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TMI Blog2011 (2) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of other clearances for captive consumption within the unit or to sister concern/contract manufacturing units, there is no short payment of duty - As in terms of provisions of Section 4(3)(b) of Central Excise Act, 1944, as it stood during the period w.e.f. 1-7-2000 read with Rule 10 and 9 of the Central Excise Valuation Rules, 2000, if the buyer is a holding company or subsidiary company of the assessee, the assessee and the buyer would be deemed to be related persons and if the related buyer uses the goods for manufacture of these articles, the assessable value would have to be determined under Rule 8 of the Valuation Rules. Demand, interest and penalty - Under section 11AC - limitation - On account of determining assessable value on the basis of preceding years, cost of production, in some cases, there have been higher duty payment, it cannot be alleged this was done with the intention to evade the duty - Moreover, in respect of clearances within the unit for captive consumption or to sister concerns, the Cenvat credit of duty was immediately available and hence, there could not be any intention to evade the duty. The Larger Bench of the Tribunal in the case of Jay Yuhshi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1944 wherein he confirmed that the assessable value of packaging materials and flavour mix was being determined on the basis of the cost of production for the preceding financial year after adding 15% and not the cost of production for the current financial year. The officers found that if the assessable value is determined on the basis of the cost of production for the current financial year, there would be short payment of duty to the tune of Rs. 79,26,630/-. It also appeared that though the appellants were declaring the assessable value in respect of the clearances for the captive consumption within the factory and to their sister unit and other contract manufacturing units in the price declarations filed by them, they had not disclosed to the Department that the assessable value was being determined on the basis of the preceding financial year s cost of production. It is in view of the above facts that a show cause notice dated 19-1-2004 was issued to the appellant company and authorised signatory, Shri Rajender Monga for - (a) confirming the demand of allegedly short paid central excise duty of Rs. 79,26,630/- in respect of clearances of the packaging materials and flavour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and of Hon ble Supreme Court in the case of Commissioner of Central Excise, Chennai v. Beacon Neyrpic Ltd. reported in 2006 (193) E.L.T. 16 (S.C.) wherein it was held that an assessee cannot be treated as related to its subsidiary company within the meaning of this terms as defined in Section 4, unless there is evidence that the relationship has influenced the price, that once the price in respect of the clearances to M/s. Parle Products Ltd. is accepted as price to unrelated buyers, i.e. normal price, there would not be any short levy as in respect of clearances for captive consumption and to contract manufacturing units, the same price had been adopted, that in any case, the duty demand is time barred, as there is no wilful misstatement or suppression of facts on the part of the appellant company, that there is evidence on record indicating that the department s officers were aware of the fact that the assessable value was being determined on the basis of the cost of production for the previous financial year, that by adopting this practice in some cases, the duty paid was higher, which shows that there was no intention on the part of the appellant company to evade the duty, tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y new Section 4 based on the concept of transaction value and the Central Excise Valuation Rules, 1975 were replaced by the Central Excise Valuation Rules, 2000. 3.2 During the period prior to 1-7-2000, as per the provisions of sub section 4(1)(a), the assessable value was the normal price, that is to say, the price at which such goods are ordinarily sold in the course of wholesale trade for delivery at the time and place of removal and where the buyer is not a related person and the price is sole consideration for sale. Under Section 4(1)(b), where the normal price of such goods is not ascertainable for the reason that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof is to be determined in such manner as may be prescribed. For determining the nearest ascertainable equivalent of normal price in such a situation, the Central Government had framed Central Excise Valuation Rules, 1975. Under Rule 4 of the Central Excise (Valuation) Rules, 1975, if the price of the goods at the time of removal is not known, the value thereof would be based on the value for delivery at any other time nearest to the time of the removal of goods under assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same existed during the period w.e.f. 1-7-2000 and the Central Excise Valuation Rules, 2000, it is clear that if the goods are cleared for captive consumption and their normal price/transaction value at the time of removal is available, that price would be adopted in respect of the clearances for captive consumption, if normal price/transaction value is not available at the time of removal but is available for some other time, nearest to the time of removal, that value would be adopted in respect of clearances for captive consumption after adjustments, if any necessary on account of the difference in the date of delivery. But if no such price is available, the assessable value would be determined on the basis of the cost of production plus profit margin during period prior to 1-7-2000 and 115% of the cost of production during period w.e.f 1-7-2000. Since the assessable value determined under Central Excise Value Rules, 1975 or Central Excise Valuation Rules, 2000, has to be as close as possible to the normal price/transaction value at the time and place of removal, for determination of assessable value of the goods cleared for captive consumption, the cost of production has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Ralliwolf Ltd. (supra) is applied, the appellant and the Parle Products Ltd. cannot be treated as unrelated persons, as the Parle Products is a holding company of the assessee s company and there is no evidence that this relationship has not influenced the price in respect of the sale of the goods by the appellant company to M/s. Parle Product Ltd., as there are no sales to any other independent buyers. 5. In view of the above discussion we hold that the appellant should have made payment of duty in respect of clearances for captive consumption within the same unit or to contract manufacturing units/sister concerns and M/s. Parle Products Ltd. on the assessable value determined on the basis of cost of production for the current financial year and since they have paid the duty on the value determined on the basis of the previous year s cost of production, the duty short paid would be recoverable from them. 6. Next comes the question of limitation. Longer limitation period under proviso to Section 11(1) of Central Excise Act, 1944 can be invoked only if just short payment of duty has taken place by the reason of fraud, collusion, wilful misstatement or suppression of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 28-3-2002, wherein the Dy. Commissioner observed that the assessable value in respect of the goods transferred to their own factory is being determined based on the cost construction method worked out on the basis of the production cost of the previous financial year 2000-2001, whereas it should be based on the production cost of current financial year. The Dy. Commissioner, therefore, directed the Range Officer to obtain the revised costing for the current financial year 2001-2002 and take steps to recover the differential duty, if any. From the records, it is seen that in pursuance to this, the appellant sent letter dated 30-4-2002 stating that they were filing, the cost sheets with excise department based on the previous year s finalized balance sheets. They also submitted that whenever there was a major change in the prices of raw materials, they revised the assessable value. From the Dy. Commissioner s inspection note and the correspondence of the appellant with the Department, it is clear that in this matter, the department was well aware of this issue at-least since November, 2001. We also find that on account of the practice of determining the assessable value in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable. Since the criteria for imposition of penalty under Section 11AC is the same as the criteria for invoking larger limitation period under provision to Section 11A(I) and as discussed above, there are no grounds for invoking extended period under proviso of Section 11A(1), no penalty can be imposed on the appellant company under Section 11AC and the Commissioner imposing penalty under Section 11AC is not sustainable. 6.3 As regards penalty on Shri Rajender Monga, Authorised Signatory of the Appellant Company, under Rule 26 of the Central Excise Rules, 2001/2002, in view of our above findings with regard to the liability of the Appellant company for penalty under Section 11AC, there is no question of imposition of penalty on him. 7. In view of the above discussion, while on merits, the duty demand is held to be correct, for its recovery longer limitation period would not be available to the Department and the same can be recovered only for the normal limitation period. Penalty on the appellant company under Section 11AC and on Shri Rajender Monga under Rule 26 of the Central Excise Rules, 2001/2002 is set aside. The matter is remanded to the jurisdictional Commissioner fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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