1.1 The Appellants are job workers, manufacturing grease from the raw materials and packing materials supplied by M/s Tide Water Oil Co.
India Ltd. They filed necessary price lists under Rule 173C of CER 1944, duly supported by independent Charted Accountants certificates showing the landed cost of raw materials and packing materials in their factory and the job charges, and paid excise duty on such cost +job charges basis.
However, the department, in the proceedings before us seeks to levy excise duty on the selling price of M/s Tide Water Oil Co. India Ltd. ii) that the appellants are related persons of Tide Water within the meaning of Section 4(4)(d)(ii) of the Act; iii) that there is any flow back of financial consideration from Tide Water; i) suppression of fact as the appellants have "special relationship" with Tide Water Oil Co., and that they further suppressed the wholesale price at which the said Tide Water Oil Company sold the products.
ii) the Appellants have deliberately, wilfully and with an intent evade payment of Central Excise Duty contravened the provisions of Rules 173C and 173F. iii) the relationship between the Appellants and Tide Water is not one of principal to principal, and the dealings are not at arm's length.
iv) There is no sale of the products by Appellants to Tide Water and hence the assessable value (based on cost +job charges) does not reflect the "normal price" under Section 4(1)(a) of the Act.
v) Some varieties of grease are made by M/s Tide Water Oil Co. in their Chennai and Calcutta factories and sold by them in market.
Hence on the basis of "comparable goods", the selling price of Tide Water for such varieties is to be taken for payment of excise duty.
In respect of other varieties also since there is no sale between the Appellants and Tide Water and as sale is effected for the first time by Tide Water the selling price of Tide Water is to be taken.
vi) The Appellants had not included certain elements of costs (though it does NOT say which cost(s) is / are not included).
2. The appellants contest, the demands and the issue on merits and limitation as - i) The period involved is October 1994 to December 1997. The show cause notice was issued on 27^th October 1999, invoking the larger period of limitation.
ii) A copy of the agreement and the Price Declarations (duly supported by CA's certificates) /Classification lists were filed with the Department even before the first clearance was made, along with their letter dated 3.8.1994, which was received by the Department., on 26^th August 1944. In the letter they also clarified that they will pay central excise duty on the basis of the judgment of the Supreme Court in the case of Ujagar Prints -1989 (39) ELT 493 SC. iii) Subsequently department issued as many as eight show cause notices alleging that the Appellants have not included the amount of duty paid on inputs while calculating the assessable value. No other issue was raised. These show cause notices were dropped by the O/O dated 14.7.2000 on the basis of the judgment of the Supreme Court in the case of Dai Ichi Karkaria 1999 (112) ELT 353 (SC).
v) Thus the Department was fully aware of the relationship which existed between the Appellants and Tide Water and also the method of paying central excise duty.
vi) The order in original records that the ratio of the Ujagar Prints case is not applicable in the present case; that the Appellants have not revealed the base adopted for fixation of the prices of the goods. It further records that the Appellants have suppressed the actual transaction with Tide Water and they effected stock transfer of goods and paid duty at much lower than the price of goods sold at the depots of Tide Water and further suppressed the fact of clearance though the depots of Tide Water. The demand is thus completely barred by limitation.
vii) In the absence of any allegation of dummy unit, flow back of consideration, "related person under Section 4(4)(d)(ii), etc., principles of Ujagar Prints case (1989 (39) ELT 493 (SC)) is applicable for determination of assessable value. They also rely on - a) Pawan Biscuits v. CCE - 2000 (120) ELT 24 (SC) b) Sidharth Petro Products v. CCE viii) Relationship between the trader and the job worker will not take the case of the job worker out of the purview of the decision of Supreme Court in the case of Ujagar Prints and in case of Prafful Industries v. CCE "Comparable goods" principle of Rule 6(b) (i) is not applicable, for goods produced by job worker as also on Kandivali Metal Works v. CCE - 1997 (90) ELT 187 (T) Appeal of Revenue dismissed by Supreme Court - 1999 (97) ELT A222(SC) ix) The impugned order travels beyond the scope of the show cause notice in respect of the following matters: a) Even though the show cause notice never raised the issue of mutuality of interest between the Appellants and Tide Water, the same has been taken in the order; b) The impugned order proceeds on the basis that Tide Water provided not only assistance in technical know-how and supervision of manufacture, but also undertook marketing and responsibility for advertising, after sales service, etc of goods manufactured by the Appellants. No such stand was taken in the show cause notice.
Further this is contrary to the provisions of Clauses 4 and 5 of the agreement.
c) The impugned order states that the staff of Tide Water were present in the factory premises of the assessee. No such allegation was made in the SCN nor any material placed on record.
d) The impugned order proceeds on the basis that greases were produced on the basis of patented formula which is an intellectual property and tangible asset. No such allegation was made in SCN. e) The impugned order holds that in the price declaration, disclosure of various expenses incurred by Tide Water on behalf of the Appellants was not made. No such allegation was made in SCN. On the contrary, the issue regarding expenses to be included in the cost got settled in the matter of eight SCN which were dropped.
& submit it is well settled that where the findings in the order is beyond the show cause notice, the same is not sustainable at all.
i) for the period Oct. 96 to December 97, penalty has been imposed under Section 11AC read with Rule 173Q. Penalty cannot be imposed under both these provisions in terms of Board's Circular No. 246/80/96-CX dated 1.10.1996. Hence the penalty imposed under both these provisions is not sustainable.
ii) Penalty of Rs. 16,30,000/- imposed under Rule 173Q read with Rules 209 and 210 is also not sustainable.
xi) No penalty is imposable under Rule 209 simultaneously with Rule 173Q, as the rule itself states "...... .notwithstanding anything contained in any other provision of these rules save and except Rule 57H and Rule 173.Q.......".
xii) Rule 210 is applicable only when no other penalty is provided under the rules. Having opted to impose penalty under other rules, this residuary provision cannot be invoked.
3.1 After hearing both sides, we found appellants reliance on the constitutional Bench decision of the apex Court in case of Ujagar Prints (1989 (39) ELT 493 SC & other decision is well founded. That decision in Ujagar Prints case, would entitle them to arrive at values on a cost construction method as adopted and not found fault with alternately working out the value from the Sale Price M/s Tide Water Oil Co could be adopted by reducing the Traders Profit i.e. Costs and profits of M/s Tide Oil Co. after taking the charge of the goods at the appellants factory gate. In any case the Sale Price of M/s Trade Oil Company cannot be applied and approved as value under Section 4 of the Central Excise Act 1944 in the facts of this case in view of the settled law by the apex court. Revenue has no case to uphold the demands or and penalty as made out and imposed.
3.2 On view of the findings, the order is to be set aside and appeal allowed.