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TMI Blog2004 (10) TMI 363X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention. We therefore agree with the contention of the Commissioner the 10% profit should be added while computing the cost of production of the captively consumed yarn. In regard to addition of profit to cost of production when value is arrived at under Rule 6(b)(ii) we observe that the Hon ble Supreme Court in the case of Mallur Siddeswara Spinning Mills Ltd. v. CCE, Coimbatore [ 2004 (3) TMI 68 - SUPREME COURT] , held that profit is addable. Invocation of larger period of limitation u/s 11A(1) proviso - The evidence collected by the Department established that the persons in charge were aware of the difference. It is not the case of the appellant that they were under a bona fide belief that what they declared to the department was the correct position in law. The two tests laid down by the Supreme Court are satisfied in this case. We may also add that a part of the period i.e. February, 2000 to June, 2000 is covered under normal period of limitation. Rule 57E of the Central Excise Rules, as then existed lays down under Sub-Rule 3 that if any additional amount of duty became recoverable from the manufacturer of inputs on account of any short-levy or non-levy by reason of suppres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at the factory gate and also removed for captive consumption to the appellant s Tarapur factory. At Tarapur factory the goods are utilized in further manufacture of final products. On 1st March, 1994 and 28th March, 1994 the appellant filed the price lists in Proforma Part I under Section 4 of the Central Excise Act, 1944. In the price lists the appellant declared the wholesale price of the TCY and applied the same price for the said goods removed for captive consumption in the appellants' Tarapur factory. On 1st March, 1998 the appellant filed a price declaration in respect of TCY being manufactured and removed for captive consumption. This price declaration was filed in terms of Section 4(2) read with Rule 6(b)(i) of the Central Excise Valuation Rules, 1975. On the price declaration the appellant had also made a remark to the effect that the said TCY was sold at the same rate to wholesale buyers at their factory gate and accordingly adopted the same price for goods cleared for captive consumption. Later the appellant in his letter dated 21-2-2000 informed the Superintendent of Central Excise that there is a difference, in quality and grade of the yarn sold to the customers at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee or by any other assessee can be taken as the assessable value for captively consumed goods. He held that the appellant deliberately mis-declared that the goods cleared at the factory gate and the ones cleared for captive consumption are either same or comparable. The appellant suppressed the real value of captively consumed goods. He relied upon the statements of the various persons as mentioned above to come to this conclusion. He held that the appellant was well aware of the fact that the goods cleared to Tarapur differ in technical specification. The same goods are never sold at the factory gate and this material fact was suppressed from the department with an intention to evade duty. Hence show cause notice invoking proviso to Section 11A(1) is rightly issued. He discarded the appellants contention as regards to availability of Modvat credit of duty paid at Goregaon unit to Tarapur unit by holding that huge difference in the value between the product sold at the gate and the one cleared for captive consumption is a strong circumstance in support of the allegation that there was an intention to evade duty. In any case the evasion undeniably resulted in a financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be compared with the ones cleared for captive consumption suitable adjustment could have been made to determine the value of captively consumed goods. The Commissioner proceeded on the assumption that the value can be determined only under Rule 6(b)(ii) without exhausting the various ways of determining the value thereof under Rule 6(b)(i). The Second argument is that even if the value had to be determined under Rule 6(b)(ii) addition of 10% Notional profit to the cost of production of the impugned goods is erroneous in view of the fact the company was making losses. It is also argued that the Commissioner did not give any finding on the contention that there cannot be any allegation of suppression when the duty paid at Goregaon unit was available at Tarapur Unit as MODVAT credit. He stressed that when there was revenue neutrality the charge of suppression cannot be sustained. It was contended that the Commissioner was in error invoking the provisions of Section 11AC when that section itself had come into force only with effect from 20th September, 1996 when the allegation in the show cause notice was that the appellant suppressed material facts in February, 1996. He also contende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tyre cord yarn and tyre cord fabrics. The unit cleared a certain variety of yarn to its Tarapur Unit. This yarn was different in both specification and standard from the one cleared to other wholesale buyers. The unit adopted the same price for both types of yarn for the purpose of assessment to duty. This position continued till March, 1998. During tins period i.e. 1994 to March, 1998 the appellants did not file any price declaration even though he was required to do so under the amended Rule 173C w.e.f. 1-4-1994 whenever there was a change in the assessable value. The appellants however filed the price declaration on 1-3-1998, this time declaring that the value of goods cleared to their Tarapur unit has to be determined under Section 4(1)(b) read with Rule 6(b)(i) of Valuation Rules, 1975. Rule 6(b)(i) stipulates that when goods are captively consumed the value of such goods shall be based on the value of the comparable goods produced or manufactured by the assessee or any other assessee . While filing this declaration the appellants claimed that the value of the comparable goods was available at the factory gate as they were manufacturing and selling the same goods to other who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant at no stage demonstrated a figure less than 10% to 13 rebut the department's contention. We therefore agree with the contention of the Commissioner the 10% profit should be added while computing the cost of production of the captively consumed yarn. In regard to addition of profit to cost of production when value is arrived at under Rule 6(b)(ii) we observe that the Hon ble Supreme Court in the case of Mallur Siddeswara Spinning Mills Ltd. v. CCE, Coimbatore [2004 (166) E.L.T. 154 (S.C.)], held that profit is addable. 13. While computing the cost of production under Rule 6(b)(ii) the Commissioner has also included advertising expenses, depreciation interest etc. on the plea that the Board s Circular No. 258/94-96/CX-1, dated 30-6-1996 authorised into do so. During the course of arguments the ld. Advocate did not stress on this aspect nor did he demonstrate as to how the cost would workout if the advertising expenses, depreciation, interest etc. or not added to the cost. In the absence of any plea in this regard, we are not in a position to make any observation on this issue. 14. In so far as invocation of larger period of limitation under Section 11A(1) proviso, we observe t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t credit is available to the unit. The Supreme Court observed thus in the present case also, there is no material on record from which it could be inferred or established that duty of excise was not levied or paid by reason of any fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of the Act or the Rules made thereunder with intent to evade payment of duty. It was a bona fide belief on the part of the appellant that scrap and waste, which was recovered while manufacturing batteries was exempt from levy of excise duty. Further appellant was entitled to get benefit of Modvat scheme, therefore, there was no justifiable reason for the appellant to suppress any fact . It is clear from the above passage that if an assessee acts under a bona fide belief that duty is not payable suppression with an intent to evade duty cannot be invoked and more so when the benefit of Modvat scheme was available to him. Clearly the ratio laid down in this case does not apply to a situation where suppression per se is evident and is established from the facts of a given case. The concept of revenue neutrality is not novel to a manufacturer where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt also held that the initial burden to prove that both these ingredients exist is on the department. In the present case the assessee was aware that the goods cleared at the factory gate were different from the ones cleared to Tarapur unit. Yet the appellant chose to declare that they were one and the same and adopted the same price for both the goods. The evidence collected by the Department established that the persons in charge were aware of the difference. It is not the case of the appellant that they were under a bona fide belief that what they declared to the department was the correct position in law. The two tests laid down by the Supreme Court are satisfied in this case. We may also add that a part of the period i.e. February, 2000 to June, 2000 is covered under normal period of limitation. 20. Rule 57E of the Central Excise Rules, as then existed lays down under Sub-Rule 3 that if any additional amount of duty became recoverable from the manufacturer of inputs on account of any short-levy or non-levy by reason of suppression of facts with an intent to evade payment of duty such incremental duty paid would not be available as Modvat credit to the user of the said goods. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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