August, 2005
ORDER T.K. Jayaraman, Member (T)
1. These 2 (two) appeals are filed against the Order-in-Appeal No. 532/2002-C.E. dated 5-2-2002 passed by the Commissioner of Customs & Central Excise (Appeals), Bangalore.
2. The brief facts of the case are follows :-
(a) E/37/2003 The appellants cleared semi-finished piston rings to their sister unit at Patiala. The issue is valuation of the above goods in terms of Rule 6(b)(ii) of the Valuation Rules, 1975. Both the lower authorities relied on the Board's Circular No. 258/92/96-CX, dated 30-10-1996 and included the profit margin of the final products in the cost of the semi-finished piston rings in order to arrive at the assessable value. The appellants' contention is that profit margin required to be included should be only a notional profit margin and not the profit margin earned on the final products. The lower authorities adjudicated their case for different period from September 1997 to September 1999 and demanded differential duty of Rs. 5,89,722.00. The Commissioner (Appeals) upheld the lower authority's order.
(b) E/48/2003 The appellants filed a refund claim for an amount of Rs. 25,000/- after they succeeded in the appeal proceedings before the Commissioner (Appeals). The above amount was paid by the appellants as pre-deposit ordered by the Commissioner (Appeals). Later the Commissioner (Appeals) passed the Order-in-Appeal No. 497/2002-C.E., dated 25-10-2000 in favour of the appellants. The above order has been accepted by the Department. Hence the appellants are entitled for refund of Rs. 25,000/-. The Original Authority while sanctioning the refund claim, appropriated the sum against certain duty and penalty which was outstanding from the appellants in another proceedings which was subject matter of an appeal before the Appellate authority in Appeal No. 36/2001. The Commissioner (Appeals) in the impugned order upheld the order of the Original Authority. Therefore, the appellants have come before this Tribunal with a prayer to hold that the adjustment of refund against the demand of duty in another proceedings is illegal and untenable in law.
3. Shri Rajesh Chander Kumar, learned Advocate appeared on behalf of the appellants and Shri Ganesh Havanur, learned S.D.R. appeared on behalf of the Revenue.
4. The learned Advocate adduced the following arguments:-
(a) E/37/2003
(i) The profit margin referred to in Rule 6(b)(ii) of the Valuation Rules, 1975 is not the profit earned on the sale of the final/end-products.
(ii) The Tribunal in the case of Dharangadhara Chemicals Works Ltd. has held that the assessable value of the captive consumption items has to be computed by the method of cost accounting, delinked from the margin of profit of the end-product. Similar rulings were held in the following cases:-
(1) CCE v. Festo Elgi Pvt. Ltd.
(2) Groz Beckert's case
(iii) For the semi-finished piston rings sent to the appellant's Pa-tiala unit also, there is no comparable goods cleared by them as admitted in the Show Cause Notice itself. Hence on the basis of the above-mentioned case laws, profit margin of the final/end-product cannot be taken into account while arriving at the profit margin of the semi-finished piston rings also.
(iv) Even if the profit margin has to be determined on the basis of the previous year's balance sheet, the balance sheets of all the units of the appellants (not only Bangalore unit) should be taken into account.
(v) The Board's Circular No. 258/92/96-CX., dated 30-10-1996 is not binding on the Appellate authority but the Commissioner (Appeals) has blindly followed the Board's Circular.
(vi) The Hon'ble High Court of Karnataka has held that for the purpose of valuation in terms of Rule 6(b)(ii), the notional profit alone has to be taken into account and not the profit actually earned on the final products. The Appellate authority has not considered the above-mentioned case which was cited by the appellants before him.
(b) E/48/2003 The learned Advocate relied on the Hon'ble High Court of Madhya Pradesh in National Steel Industries Ltd. v. UOI wherein it was held that no recovery proceedings should be resorted pending disposal of the appeal and stay petition. He prayed for allowing the appeal.
5. We have gone through the records of the case carefully. We find that:-
(a) E/37/2003 In the case of Festo Elgi Pvt. Ltd. cited by the learned Advocate, the price list declared as assessable value has sum total of the cost of raw material, manufacturing cost and 10% of marginal profit. This was not accepted by the Department. But the Tribunal observed that the gross profit margin earned on the final product cannot be mechanically applied to captively consumed items without considering the various factors. The Division Bench of the Hon'ble High Court of Karnataka in the Writ Appeal Nos. 771 & 772/1989 has held as follows:-
We are entirely in agreement with the view taken by the learned Single Judge to the effect that in respect of nuts, bolts, screws and cutting tools which are intermediate products manufactured by the respondent and which ultimately become component parts of finished goods, the only reasonable method that could be adopted, having regard to the facts and circumstances of the case, has to ascertain the manufacturing cost of these items in the first instance by cost accounting method and to add 10 per cent as the margin of profit, which the respondent would have earned had these materials been sold at that stage itself. Therefore, we find no ground to entertain these appeals.
In view of the above ruling and the cited case laws, addition of the profit margin of the final products is not correct method of valuation of captively consumed intermediate products. Hence the Order-in-Appeal is not legal and proper. The Commissioner (Appeals) ought not to have ignored the decision of the Hon'ble High Court of Karnataka. Hence we allow the appeal.
(b) E/48/2003 While rejecting the refund claim of the appellants, the Commissioner (Appeals) has observed the following:
Now I consider appeal No. 129/2001. The appellants filed a refund claim for Rs. 25,000/- consequent to a favourable decision in appeal No. 654/98 (B II). But the lower authority after sanctioning the refund appropriated it to the Government dues due from appellants as per Order No. 87/2000 dated 27-12-2000. The appellants in their grounds of appeal contended that since appeal against Order-in-Original No. 87/2000 is still pending with appellate authority, the lower authority's action of appropriating the refund sanctioned is irregular. No Show Cause Notice was also issued before such an action.
In view of the foregoing, I pass the following order:
1. I uphold Order-in-Original No. 87/2000-C.E., dated 27-12-2000 passed by lower authority and reject the appeal bearing No. 36/2001 filed by the appellants.
2 In view of my decisions to reject the appeal filed against the Order No. 87/2000-C.E., appeal bearing No. 129/2001 becomes infructu-ous.
In our view, the action of the Original Authority is not proper when the appeal in the same case was pending, he could not have appropriated the refund towards the demand which was pending before the Commissioner (Appeals). Moreover, the appeal filed against Order No. 87/2000-C.E. and rejected by Commissioner (Appeals) relates to valuation of semi-finished piston rings which is the subject matter of appeal before this Tribunal in E/37/2003 which we have decided in appellant's favour. Hence, there is no merit in the Commissioner's (Appeals) order. The ratio of the decision of the High Court of Madhya Pradesh in the case of National Steel Industries Ltd. (supra) is squarely applicable to the present case. Hence we allow the appeal and order refund of the pre-deposit.
6. These 2 (two) appeals are allowed in the above terms.
(Pronounced in the open court on22-08-2005)