M/S Aarti Industries Ltd vs Commissioners Of Central Excise

[ Arising out of OIO-11/DEM/VAPI/2007 dtd 20.12.2007 passed by Commissioners of Central Excise, Customs and Service Tax-VAPI ]

M/s Aarti Industries Ltd - Appellant(s)

Vs

Commissioners of Central Excise, Customs and Service Tax-VAPI - Respondent (s)

Represented by

For Assessee : Shri Deepak Kumar, Consultant For Revenue : Shri S K Shukla, Authorised Representative

For approval and signature :

Mr. P.K. Das, Hon'ble Member (Judicial) Mr. P.M. Saleem, Honble 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?

No 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

CORAM :

Mr. P.K. Das, Hon'ble Member (Judicial) Mr. P.M. Saleem, Honble Member (Technical)

Date of Hearing / Decision : 27/10/2015

ORDER No. A/11665 / 2015 dtd 27/10/2015

Per : Mr.P.K. Das,

The relevant facts of the case, in brief, are that the appellants were engaged in the manufacture of Ortho Nitrate Anisole (ONA) classifiable under Chapter 29 of the Schedule to the Central Excise Tariff Act 1985. A show cause notice dtd 14.1.2006 was issued proposing demand of duty alongwith interest and to impose penalty on the ground of undervaluation of the goods. It has been alleged that the appellants paid the duty on their own calculation and they have not followed the provisions of Rule 8 of Central Excise valuation (Determination of Price of Excisable Goods) Rule 2000 and CAS-4 in respect to clearance of the goods to their sister unit during the period from December 2001 to March 2006. The Adjudicating Authority confirmed the demand of duty of Rs 14,00,831/- alongwith interest and imposed penalty on the appellant company.

2. The Learned Counsel on behalf of the appellant submits that during the period 2001-02 and 2002-03, they had not any independent sale and therefore, they are liable to pay duty under Rule 8 of the Valuation Rule 2000 read with CAS-4. He further submits that the remaining periods i.e., 2003-04 to 2005-06 there was sale of independent buyer to the extent 3% in 2003-03 and 30% in respect of the other two years. He relied upon the decision of the Larger Bench in the case of M/s Ispat Industries Ltd Vs CCE Raighad  2007.209. ELT. 185. (Tri.LB). He further submits that the Honble Supreme Court in the case of M/s A K Roy and Another vs Voltas Ltd  1997.1.ELT.J177(SC) accepted 5% sale to the independent buyer having determining for the valuation. He submits that the Tribunal consistently viewed that, if there is a sale to the independent buyer clearance to the sister unit could not come under Rule 8 of the Valuation Rule. He relied upon the following case laws:

a) Reliance Industries Ltd vs CCE&ST, Rajkot - 2014.308.ELT.495 (Tri.Ahmd)

b) Daman Ganga Board Mills Pvt Ltd vs CCE, Vapi  2012.276.ELT.532 (Tri.Ahmd)

c) Subray Catal Chemical P Ltd vs CCE, Vapi  2010.261.ELT.1170 (Tri.Ahmd)

d) Jai Corporation vs CCE&ST, Daman  2015.317.ELT.353 (Tri.Ahmd)

e) Ultratech Cement Pvt Ltd vs CCE, Bhavnagar  2013.295.ELT.470.(Tri.Ahmd)

f) Ultratech Cement Pvt Ltd vs CCE, Bhavnagar  2014.302.ELT.334.(Guj)

g) Gangotri Electrocasting Ltd vs CCE&ST Patna - 2013.293.ELT.395 (Tri.Kolkata)

h) Ferro Alloys Corpn Ltd CCE&ST, Bhubanewshwar 1  2013.294.ELT.440. (Tri.Kolkata)

3. The Learned Authorised Representative on behalf of the Revenue reiterates the findings of the Adjudicating authority. He submits that for the first two years, they have not followed Rule 8 of the Valuations Rules and CAS-4 system and therefore it would apply for the subsequent periods. He further submits that for the 3rd year sale to the independent buyer is about 3%, which cannot be accepted as sale to the independent buyer.

4. After hearing both the sides and on perusal of the records, we find that the Larger Bench of the Tribunal in the case of M/s Ispat Industries Ltd (supra) held that transfer part of production to another plant of same assessee and balance production sold to independent buyers, Rule 8 could not be applicable and value could be determined by the assessee under Rule 4 of the Valuation i.e., transaction value. It has been held that the provision 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 consequential 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 be allowed to determine value which will be more consistent and in accordance with the parent statutory provisions of Section 4 of the Central Excise Act 1944. In the present case, there is no dispute that during the period 2003-04 to 2005-06 the appellant transferred the goods to their sister unit as well as to the independent buyers. The Learned Authorised Representative submitted that in 2003-04 there was sale of 3% to the independent buyer. The Honble Supreme Court in the case of M/s A K Roy and Another (supra) held as under :

 20.Excise is a tax on the production and manufacture? of goods `see Union of India v. Delhi Cloth and General Mills (AIR 1963 SC 791) section 4 of the Act therefore provides that the real value should be found after deducting the selling cost and selling profits and that the real value can include only the manufacturing cost and the manufacturing profit. The section makes it clear that excise is levied only on the amount representing the manufacturing cost plus the manufacturing profit and excludes post-manufacturing cost and the profit arising from post manufacturing operation, namely selling profits? The Section postulates that the wholesale price should be taken on the basis of cash payment thus eliminating the interest involved in wholesale price which gives credit to the wholesale buyer for a period of time and that the price has to be fixed for delivery at the factory gate thereby eliminating freight, octroi and other charges involved in the transport of the articles. As already stated it is not necessary for attracting the operation of s. 4 (a) that there should be a large number of wholesale sales. The quantum of goods sold by a manufacturer on wholesale basis is entirely irrelevant. There are facts that such sales may be few or scanty does not alter the true position.

5. In view of the decision of Honble Supreme Court, in the case of M/s A K Roy and Another (supra) the contention of the Learned Authorised Representative for the Revenue cannot be accepted. In our considered view, the appellant rightly paid duty on transaction value for the period 2003-04 to 2005-06 and the demand of duty alongwith interest and penalty cannot be sustained.

6. The demand of duty for the period 2001-02 and 2002-03, the learned Counsel on behalf of the appellant fairly submits that they are liable to pay duty under Rule 8 of the Valuation Rule read with CAS-4 system. It is contended that CAS-4 system was introduced in 30.2.2003. So, the demand of duty is liable to re-determined under the provisions of Rule 8 and CAS-4 for the first two years.

7. The Learned Counsel on behalf of the appellant submits that the duty has already been determined without adjustment of the excess payment with the short payment, which is contrary to the decision of the Tribunal in the vase of M/s Bajaj Tempo Ltd vs CCE, Pune  2004.172.ELT.473 (Tri.Mum) and Essar Steel India Ltd Vs CCE&ST - 2014.307.ELT.569 (Tri.Del). We find that the Tribunal in the case of Bajaj Tempo Ltd (Supra) allowed adjustment of the demand of the differential duty against excess payment and short payment. This is also supported by earlier decision of the Tribunal in the case of M/s Smithklin Beecham Consumer Healthcare Ltd vs. CCE, Chandigarh  2003.153.ELT.579 (Tri.) and Vinir Eng Pvt Ltd Vs CCE Bangalore - 2004.168.ELT.34 (Trib). So, we find force in the submission of the Learned Counsel on behalf of the appellant that the quantification of demand of duty for the first two years is required in the light of the decision of the Tribunal. As the demand of duty alongwith interest for the last three years cannot be sustained and the first two years also required to be quantified, the imposition of penalty is not warranted.

8. In view of the above discussion, the demand of duty alongwith interest for the period 2003-04 to 2005-06 is set aside. The demand of duty for the period 2001-02 to 2002-03, the adjudicating Authority is directed to examine in the light of the decision in the case of M/s Bajaj Tempo Ltd (supra) after giving adjustment of excess/short duty in accordance with law. The penalty is set aside. The impugned order is modified accordingly.

(Dictated and pronounced in the Court)

(P.M. Saleem) (P.K. Das) Member (Technical) Member (Judicial)

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