Custom, Excise & Service Tax Tribunal
Yes vs Represented By : Shri P.M. Dave, ... on 9 August, 2010
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Zonal Bench, Ahmedabad Appeal No. : E/2625 of 2005 and E/160 of 2006 Arising out of : OIO No. 4/BRC-I/MP/2005 dated 10.05.2005 Passed by : Commissioner of Central Excise & Cus. Vadodara For approval and signature : Hon'ble Mrs. Archana Wadhwa, Member (Judicial) Honble Mr. B.S.V. Murthy, Member (Technical) 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3 Whether their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes Appellant (s) : M/s. Unicure Remedies Pvt. Limited Commissioner of Central Excise Vadodara Represented by : Shri P.M. Dave, Advocate & Shri Avinash Thete, SDR Respondent (s) : Commissioner of Central Excise Vadodara
M/s. Unicure Remedies Pvt. Limited Represented by : Shri Avinash Thete, SDR & Shri P.M. Dave, Advocate CORAM :
Hon'ble Mrs. Archana Wadhwa, Member (Judicial) Honble Mr. B.S.V. Murthy, Member (Technical) Date of Hearing : 09.08.2010 Date of Decision : 09.08.2010 ORDER No. _____________ /WZB/AHD/2010 Per : Mr. B.S.V. Murthy;
M/s. Unicure Remedies Pvt. Limited (Unicure for short) is engaged in the manufacture of pharmaceutical products. An offence case was registered against the Unicure whereby there was a proposal to deny the exemption to their another factory under notification No. 07/1997-CE dated 01.3.1997, proposal to enhance the value for sale of the product Vital Z to M/s. Redkine Pharmaceuticals Pvt. Limited (Redkine for short) and duty demand for clandestine removal of Vital-Z and other products. In the first round of litigation, the matter had reached the Tribunal and the Tribunal had set-aside the demand relating to denial of exemption under notification No. 7/97 dated 01.3.1997 and in respect of other issues the matter was remanded to original adjudicating authority for fresh decision. The impugned order has been passed in terms of the directions of the Tribunal in the order No. 950 to 952/04-NBA dated 27.8.2004/ 22.9.2004. In the impugned order, the Commissioner confirmed a portion of the demand in respect of clandestine removal and on the ground that there was no under valuation as regards sales to Redkine and Redkine cannot be treated as a related person set aside the demand relating to under valuation in respect of sales to Redkine. Both, the Unicure and the Revenue are in appeal.
2. Unicure is in appeal against the order of Commissioner wherein he has upheld the demand of Rs. 6,24,158/- with interest and also imposed penalty of equal amount. The allegation of clandestine removal in show cause notice was based on goods cleared on proforma invoices / delivery challans. While the Commissioner has accepted the claim of Unicure in respect of 70% of the demand by co-relating with proforma invoices/ delivery challans with the invoices he has confirmed the demand for the duty in respect of those proforma invoices/ delivery challans in respect of which Unicure could not show corresponding invoices. It was submitted on behalf of Unicure that department has not produced any evidence to support the contention that goods were illicitly removed. The department has not enquired with the alleged recipients whose names appeared on the concerned Proforma Invoices/ deliver challans. No verification of transportation or octroi payment was made and in the absence of any corroborative evidence, demand could not have been upheld. Further, it was also submitted that Unicure had done their best to produce relevant evidence. It was submitted that it is not humanly possible to correlate each and every proforma invoice with corresponding duty paying documents after lapse of nearly 8 years and when the number of transactions run into a few hundreds. The very fact that Unicure could produce satisfactory evidence for atleast 70% of the alleged illicit removal would suffice to prove the bonafides on the part of Unicure and explanation given by them regarding issue of proforma invoices cum delivery challans for genuine and licit clearances. We find that department has no evidence other than the proforma invoices cum delivery challans and has not even bothered to investigate randomly selected receivers of the goods and not even verified one transporter. As submitted by the learned advocate, we find that the fact that Unicure has been able to show the licit removal in respect of 70% of such documents makes them eligible for benefit of doubt in respect of remaining 30%.
3. As regards departments appeal, the contention of the department is that Redkine should have been treated as a related person and this submission has been made on the following grounds :-
(i) The adjudicating authority has observed that the discount given to Redkine by the unit was quite normal and acceptable and the mutuality of interest between the unit and Redkine as related persons and adoption of sale price of Redkine as assessable value was not sustainable and they were liable to pay the duty amounting to Rs. 6,24,158/- towards illicit removal along with penalty and interest.
(ii) However, the adjudicating authority has failed to appreciate that the mutuality of interest between the unit and Redkine as related is well established on the following grounds.
(a) The adjudicating authority has failed to note that ever since the unit and Redkine entered into the agreement, there had been a sudden decrease in assessable value from 1999-2000 onwards in respect of the price trend of their product Vital-Z.
(b) The adjudicating authority has failed to note that the marketing team of Redkine was the same team which used to work for the unit and, in order to reduce the marketing expenses, which used to form part of the assessable value of their excisable products, the entire team was transferred to Redkine from 01.4.1999. He failed to notice that the debit notes issued by the unit, the outstanding dues of the employees who joined Redkine after 01.4.1999 were transferred to the account of Redkine by the unit.
(c) The adjudicating authority has failed to note that the price lists of Redkine showed the rice of Vital-Z as mentioned Transfer Rate URPL to RPPL and hence, it was not the whole sale price, but was the transfer price.
(d) The adjudicating authority has failed to note that as per clause of the agreement dated 08.4.1999, Redkine was not free to fix the price in respect of the sale of the products of the unit and the price had to be mutually agreed upon by both, the unit as well as by Redkine.
(e) The adjudicating authority has failed to note that against certain purchases, Redkine made the payments either by cheque or by demand drafts and the amount so paid for the purchases of the unit was in the nature of flow back of the additional money, which was earned through Redkine by the unit, by selling their products at reduced rate to Redkine.
(f) The adjudicating authority has failed to note that the amount charged to make provision for advertising or publicity, marketing and selling organization expenses, which were actually paid or payable by the unit or on its behalf by reason of, or in connection with the sale, whether payable at the time of sale or at any other time were to be included in the assessable value. He failed to note that the whole arrangement after 01.4.1999, was made to reduce the assessable value of their products under the guise of marketing expenses, which enriched the product and, the elements which enriched product were liable to be included while arriving at the Transaction value.
4. We find that this issue has been dealt with thoroughly by the Commissioner in his order. We find that the grounds of appeal of the Revenue are not really sustainable. The Commissioner has observed that Redkine was the buyer of 70% of the total turnover of Unicure and got discount of 45% and three other independent buyers were given 40 to 42% discount. Therefore, the price to independent buyers can be said to be more or less to be the same. He has actually given the names of other independent buyers, the price charged to them and the level of discount etc. He has rightly taken note of the provisions in the Valuation rules as regards sales to related persons that the same is applicable only when the manufacturer arranges in such a way that the excisable goods are not sold except to or through related person. As rightly observed by him, that is not the case here and therefore, the provisions of valuation Rules itself cannot be applied. As regards the marketing team, the Commissioner has given names of officers who had not joined Redkine. Further, he has also given the names of employees who were never employed by Unicure. He has examined the agreement between Unicure and Redkine and has come to the conclusion that transaction was on principal to principal basis and in our view it is rightly so. We also agree with the Commissioner that there was nothing seriously wrong with the Director Shri B.R. Shah meeting with the marketing persons of Redkine.
5. In view of the above, we do not find any merit in the appeal filed by the Revenue. Accordingly, the appeal filed by the Revenue is rejected and appeal of Unicure is allowed.
(Pronounced in the Court)
(Archana Wadhwa) (B.S.V. Murthy)
Member (Judicial) Member (Technical)
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