SooperKanoon Citation | sooperkanoon.com/26176 |
Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Mumbai |
Decided On | Oct-10-2001 |
Reported in | (2002)(147)ELT693Tri(Mum.)bai |
Appellant | Ashima Denims, H.S. Rajput, J.C. |
Respondent | Commissioner of Central Excise |
2. It is the contention of the counsel for the applicant that it had produced before the Commissioner numerous invoices of various manufacturers to show that the sale price of yarn that it manufactured was lower than the value that was proposed to be taken in the show cause notice and there is not finding on this. He further contends that the extended period of limitation contained in the proviso under Section 11A of the Act which the notice invoked, for demanding the duty will not be available to the department. There is nothing to show that there was suppression of facts with an intent to evade duty. The statements of various persons recorded did not indicate that there was any intend to evade duty. During the relevant period, the department itself was under the belief that the administrative overhead expenses were not includable in the department under Rule 6(b)(ii) the value of yarn captively consumed. There is therefore no basis for inclusion of these overheads. He contends that profit that has been applied if the overall gross profit of the company which is impermissible.
3. The contention with regard to the second part of the demand relating to dyeing and sizing of yarn is that it is barred by limitation.
Applicant has filed classification list for dyeing the yarn the ground plan as well as process chart and that the applicant clearly sys that the yarn is to be dyed when it is used as warp yarn. The applicant had itself chosen to pay duty by filing classification list on 10.4.95 and 23.6.95 which included the cost of dyeing of the yarn. The department however, "prohibited this by issuing show cause notice to say that duty must be paid on the yarn only at the spindle stage the assessee cannot include the cost of dyeing in that yarn and claim modvat credit on the dying material. It is only subsequent to an order of Commissioner (Appeals) it was held that the applicant could include in the value the cost of dyeing. The decision of the larger bench in Tribunal in Raymonds Ltd. v. CCE 2001 (129) ELT 327 is relief upon in support.
4. The departmental representative reiterates the Commissioner's finding.
5. As we have noted, there are two distinct bases on which duty has been demanded. The Commissioner has not accepted with regard to the first, the valuation of captively consumed yarn the contention that was raised before him that this value ought to be based on the price at which yarn manufactured by other persons was being sold in the market on his view that such yarn had not been shown to be identical with the yarn under consideration by him. Prima facie we do not find any reason to disagree with this view. Not the slightest evidence has been produced before us to show that the yarn that the other persons were selling is of the same count, composition, variety and results from an identical process of manufacture that the applicant employed. Each of these factors would have a significant bearing upon the price upon which it is sold. We are therefore of the prima facie view that the Commissioner has rightly invoked Rule 6(b)(ii) to base the value of the yarn on the cost of production.
6. This brings up to the element which forms such costs. The Commissioner has relied upon the decision of this Tribunal in Tube Investments v. CCE 1998 (74) RCR 775, Kanoria Chemical Inds. v. CCE 1995 (80) ELT 795 to say that in such a situation it is appropriate to take into account the profit earned on the product manufactured out of the yarn. The larger bench of the Tribunal in its decision in Raymond Ltd. v. CCE 2001 (129) ELT 327 to whom this question was referred by another bench has found that well accepted principles of accounting could be utilised to determine the margin of profit in such cases.
Counsel for the applicant is not able to justify that by application of such principles, the profit that the Commissioner has taken is incorrect. Similarly inclusion of administrative overheads to determine the cost of manufacture appears to us to be rational and consonance to the Rule 6(b)(ii).
7. We now come to the second issue, the determination of the cost of assessable value that the applicant purchased form the market and subjected to the process of bleaching and dyeing. The Contention here is on limitation. The department ought to have been aware that eh applicant carried out this activity. The basis for this contention appears to be that since the department was aware that the applicant dyed and bleached the yarn that it manufactured before taking it up for use in weaving of fabric, the department ought to h ave been aware that it would subject the yarn that it purchased from the market to the same process. We do not at this stage find it possible to agree. It has not been brought to our notice that the fabric cannot be manufactured out of unbleached or undyed yarn. To our understanding, fabric is often manufactured out of such yarn. Therefore, the department's awareness of the fact that the applicant dyed the yarn that it manufactured would not by itself lead it to conclude that it subjected the yarn that it purchased to the same processes.
8. However we also take note of the contention that was urged before us that on adjudicating the notice issued to textile mills in Mumbai, the Commissioner there had dropped the demand on limitation. Detail study of the circumstances leading to the order and those leading to the present order will have to be made before it can be decided whether the facts were identical or not. We have to keep in mind that each case has to be decided on its own facts.
9. Taking all these aspects into account, we direct deposit by the applicant of Rs. 50 lakhs within two months from the receipt of this order. Thereupon we waive deposit of the remaining amount of duty demanded from it and penalty imposed upon it and the penalty imposed on the other applicant.