Cce-Jaipur-Ii vs M/S. Hindustan Zinc Ltd

[Arising out of Order-in-appeal No. 48-49(HKS)CE/JPR-II/2006 dated 18/1/2006 passed by Commissioner (Appeals-II), Customs & Central Excise-Jaipur]

1. Whether Press Reporter may be allowed to see the Order for Publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it would 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 of the order?

4. Whether order is to be circulated to the Department Authorities?

CCE-Jaipur-II Appellant

Vs.

M/s. Hindustan Zinc Ltd. Respondent

Appearance: Shri Pramod Kumar, JCDR, for the appellant.

Shri B.L. Narsimhan, Advocate for the respondent.

Coram: Honble Shri Rakesh Kumar, Member (Technical)

Honble Mrs. Sulekha Beevi C.S., Member (Judicial)

Final order no. 51947/2015

Per: Rakesh Kumar

The facts leading to filing of this appeal by the Revenue are, in brief, as under:

1.1 The respondent company are engaged in manufacture of Zinc from Zinc Ore. The present dispute is in respect of ore concentrate the unit of the respondent company at Rajpura Dariba Mines where the zinc ore is mined and ore concentrate is manufactured. During the period of dispute, i.e., during 1999 to 2000, the ore concentrate attracted Central Excise Duty. The respondent were clearing the ore concentrate to their various smelting unit on payment of duty on the value determined under Rule 6 (b) (ii) of the Central Excise Valuation Rules, 1975, i.e., on the cost of production plus the profit which the assessee would have normally earned on sale of the goods captively consumed. In this regard, the respondent had added a notional profit of 10 per cent, even though, during the period of dispute, the ore concentrate unit was incurring loss. The cost of production adopted was the cost of production for the previous year. The department was of the view that the value under Rule 6 (b) (ii) should be determined on the basis of the current years cost of production plus gross profit of the company as reflected in the audited balance sheet of the company which was 15.24%. It is on this basis that two show cause notices were issued for period from 1/6/1999 to 30/11/1999 and 1/12/1999 to 31/3/2000 for demand of differential duty of Rs. 77,57,878/- and 46,72,629/- respectively. These show cause notices were adjudicated by the Assistant Commissioner by a common order-in-original dated 25/8/2003. In this order, the Assistant Commissioner, while holding that current years cost of production is to be adopted held that since during 1999-2000, ore concentrate unit was making loss he adopted the notional profit margin of 10%. Accordingly, he confirmed the total duty demand of Rs. 21,14,119/- against the respondent along with interest on it under section 11 AB and besides this, imposed penalty of Rs. 5 lakh on the respondent under Rule 173Q.

1.2. Against this order of the Commissioner while the respondent filed an appeal challenging the cost of production adopted, the department filed an appeal challenging the part of the Assistant Commissioners order adopting 10% profit margin as according to the department, overall profit margin of the respondent company as reflected in its balance sheet was to be adopted which during 1999-2000 was 15.24 per cent. The Commissioner (appeals) vide order-in-appeal dated 25/8/2003 while dismissing the departments appeal for enhancing the profit margin to 15.24 per cent, remanded the matter to Original Adjudicated Authority in respect of the appeal filed by the respondent. The Revenue is in appeal against the CCE (appeals)s order dismissing the Departments appeal.

2. Heard both the sides in respect of the Revenues appeal.

3. Shri Pramod Kumar, ld. JCDR, assailed the impugned order of the Commissioner (appeals) in respect of the profit margin to be adopted and pleaded that in terms of the provisions of Rule 6 (b) (ii) of the Central Excise Valuation Rules, 1975, the value of the goods cleared for captive consumption is to be determined on the basis of cost of production plus profit, if any, which the assessee would have normally earned on the sale of the goods; and that the profit in this regard has to be of the finished goods as reflected in the assessees balance sheet; that the Tribunals judgment in the case of Raymond Limited Vs. CCE-Aurangabad reported in 2001 (129) ELT 327 (Tri-LB) relied upon by the Commissioner (appeals) is not applicable to the facts of this case as the M/s. Raymond Limited was the multi-product company engaged in manufacture of several goods like fabrics and cements and these goods were being manufactured out in different factories, while this is not so in the present case; that earlier in respect of the Jawar Mines of the Appellant company, the ore concentrate was being cleared to smelting unit on payment of duty on the value determined under Rule 6 (b) (ii) and at that time, overall profit margin of respondent company was being adopted and the respondent cannot adopt two different practices on similar issue for two different units and that in view of this, the impugned order of the Commissioner (appeals) with regard to the profit margin to be added for determining the assessable value under Rule 6 (b) (ii) of the Central Excise Valuation Rules, 1975 is not correct.

5. Shri B.L. Narsimhan, Advocate, the ld. Counsel for the respondent defended the impugned order by reiterating the findings of the Commissioner (appeals) and pleaded that the judgment of Larger Bench of the Tribunal in the case of Raymond Limited Vs. CCE-Aurangabad has been correctly relied upon by the Commissioner (appeals); that in this judgment the Larger Bench of the Tribunal has held that the profit or loss made by the manufacturer from other activities, be it the manufacture of other goods or trading in other goods is of no relevance while determining the assessable value of the goods cleared for captive consumption under Rule 6 (b) (ii) and for this purpose only the profit margin which the assesse would have earned on the sale of the goods cleared for captive consumption which is to be considered and not the overall profit of the company; that in the respondent companys own case in respect of other mine, where the identical issue regarding valuation of the ore concentrate cleared for captive consumption was involved, the Tribunal vide judgment reported in 2011 (263) ELT 112 Tri-Del relying upon the Larger Benchs Judgment of the Tribunal in the case of Raymond Limited (Supra) held that when the ore concentrate unit was incurring loss, the notional 10 per cent profit margin has been correctly adopted and there was no justification for adopting the profit margin of the respondent company which during that year was 15.24 per cent; and that the ratio of this judgment of the Tribunal, which is in respect of the respondents own case, is squarely applicable to the facts of this case. He, therefore, pleaded that there is no merit in the Revenues appeal.

6. We have considered the submissions from both the sides and perused the records.

7. The dispute in this case is in respect of the clearances of ore concentrate made by Rajpura Dariba Mines unit of the respondent company and the point of dispute is regarding assessable value of the ore concentrate cleared for captive consumption to the smelting units of the respondent. While determining the assessable value under Rule 6 (b) (ii) of the Central Excise Valuation Rules, 1975, the dispute is only about the profit margin to be added. While according to the respondent, the profit margin of 10 per cent has been correctly adopted, according to the departments profit margin to be adopted for determination of value under Rule 6 (b) (ii) must be the overall profit earned by the Respondent company and accordingly since during 1999-2000, the respondent company in its balance sheet had reflected the profit 15.24 per cent, it is this profit which is sought to be adopted by the department for determining the assessable value of ore concentrate.

8. We find that the identical issue was involved in the respondents case in respect of the another unit which has been decided by the Tribunal vide judgment dated 28/4/2010 reported in 2011 (263) ELT 112 Tri-Del wherein the Tribunal relying upon the Larger Benchs judgment in the case of Raymond Limited (Supra) had held that there is no justification for adopting the profit margin of the respondent company during 1999-2000 in its balance sheet and that the profit margin to be adopted is the profit margin in respect of the ore concentrate unit only. We do not find any reason to take a different view in the present case. In view of this, the Revenues appeal is dismissed.

(Rakesh Kumar)

Member (Technical)

(Sulekha Beevi C.S.)

Member (Judicial)

Ritu

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