| SooperKanoon Citation | sooperkanoon.com/26185 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Tamil Nadu |
| Decided On | Oct-10-2001 |
| Reported in | (2001)(78)ECC814 |
| Appellant | Microraj Electronics Pvt. Ltd. |
| Respondent | Commissioner of Central Excise, |
Ltd. confirming the following: i. " An amount of Rs. 97,25,682/- being the differential duty short paid on the quantity of 8,70,402 Kgs. Of CRSS cleared on stock transfer basis, on the differential value of Rs. 6,48,37,880/- @ 15% adv should not be demanded from them under Rule 9(20 read with proviso to Section 11A (1) of the CEA, 1944; ii. An amount of Rs. 50,32,212/- being the duty not paid @ 15% adv. on 7,17,89,422 Nos. of blades valued ate Rs. 3,35,34,747/- during the period from 1995-96 to 1996-97 not accounted for in the statutory records and subsequently removed without payment of duty should not be demanded from them under Rule 9(20 read with proviso to Section 11(A) of the CEA, 1944; iii. An amount of Rs. 3,72,209 being the duty not paid on the total quantity of blades 31,43,745 Nos. valued at Rs. 24,81,390/- which were used for testing purposes during the period from 1997-98 to 1999-2000 should not be demanded from them under Rule 992) read with proviso to Section 11(A) of the CEA, 1944; iv. Duty amounting to Rs. 3,141/- on quantities reported to have been stolen during the years 1998 and 1999 should not be demanded under Rule 9(2) read with proviso to Section 11A (1) of the CEA, 1944; v. The credit of Rs. 1,71,083/- irregularly availed on fake invoice No. 942 dated 16.10.97 of M/s. Twenty First Century Printers Ltd. Silvasa and reversed under protest under Rule 233B of the CE Rules, 1944 vide entry No. 254 dated 11.6.99 should not be confirmed under Rule 57(1) of CE Rules,1944; vi. A penalty equal to the duty demanded at SI. No. (1) (ii), (iii) and (iv) should not be imposed under Section 11A of the CEA, 1944; vii. A penalty equivalent to the irregular credit availed on the fake invoice No. 942 dated 16.10.97 of M/s. Twenty First Century Printers Ltd. Silvassa should not be imposed under Rule 57 1 (4) of the CE Rules, 1944; viii. Interest as applicable should not be collected on the amounts mentioned at SI. Nos. (i) to (vi) above in terms of Section 11AB of the CEA, 1944 and ix. Penalty should not be imposed under Rules 9(2), 52A(8) and 173Q of the CE Rules, 1944 for contravention of Rules 9(1), 52A, 57G, 173C, 173D, 173F and 173G of the CE Rules, 1944." 2. The second order passed by the Commissioner is against Micro Raj Electronics in order -in-original No. 3/2001 dated 25.1.2001 confirming the order as follows: (i) an amount of Rs. 94,50,535/- being the duty not paid @ 15% adv. on the production of 13,35,22,324 Nos blades valued at Rs. 6,30,03,563/- not accounted for in the statutory records and subsequently removed should not be demanded from then under Rule 9(20 read with proviso to Section 11A(1) of the Central Excise Act, 1944; (ii) Duty amounting to Rs. 2,72,308/- should not be demanded from them on the blades used for testing without payment of Central Excise duty on such clearances during the period from 1997-98 to 1999-2000 under Rule 9(2) read with proviso to Section 11A of the Central Excise Act, 1944; (iii) The duty amounting to Rs. 248/- being the duty not paid on the quantities of blades reported to have been stolen during the years 1996 and 1997 should not be demanded from them under Rule 9(2) of the Central Excise Rules, 1944 read with proviso to Section 11A (1) of the Central Excise Act, 1944; (iv) The credit of Rs. 12,220/- irregularly, availed on the fake invoice No. 941 dt. 16.10.97 of M/s Twenty First Century Printers, Ltd. Silvassa and debited under protest vide entry No. 193 dt.
11.06.99 should not be confirmed under Rule 571 of the Central Excise Rules, 1944; (v) A penalty equivalent to the amounts at Sl. No. (i) to (iii) should not be imposed under Section 11AC of the Central Excise Act 1944; (vi) Penalty equivalent to the irregular credit on the fake invoice No. 941 dt. 16.10.97 of M/s. Twenty First Century Printers Ltd., Silvassa should not be imposed under Rule 571 (4) of the Central Excise Rules, 1944; (vii) Interest as applicable should not be collected on the amounts mentioned at SI. Nos (i) to (iv) above in terms of Section 11AB of the Central Excise Act, 1944; and (viii) Penalty should not be imposed under Rule 9(2), 52A(8) 173Q of the Central Excise Rules 1944 for contravention of Rules 9(1) 52A, 57G 173G 173B 173C, 173F, 173G of the Central Excise Rules, 1944.
3. The appellants have filled the stay application challenging both the orders. They seek for waiver of pre-deposit and for remand of the matter on the following grounds: (a) Both the appellants are job workers for manufacture of blades for Vidyut Metallics Ltd., Bombay. Appellants had filed their classification list, price list and other declarations declaring the selling price of the blades which they had taken up for manufacture on behalf of Vidyut Metallics Ltd. under notification No. 27/92 dated 14.5.92. In terms of the said notification the valuation under Section 4 is required to be taken in terms of the selling price of the manufacturer that is Vidyut Metallics Ltd. The appellants had clearly declared the selling price of the blades of Vidyut Metallics Ltd. and were discharging duty. However, the Department after due investigation issued show cause notice to both the job workers who are appellant here in alleging that they have not valued correctly and said to have mis-declared the same. The department proceeded to adopt the value of the appellant, which according to appellant, is not a correct procedure in terms of notification referred to. They also relied on the judgment rendered by Apex Court in the case of Ujagar Prints Etc. v. UoI and Ors. as reported in 1989 (39) ELT 493 which is reproduced: "In respect of the civil miscellaneous petition for clarification of this Court's judgment dated 4.11.88, it is made clear that the assessable value of the processed fabric would be the value of the grey-cloth in the hands of the processor plus the value of the job work done plus manufacturing profit and manufacturing expenses, whatever these may be, which will either be included in the price at the factory gate or deemed to be the price at the factory gate for the processed fabric. The factory gate here means the deemed factory gate as if the processed fabric was sold by the processor. IN order to explain the position it is made clear by the following illustration: if the value of the grey-cloth in the hands of the processor is Rs. 20/- and the value of the job work done in Rs. 5/- and the manufacturing profit and expenses for the processing be Rs. 5/- then in such as case the value would be Rs. 30 being the value of the grey cloth plus the value of the job work done plus manufacturing profit and expenses. That would be the correct assessable value.
If the trader, who entrusts cotton or man-made fabric to the processor for processing on job work basis, would give a declaration to the processor as to what would be the price at which he would be selling the processed goods in the market, that would be taken by the Excise authorities as the assessable value of the processed fabric and excise duty would be charged to the processor on that basis provided that the declaration as to the price of which he would be selling the processed goods in the market, would include only the price or deemed price at which the processed fabric would leave the processor's factory plus his profit. Rule 174 of the CE Rules, 1944 enjoins that when goods owned by one person are manufactured by another the information is required relating to the price at which the said manufacturer is selling the said goods and the person so authorised agrees to discharges all the liabilities under the said Act and the rules made thereunder. The price at which he is selling the goods must be the value of the grey-cloth or fabric plus the value of the work done plus the manufacturing profit and the manufacturing expenses but no any other subsequent profit or expenses. It is necessary to include the processor's expenses, costs and charges plus profit but it is not necessary to include the trader's profits who gets the fabrics processed, because those would be post-manufacturing profits." 4 They contend that in terms of the above ruling the price of the manufacture is required to be taken that of the manufacturer and not that of the job worker. They contend that the department got the whole issue verified through a Cost-Accountant in respect of both the appellants. The report was submitted and a copy was furnished to appellants. The appellants challenged the correctness of the report on the ground that: (c) Thickness of blade for computing the weight had not been correctly taken.
5. It is contended that the department referred the matter again to the Cost Accountant for re-valuation in terms of their submission. They contend that the Cost Accountant furnished in his report of Micro Raj Electronics Ltd. clearly discharging them on the allegation of under valuation for the periods in question. Further the report stated that there was under valuation for the years 1994-95. However the department did not raise any demand in the show cause notice for this period.
6. The ground taken by Micro Raj Electronics Ltd is that this second report of the Cost Accountant is conclusive is nature and discharges them with regard to liability of Rs. 94,50,535/- alleged as duty on blades said to have been cleared clandestinely.
7. They contend that in respect of RCC Sales Pvt. Ltd. the Commissioner has not waited for the second report of the Cost Accountant to be furnished and has proceeded to pass the order; while in the case of Micro Raj Electronics Ltd there is no finding recorded by the Commissioner on the second report of the Cost Accountant discharging them on the allegation of under valuation for the periods in question.
8. It is contended on behalf of RCC Sales Pvt. Ltd. that the demand of Rs. 97,25,682/- being differential duty paid on CRSS strips cleared on stocks transferred basis is not sustainable for the reason that coils are supplied by Vidyut Metallics Ltd. and the same is got by the RCC Sales Pvt. Ltd and adopted the cast of production of Vidyut metallics in terms of the notification. They contend that amount is not liable to be paid as the said process of converting the coil into strips does not amount to process of manufacture as the item would fall on the same tariff Sub-heading 7220.90 of CET. In this regard the judgment of the Tribunal in the case of CCE, Bombay v. BAMCEE Ltd. as reported in 2001 (128) ELT 126 is relied. They contend that the judgment has been accepted by the Board by issue of Board's circular in their 584/21/2001-CE dated 7.5.2001 reported in 2001 (46) RLT M 179. They contend that this judgment and the Board's circular was not available when the Commissioner confirmed the amounts and therefore the Commissioner could not apply the ratio of the Tribunal's judgment cited and the Board's circular following that the process of cutting CRSS sheets does not amount to manufacture and the duty amount of Rs. 96,25,682/- is required to be set aside.
9. They further contend that in respect of RCC Sales Pvt. Ltd. an amount of Rs. 50,30,212/- has been confirmed being the duty not paid on blades produced and said to be clandestinely removed by them on allegation of under valuation. It is contended that this amount is not liable to be confirmed as the department had referred their objection on the first report of the Cost-Accountant for re-valuation. The report was awaited and int he absence of the second report the proceedings should not have been concluded and demands confirmed on this ground.
Therefore the matter requires to be remanded back to take into consideration the second report of the Cost Accountant which is awaited in the matter.
10. Ld. Counsel Shri N. Venkatachalam, Adv. along with Shri Muthu Venkatachalam, Adv. and Shri Vijayaraghavan, Consultant pleaded that the case requires to be remanded for the ground already referred to above. He further submits that the Commissioner has mis-applied the contents of the notification. He submits that the notification which has been referred to by the Tribunal in the case of Sangam Processors (Bhilwara) Ltd. v. CCE as reported in 2000 (122) ELT 45 and have clearly laid down in the light of the Apex Court judgement that the valuation to be adopted to is the selling price of the trader who has placed the order on the job worker. He contends, therefore that the Commissioner not answering this point and merely stating in his order in RCC Sales Pvt, Ltd. in "para 9" is as follows: 9. As regards valuation aspect it is an admitted fact that there was no sale involved when the excisable goods are removed from the factory gate of the RCC. Hence the valuation has to be necessarily done under the provisions of Section 4(1) (b) read with the Central Excise (Valuation) Rules, 1975 as were existing ate the material time. At this juncture, I must observe that the valuation done by the RCC is neither correct nor supported by any legal provisions. They had conveniently adopted value under the cloak of value of comparable goods. At one stage they also claimed out that the value in question was certified by the Cost Accountant being the value of similar products ate the hands, of VML Bombay. They also argued that the demand is hit by time limit in view of the fact that the impugned values were declared to the Department through declarations under Rule 173C of the Central Excise Rules, 1944. This version is not acceptable for the simple reason that the RCC had not taken cogent stand from time to time. To start when the investigation has commenced they stated that the value of comparable goods at VML was adopted and later on switched over to the stand that the costing done at VML was adopted. All this is nothing but vain efforts by RCC to escape the clutches of law. The fact remains that the RCC had suppressed correct state of affairs from the department and filed false declarations from time to time obviously with an intent to pay less duty on the suppressed value. Hence it is a case clearly covered by the provisions to Section 11A of the Central Excise Act, 1944. Further they vehemently argued with the support of some case laws that when the buyer is to take modvat benefit, extended period is not invocable for demand of duty. I have carefully gone though the case laws vis-a-vis the facts of the present case. I find that the facts of the present cases are not covered by the ratio decided in the said cases. There, in those cases, no stock transfer is involved. Whereas in the present case, the transactions among three units viz. VML, RCC and Microraj under agreement, are more or less in the nature of transfer pricing and hence scope of suppressing value in order to share financial accommodation among the three units and ultimately suppressing the value of final products cannot be ruled out and hence I am lead to an irresistible conclusion that there is short payment on account of under valuation. Further, I must also say that the present case is similar to Ujagar Prints case. The constitution Bench in a two paragraphs order dt. 27.1.89 reported in 1989 (39) ELT 493 clarified that the assessable value of the processed fabric would be value of gray cloth (raw material) in the hands of processor (job worker) plus the value of job work done plus manufacturing profit and manufacturing expenses what ever they pay. Thus, I have no doubt in my mind to say that the valuation done by the department with the help of Cost Accountant in this case is in accordance with ratio laid down by the Hon'ble Supreme Court in the above case. Further, I must also observe that the demand in question is also covered by the provisions of Section 110 of the Finance Act, 2000' this section clearly provides that the demand of differential duty can be revised even after approving of price lists for the past period and these provisions have been given retrospective effect by the Parliament. I therefore hold that all the judicial pronouncements referred to by the RCC on time bar aspect are distinguishable from the facts of the present case.
11. As the impugned orders are not correct in terms of law Ld. Counsel submits that the entire finding is neither in terms of judgments nor in terms of notification. Further, the finding recorded is not speaking one in terms of the replies given as could be seen from the said paragraph. There is no reference to the Cost Accountant's report and as well as for the subsequent report which is awaited and hence the order passed in RCC Sales Pvt. Ltd. is not in terms of law which requires for remand for re-adjudication.
12. Ld. Counsel submits that RCC Sales Pvt. Ltd. after converting coils to strips were sending the same to their sister unit namely Micro Raj Electronics for the purpose of manufacture of blades. Micro Raj Electronics were entitled to modvat credit on these duty paid strips.
The denial of modvat credit is not in terms of law. Although Ld.
Commissioner has stated that the judgement are distinguishable but has not given the ground for distinguishing the same.
13. Ld. Counsel in over all facts and circumstances contends that both the orders are not speaking orders and without due consideration to their detailed pleas raised by them and hence against reiterated for remand of the matter.
14. Ld. DR Shri Soundararajan countered the arguments and contends that the Commissioner can be directed to file a report and thereafter a decision can be taken for remanding the matter. However, he reiterates the allegations made in the show cause notice and detailed findings recorded in both the orders. He contends that this prima facie stage, the revenue's interest is required to be safe guarded and therefore the appellants should be put to terms to pre-deposit the amount. He contends that the matter can be agitated and argued at length at final stage by which time he will have the benefit of comments from Commissioner.
15. On a careful consideration of the submission made by Ld. Counsel and Ld. DR in the matter and on perusal of the entire material before us and the judgement cited including the impugned order, we are of the considered opinion that the main point required for confirmation of the duty is: (b) to come to a conclusion as to whether there was any clandestine removal or not.
16. Both the show cause notices has adopted to costing on the basis of the Cost Accountant took up the matter for reconsideration and submitted his report in the case of Micro Raj Electronics.
17. This vital basis of observation was required to have been taken into consideration by the Ld. Commissioner. On a perusal of the finding portion of the Commissioner's order, we notice that he has not referred to second report of the Cost Accountant thereby the pleas of the Ld.
Counsel that the order is not speaking order and that had this report had it been taken into consideration the demand would not have been confirmed is well taken. We are of the considered opinion after perusing of the judgment of the Apex Court in the case of Ujjagar Prints (supra) and the observation made in the case of Sangam Processors (Bhilwara) Ltd. (supra) that the Ld. Commissioner has erred in not properly applying his mind in interpreting the terms of the notification no. 27/92 wherein it is clearly stated that the valuation shall be the selling price of the manufacturer. The ratio has been rightly laid down on this aspect in terms of the Ujjagar Prints (supra) and that in the case of Sangam Processors (Bhilwara) (supra). As there is non-application of mind and mis-application of the judgment and non-dealing of these points, therefore the prayer for remand of the matter for de novo consideration is sustainable in this prima facie stage when the Bench finds that the orders have missed vital points and does not deal with the main question and the law has not been properly applied therefore no further purpose will be served in retaining the file for final consideration in this prima facie stage itself we are satisfied that there is non-application of mind and orders are not speaking ones in terms of the notification referred to and the case law cited.
18. We further notice that the Tribunal in the case of CCE v. Bamcee Ltd 2001 (128) ELT 126 had clearly held that duty paid coils purchased from market does not amount an activity of manufacture if the item falls under the same sub-heading. This ruling has been accepted by the Board of Central Excise. Therefore the duty demand on coils which are converted into strips is required to be set aide. However, we are directing the Commissioner to re-examine the issue and re-decide the issue in the light of the Tribunal's judgment and the Board's circular.
The contention by the appellant that the strips which were removed to Micro Raj Electronics after payment of duty by RCC Sales Pvt. Ltd and that Mirco Raj Electronics have rightly taken modvat credit and the denial was not justified is also well taken. Ld. Counsel in the course of argument submitted that revenue was required to have made Vidyut metallic Ltd. as a party and they should collect the information from them regarding the selling price for the purpose of arriving at the valuation. This aspect is kept open to unable the appellant to place their argument before the Commissioner during the de novo consideration.
19. For the reasons enumerated above, we grant waiver of pre-deposit and stay its recovery by allowing the stay application. The impugned order is set aside and matter remanded to the Commissioner of Central Excise, Hyderabad for de novo consideration in the light of the observations and submissions made by the assessee. The Commissioner shall after grant full opportunity of hearing to the appellants and after taking into consideration the second report of the Cost Accountant in the case of RCC Sales Pvt. Ltd. shall re-decide the case in the light of the judgment cited above on all the aspects of the matter. With regard to other demands confirmed and penalties, the same shall also be required to be re-adjudicated after the main issues are decided. Thus the appeals are allowed by remand.