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TMI Blog2015 (11) TMI 1033X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, in our view, the Commissioner's decision to adopt the average sales price at which the grey acrylic spun yarn was being purchased by RD from other suppliers would not be correct and that the correct assessable value in respect of the sale of grey acrylic spun yarn by SBM to RWM and RD would be the average price at which SBM were selling the same goods to other independent buyers during that period. Accordingly, the assessable value has to be determined on this basis and the duty demand has to be quantified. - Decided against the assessee. Wrong availmnent of exemption - concessional rate of duty in respect of the dyed yarn - notification no. 5/99 and 6/2000 CE - Held that:- in respect of grey acrylic spun yarn, the duty has been short paid by taking recourse to under-valuation, the grey acrylic spun yarn cannot be said to be the goods on which the appropriate duty has been paid and hence, the dyed yarn made out of grey yarn would not be eligible for exemption. However, if SBM pay the differential duty on the clearance of grey yarn to RD, as determined by the assessing officer, the exemption notification no. 5/99 and 6/2000 CE would be applicable in respect of the dyed ya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces that while the factories of SBM and RD are owned by the RWM and the same had been given on lease by RWM to SBM and RD, no lease rent was being paid and though SBM were selling huge quantity of grey acrylic spun yarn to RD, payment was not being received even after an year, while the same goods were being sold to other customers buying cash at much higher price. It is on this basis and also on the basis of the allegation that three units SBM, RD and RWM were being run as one unit by the three brothers, Shri Satnam Singh, Shri Mohinder Singh and Shri Bhupinder Singh, it has been alleged that there was mutuality of interest between SBM and RD and hence the sale price of the goods by SBM in respect of their sales to RD cannot be accepted. The Commissioner, therefore, has adopted the average price at which RD during the same period were buying similar grey acrylic spun yarn from other persons. The duty demand of ₹ 5,19,100/- against SBM Woolen Mills is on this basis. 1.2.2 RD during the period of dispute were availing of the exemption under notification no. 5/99 CE and 6/2000 which prescribed a concessional rate of duty for the dyed acrylic spun yarn subject to condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mposed penalty of ₹ 5 lakh each on Shri Satnam Singh, Shri Mohinder Singh and Shri Bhupinder Singh under Rule 209A of Central Excise Rules, 1944. Against this order of the Commissioner, these appeals have been filed. 2. Heard both the sides. 3. Shri B.L. Narsimhan, Advocate, ld. Counsel for the appellants, pleaded that the allegation of under valuation against SBM in respect of sales to RD is without any basis; that SBM, RD and RWM are three independent entities having their premise at different places; that while RWM is a private limited company with Shri Bhupinder Singh, Shri Satnam Singh and Shri Mohender Singh as its Directors, SBM is partnership concern with Shri Satnam Singh and Shri Mohinder Singh as its partners and RD is a partnership concern with Shri Bhupinder Singh and wife of Shri Satnam Singh as its partners; that there is no evidence that these three units were being run by a single person as one unit or that only one person was having all pervasive control over the functioning of these three units; that in view of this, SBM and RD and RWM cannot be treated as related persons and the price at which the grey acrylic spun yarn was sold by SBM to RD cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e; that in this regard he relies upon the judgment of the Apex Court in the case of Commissioner of Central Excise Vadodara Vs. Dhiren Chemical Industries reported in 2002 (139) ELT 3 (S.C.) in para 5 of which the Apex Court has held that the word appropriate used in the notification in the context means the correct or the specified rate of duty; that since the duty has been paid at the correct rate, just because, there is dispute about valuation and according to departments allegation, SBM has under valued their goods, benefit of exemption notification cannot be denied to RD who had used the goods manufactured and cleared by SBM for manufacture of processed/dyed yarn; that in view of this, in any case, the duty demand of ₹ 19,14,648/- against RD on account of the wrong availment of exemption notification is not sustainable; that as regards the duty demand of ₹ 36,78,122/- confirmed by the Commissioner against RD on the basis of allegation of clandestine clearances, this duty demand is based on the assumption that the entire quantity of grey acrylic spun yarn sold by SBM to a number of buyers in cash and to RWM has actually been received by RD and the same has been use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this, the duty demand of ₹ 5,19,100/- has been correctly confirmed against SBM; that since SBM in respect of the yarn sold by them to RD had not paid the appropriate Central Excise duty leviable, RD would not be eligible for exemption under notification no. 5/1999CE and 6/2000 CE in respect of the dyed yarn manufactured by them out of the grey acrylic spun yarn purchased from SBM, as one of the condition for exemption under these notifications is that the appropriate duty of excise should have been paid on the grey acrylic spun yarn; that the term appropriate duty of excise means the correct quantum of duty of excise payable on the goods, that is, payment of duty not only at the correct rate of duty but also on the correct value; that the expression appropriate duty of excise used in these notifications cannot be construed as payment of duty at the correct rate; that even in terms of Apex Courts judgment in case of Collector of Central Excise Varodara Vs. Dhiren Chemical Industries (supra) which has been relied upon by the appellant, the Apex Court in para 6 of the judgment has observed that for the purpose of getting the benefit of exemption under the notification th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the duty demand of ₹ 5,19,100/- confirmed against SBM on the base of allegation of under valuation. The evidence relied upon by the department in support of the allegation of under valuation against SBM is that-(a) all the three entities, SBM, RD and RWM are being run as one business concern and are being controlled by the same persons in as much as-(i) while SBM is a partnership concern of Shri Satnam Singh and his brother Shri Mohinder Singh, RD is a partnership concern of Shri Bhupinder Singh (brother of Shri Satnam Singh) and wife of Shri Satnam Singh, RWM is a private limited company with the three brothers, Shri Satnam Singh, Shri Bhupinder Singh and Shri Mohinder Singh as its Directors who have 100% share holding in RWM and thus, the three firms are controlled by the three brothers; (ii) while SBM and RD have taken the plant and machinery on lease from RWM, no lease rents were being paid by SBM and RD to RWM; (iii) while SBM was selling grey acrylic spun yarn to RD as well as RWM on credit at a price below the cost price and much lower than the price at which same goods were being sold to other independent buyers in case, huge amount of payments were outstanding from R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no dispute that RD have not availed the CENVAT Credit in respect of the inputs or capital goods. The only point of dispute is as to whether the grey acrylic spun yarn purchased by them from SBM which was dyed by them can be treated as the yarn on which the duty of excise under Schedule to the Central Excise Tariff Act, has been paid. According to the department since SBM have not discharged full duty liability in respect of the grey acrylic spun yarn cleared by them to RD, as they have deliberately under valued the yarn, the yarn purchased by RD from SBM cannot be said to be yarn on which the appropriate duty of excise has been paid. The appellant plead that the expression appropriate duty of excise under the said schedule means the payment of duty at the appropriate rate not the appropriate quantum. In support of their respective plea, both the department as well as the appellants rely upon the Apex Courts judgment in the case of Dhiren Chemical Industries Vs. CCE-Vadodara reported in 2002 (139) ELT 3SC. While Shri B.L. Narsimhan, ld. Counsel for the appellants points out the Apex Courts observations in para 5 of the judgment that word appropriate in the context means ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id is to be construed-whether it means payment of duty at the correct rate or whether it means payment of correct amount of duty, i.e., payment of duty not only at the correct rate but also on the correct value in case the rate of duty is ad-valorem. The expression appropriate duty means the applicable or the correct duty. The rate of duty on any the goods, as specified in the schedule to the Central Excise Tariff Act, 1985 read with exemption notification, if any, can be either specific rate or an ad-valorem. In case the rate of duty is specific, payment of duty at that rate would result in payment of appropriate duty. However, if the rate is ad-valorem, the payment of correct duty would involve not only the payment on the correct rate but also on the correct value. Therefore, in our view, the word appropriate duty of excise under the said schedule means the payment of correct amount of duty, i.e., the payment of duty not only at the correct rate but also on the correct value. Therefore, if in the present case, however, in respect of grey acrylic spun yarn, the duty has been short paid by taking recourse to under-valuation, the grey acrylic spun yarn cannot be said to be the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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