Per: Mr. P.G. Chacko, Member (Judicial)
1. These appeals are against the Commissioner’s order wherein demand of duty of over Rs.7.5 lakhs was confirmed against the assessee, viz., M/s. Sumo Polyconverters (Appellant in Appeal No.E/1952/03) for the period July 1997 to March 2002, equal amount of penalty was imposed on them, the amount of Rs.9.00 lakhs paid by them earlier was appropriated towards the demand of duty and penalty and a penalty of Rs.50,000/- was imposed on the proprietor (Appellant in Appeal No.E/1953/03). The Revenue’s appeal is against that part of the Commissioner’s order, whereby the benefit of cum-duty price was given to the assessee under Section 4 of the Central Excise Act, 1944.
2. After examining the records and hearing both sides, we find that the assessee was functioning as a small scale industrial unit manufacturing moulds for plastic articles and that they had surrendered the registration certificate in 2000-01 by claiming full exemption under relevant SSI Notification. The show-cause notice, which was issued to the assessee, proposed to recover duty of over Rs.10.17 lakhs on the ground that their aggregate value of clearance for each financial year comprised in the period of dispute had exceeded the prescribed limit of Rs.1.00 crore and hence, they were liable to pay duty on the excess clearances. The main part of the demand was on the so-called excess clearances valued at Rs.73,92,000/- based on loading of aggregate value of clearances for the financial years 1997-98 to 2001-02. The moulds/mould parts, which were originally cleared by the assessee to their customers, after a long period of use, returned for modifications/repairs and the assessee, after such modifications/repairs, returned the moulds/mould parts to the customers, which transaction took place during the above period of dispute. According to the assessee, the cost of modifications/repairs was not liable to be included in the aggregate value of clearances in asmuch as they did not undertake any manufacturing activity. On the other hand, the show-cause notice alleged that the assessee had undertaken processes amounting to manufacture on bought-out components and used the processed components for repairs and modifications of the moulds/mould parts returned by the customers. On account of this manufacturing activity, the value of subsequent clearances to the customers were considered to be addable to the aggregate value of clearances effected during the period of dispute. On account of this loading of the aggregate value of clearances, the limit of Rs.1.00 crore was exceeded and consequently the liability to pay duty on the excess value ensued. A major part of the demand of duty is on account of this liability.
3. Another value addition was of Rs.10,98,340/- for the financial year 2001-02 as per the show-cause notice, on the premise that the sales value of the goods cleared to M/s.Modern Thermoplastics (India) Pvt Ltd., who were allegedly an interconnected undertaking , was liable to be adopted under Rule 9 of the Central Excise Valuation Rules 2002 for the purpose of payment of duty. An amount of Rs.27,55,000/- was also allegedly addable to the aggregate value of clearances for the year 2001-02. In this connection, it was alleged in the show cause notice that, in order to avail the benefit of SSI exemption for the year 2001-02, the assessee showed certain clearances of the said year as clearances of the previous year. For the year 1997-98, the show-cause notice proposed to load an amount of Rs.8,000/-. All the proposals in the show-cause notice were contested. In adjudication of the dispute, the ld. Commissioner, by granting the benefit of cum-duty value, reduced the demand of duty to Rs.7.5 lakhs and imposed equal amount of penalty on the assessee. The Revenue’s appeal is against grant of the said benefit to the assessee.
4. At the outset, we have to dismiss the Revenue s appeal in asmuch as the question whether the invoice price of the goods should be treated as cum-duty price is already settled vide CCE, Delhi Vs. Maruti Udyog Ltd., 2002 (141) ELT 3 (SC) wherein the Hon ble Supreme Court held against the Revenue. Even the review petition filed by the department was rejected by the apex Court vide 2005 (179) ELT A-102 (SC). In the result, the relief prayed for in the Revenue’s appeal cannot be granted and the same is rejected. The Revenue’s appeal stands dismissed.
5. After hearing both sides in the assessee’s appeal, we have found sufficient reasons for remand of the case to the lower authority. The ld. Counsel for the assessee has not pressed the ground raised against addition of Rs.8,000/- to the aggregate value of clearances for the year 1997-98, considering the insignificant consequence of such addition. He has, however, argued vehemently against addition of Rs.73,92,000/- to the aggregate value of clearances for the period 1997-98 to 2001-02. He has argued that there was no manufacturing activity either in the repairs of mould parts or in the modifications of the goods undertaken during the said period. He has submitted that both the repairs and modifications had to be undertaken necessarily by making use of bought-out components for replacements. The mould parts essentially remained the same after such repairs/modifications and hence there was no manufacture involved in the process.
6. The grievance of the appellant is that the job charges involved in the repairs/modifications of the mould parts were also included, over and above the value of bought-out components, in the aggregate value of clearances. On the other hand, it has been submitted by the ld. JDR that the bought-out components were used only after processes like drilling, machining, etc. were done on the same and, therefore, the entire activity amounted to manufacture and hence the labour charges as well as cost of the components were to be included in the value of clearances. After considering these submissions, we note that the necessary break-up of the bought-out components, manufactured components and job charges has not been brought out in the impugned order. Without bringing out these three elements, in our view, it would not be possible to arrive at a reasonable finding as to whether any extra amount requires to be added to the aggregate value of clearances for the relevant financial year and, if so, to what extent. As a major part of the value addition is found in this context, we are of the view that, for the ends of justice, the entire case needs to be readjudicated by the Commissioner, barring, of course, the aspect of the cum-duty price.
7. On the question whether, in respect of clearances made by the assessee to M/s.Modern Thermoplastics (I) Pvt Ltd. during the year 2001-02, there should be any addition to the aggregate value of clearances, we find that the ld. Commissioner added an amount of over Rs.10.90 lakhs to the aggregate value of clearances for the said year, after holding that the entire sales value of clearances to the above company being related person should be adopted under Rule 9 of the Valuation Rules. The ld. Commissioner found the said company to be an interconnected undertaking”.
8. On the other hand, the case of the assessee is that, as a proprietorship concern, the assessee cannot be brought within the ambit of the definition of interconnected undertaking. In this connection, the ld. Counsel has relied on the Tribunal’s decision in the case of Dujodwala Products Ltd., Vs. CCE, Raigad, 2007 (213) ELT 346 (Tri-Mum) wherein it was held that the assessee and one M/s. Royal Chemicals (proprietary concern) were not interconnected undertakings and a finding to the contra was set aside. The ld. Commissioner, obviously, had no occasion to consider the above case law. There is yet another reason why the above case of the assessee should be reconsidered. We find that, during the above period (2001-02), the assessee had cleared 14 consignments of goods to M/s. Modern Thermoplastics India Pvt Ltd, but only two of such clearances were selectively taken by the adjudicating authority for loading of aggregate value of clearances, the sale value of those two clearances being the highest. It appears that, in the impugned order, the ld. Commissioner did not examine the objections raised by the assessee in this behalf.
9. In relation to addition of value of Rs.27.55 lakhs to the aggregate value of clearance of the year 2001-02, we find that, admittedly, the moulds in question were cleared in the month of March 2001. May be, those clearances might have been on trial basis. Nevertheless, those were clearances envisaged under the SSI Notification. We have found no justification for shifting those clearances to the next financial year by mere reason of the goods having been sent back to the assessee by the customer for repairs. In this view of the matter, the value addition of Rs.27.55 lakhs for the financial year 2001-02 requires to be set aside, and it is ordered accordingly.
10. In the result, we set aside the impugned order except the Commissioner’s decision for giving the benefit of cum-duty price to the assessee, and allow these appeals (E1952/03 and 1953/03) of the assessee by way of remand, directing the ld. Commissioner to pass a speaking order afresh on all other issues except the question relating to addition of value of Rs.27.55 to the aggregate value of clearances of 2001-02, which loading we have set aside. A reasonable opportunity of being heard shall be given to the assessee.