2016 (12) TMI 32 - AT - Central Excise

Demand - valuation - undervaluation of compound of automatic chemicals dIspatched to contract manufacturers during the period January 1995 to April 2000 - understating overheads, labour charges and profit margin as the final products manufactured by contract manufacturer s were sold in entirety to respondent - Whether the respondent has short paid the duty on the various goods cleared by them to their contract manufacturers? - Held that - learned Counsel for the respondent was correct in pointing it to us that the self same issue of the same respondent is decided by the bench for the subsequent period that is clearances effected from May 2000 to March 2003 in the case Commissioner of Central Excise, Mumbai-I Versus Colgate Palmolive (I) Ltd. 2011 (2) TMI 636 - CESTAT, MUMBAI , where it was held that no evidence is brought on record either in form of statements or contracts which would indicate that the prices charged by the respondent for the aromatic compounds were influenced in any way or that they were abysmally low - Since the self same issue has already been decided by the bench for the subsequent period and for the earlier period, the adjudicating authority by an order dated 31.3.2000 has held the same we do not find any merits in the appeal filed by the revenue. As an identical issue for the subsequent period in respect of the very same respondent held in their favour, respectfully following the same, we reject the appeal filed by the revenue - decided in favor of respondent-assessee.

Summary

Issues:
Undervaluation of goods cleared to contract manufacturers, interpretation of normal price under Section 4 of CEA 1944, consideration of cost of production plus profit for duty liability, valuation of goods manufactured on job work basis, acceptance of declared value as normal price, applicability of previous judgment on the same issue.

Issue 1: Undervaluation of goods cleared to contract manufacturers

The appeal was filed by the revenue against an order alleging that the respondent had short paid duty on goods cleared to contract manufacturers. The revenue contended that the respondent undervalued the goods by understating overheads, labor charges, and profit margin. Show cause notices were issued demanding differential Central Excise duty, interest, and penalties. The adjudicating authority dropped the proceedings initiated by the show cause notice.

Issue 2: Interpretation of normal price under Section 4 of CEA 1944

The Departmental Representative argued that the duty was being paid on a cost-plus basis during the impugned period, and the normal price should be determined as per Section 4 of the Central Excise Act, 1944. The Department emphasized that the price at which goods are sold in the market in wholesale trade should be considered the normal price.

Issue 3: Consideration of cost of production plus profit for duty liability

The Department contended that if the cost of production is more than the sales price, duty liability must be discharged on the cost of production. They argued that the assessable values listed in the show cause notices reflected the manufacturing cost as per the respondent's financial statements, justifying the demand for duty.

Issue 4: Valuation of goods manufactured on job work basis

The Department highlighted that the transaction between the respondent and contract manufacturers was akin to a principal-job worker relationship. They referred to previous judgments emphasizing valuation on a cost-plus-profit basis for goods manufactured on job work basis.

Issue 5: Acceptance of declared value as normal price

The respondent claimed that the transaction between them and the contract manufacturers was at arm's length and declared value was the normal price. However, the Department argued that the declared value did not consider other documents or details to be considered as normal prices.

Issue 6: Applicability of previous judgment on the same issue

The respondent's counsel cited a previous judgment in favor of the respondent on an identical issue for a subsequent period. The Tribunal found that since the same issue had been decided in favor of the respondent for the subsequent period, there was no merit in the appeal filed by the revenue.

In conclusion, the Tribunal upheld the impugned order, rejecting the appeal filed by the revenue based on the previous decision in favor of the respondent on the same issue for a subsequent period.