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TMI Blog2015 (12) TMI 591X X X X Extracts X X X X X X X X Extracts X X X X ..... ERP system. - Matter remanded back on this issue. Valuation of DTA clearance - majority of goods were cleared to sister unit on stock transfer basis - Held that:- this issue has been settled by various Tribunal decisions wherein the Tribunal held that FOB value of export cannot be adopted for payment of duty for DTA sales. - The appellant being a EOU and by relying Tribunal s decision, we are of the considered view that when the department is not able to bring out clear cut evidence to show that computed value arrived at by the appellant is either manipulated or otherwise, merely taking FOB price for DTA sales is not justified. Therefore, the value adopted by the adjudicating authority by taking the FOB price and the consequential demand of differential duty is not sustainable. Accordingly, the demand of customs duty in respect of four appeals on account of taking FOB price is liable to be set aside. As regards the demand of educational cess and higher secondary education cess thrice while calculating excise duty, we find that appellants have already calculated educational cess twice while computing the transaction value and the same cannot be calculated again. In this rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N also proposed levy of Special Additional Duty (S.A.D.) for calculating differential duty and whether S.A.D. to be considered when goods are not sold but sent to their own units on stock transfer basis and also whether higher education cess should be considered under Section 3 (1) of Central Excise Act. Adjudicating authority confirmed the demand of ₹ 4,94,11,050/- under Section 11A along with interest and imposed penalty of ₹ 50 lakhs under Rule 25 of Central Excise Rules, 2002. E/130-134/2008 4. The issue in these appeals are identical to Appeal E/325/2008 only the demand relates to the subsequent period wherein the Commissioner of Central Excise, Puducherry issued two SCNs dt.14.8.2008 and dt. 1.5.2009. The adjudicating authority by a common adjudication order confirmed differential duty of ₹ 8,99,54,350/- along with interest and also imposed penalty of ₹ 10,000/- under Rule 25 of Central Excise Rules. Hence appellant filed these appeals. The case was heard on 7.5.2015, 9.7.2015 and 28.8.2015. 5. The learned Advocate appearing for the appellants submitted a written synopsis for all the three appeals on issue wise and reiterates the synopsis. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the receipt of inputs stage to clearance of final products each stage. The clearance of final products are clearly declared in RT-2. The adjudicating authority relied Board's circular dt. 21.12.2001 and held that they have to maintain separate registers but failed to reconcile the data submitted in the form of computer printouts. He submits that since they have satisfied condition (3) of Notfn No.23/2003 they are eligible for payment of normal excise duty. He relied the following decisions : (1) CCE Surat-I Vs Prime Furnishing Pvt. Ltd. 2014 (308) ELT 505 (Tri.-Ahmd.) (2) CCE Ludhiana VsMalwa Cotton Spinning Mills Ltd. 2010 (252) ELT 517 (P H) (3) CCE SuratVs Favourite Industries 2012 (278) ELT 145 (SC) (4) Bannari Amman Sugars Ltd. Vs CCE Salem 2009 (241) ELT 433 (Tri.-Chennai) (5) GEM Granites Vs CC 2007 (216) ELT 153 (Tri.-Chennai) (6) Imperial Granites (P) Ltd. Vs CC 2007 (218) ELT 618 (Tri.-Bang.) 7. On the second relating to valuation, he submits that the adjudicating authority demanded differential duty by adopting FOB value of exports for the goods cleared in DTA to their sister unit. They have paid excise duty on the computed value as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following decisions :- (1) Commissioner Vs Meghmani Dyes Intermediates Ltd. 2013 (288) ELT 514 (Guj.) (2) Ruia Aquaculture Farms Ltd. Vs CC 2006 (199) ELT 241 (Tri.-Mumbai) (3) CCE Indore Vs Mild India Industries Ltd. 2005 (189) ELT 224 (Tri.-Del.) (4) Reliance Industries Ltd. CCE Mumbai 2003 (159) ELT 164 (Tri.-Mumbai) (5) Norton Intec Rubbers (P) Ltd. Vs CC Madras 2004 (164) ELT 5 (Mad.) 10. On the third issue of S.A.D, he submits that adjudicating authority has not excluded the S.A.D. and held that since appellant has not made any sale but only effected inter-unit transfer, SAD is includable. He submits that the goods cleared to their sister unit on stock transfer are not exempted from sales tax. Therefore, they are entitled to condition (i) of Notification No.20/2003. He relied the following decisions :- (i) Micro Inks Vs CCE 2014-TIOL-258-CESTAT-AHM = 2014 (303) ELT 99 (T-Ahd.) (ii) VVF Ltd. Vs CCE Belapur 2014-TIOL-04-CESTAT-Mum. (iii) STI Industries Vs CCE 2014-TIOL-2611-CESTAT-Ahm. (iv) Hanil Era Textiles Ltd. Vs CCE Belapur 2007 (210) ELT 414 (Tri.-Chennai) 11. On the Education Cess, he also submits that educ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise Act wherein the value of goods is to be determined in accordance with provisions of Customs Act and Customs Tariff Act under Section 14 of Customs Act. Price of goods is offered for sale in the course of international trade. Therefore, the rules made thereunder customs act or valuation rules becomes relevant for the purpose of proviso to section 3 (1) of Central Excise Act. He also submits that DTA clearances by EOU does not answer the rule of valuation. In the absence of any evidence for Rule 5, under rule 7 of CVR read with section 4 of Customs Valuation Rules, the sale price charged to a customer in India cannot be considered as a price in the course of international trade. Valuation is to be adopted as per section 14 of the Customs Act. Therefore, the adjudicating authority has rightly taken the FOB price for determining the transaction value of DTA clearance. He also submits that there is no bar of adopting FOB price. He relied the following citations :- 1. Commissioner Vs Wipro GE Medical Systems Pvt. Ltd. 2009 (242) ELT275 (Tri.-Bang.) 2. Hindustan Granites Vs CC Bangalore 2010 (262) ELT 885 (Tri.-Bang.) 15. In the rejoinder, learned counsel for the appellant co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputed value is correct or otherwise. Whether there was suppression of facts or not and whether the demand is hit by limitation or otherwise. (3) In respect of three remaining appeals, the issue in addition to valuation of adopting FOB value, whether Special Additional Duty (SAD) to be considered while calculating the rate of duty of Central excise under section 3 (1)of Central Excise Act for the clearances made to their sister unit on inter unit stock transfer; Whether the goods are not exempted from VAT by the State Government and (4) the last issue is whether education cess and higher secondary education cess to be considered thrice while calculating the rate of duty of central excise under section 3910/(5) whether the appellant is liable for penalty under section 11AC in respect of first appeal and liable for penalty under Rule 25 in respect of other three appeals. 18. The main dispute in all the appeals relates to valuation and rate of duty of the clearance to their sister unit. The period involved is 22.4.2004 to 27.3.2009. Only in appeal E/18/08 the benefit of exemption notification was denied on the ground that there was no evidence to prove that only the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) Any Chapter All goods other than those referred to in Sr. Nos. 5, 5A, 6, 7 and 7A [OLD-Sr.Nos.5,6 and 7 of] of this Table In excess of amount equal to aggregate of duties of excise leviable under Section 3 of the Central Excise Act or under any other law for the time being in force on like goods produced or manufactured in India other than in an export oriented undertaking, if sold in India ANNEXURE S. No. Conditions 3 If,- The (i) goods are produced or manufactured wholly from the raw materials produced or manufactured in India; the (ii) goods are cleared into Domestic Tariff Area in accordance with sub-paragraphs (a), (b), (e) and (g) of Paragraph 6.8 of the Export and Import Policy; and (iii) such goods, if manufactured and cleared by the unit other than export oriented undertaking are not wholly exempt from duties of Excise or are not chargeable to NIL rate of duty. 20. As seen from the above, Sl.No.3 of the notification exempts all goods which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m this E.R.P report that 100 kgs. of this input Pyridoxine Hydrochloride was consumed in the manufacture of METADOXINE IH under Invoice No.L018 under 3 lot numbers i.e. (i) Lot No.183RI40654 [45,660 kgs.] and (ii) Lot No.183RI40999 [49,410 kgs.] and (iii) Lot No.183RI41123 [4,930 kgs.]. For second lot the supplier's name was shown as C.J. Shah Co. and the input invoice Nos.312417 and 012250. From the above sequence of this Batch Manufacturing Records (BMR) for the said invoice read with system generated report of E.R.P, we are convinced that the quantity of 100 kgs. Pyridoxine Hydrochloride (Vitamin B6) is related to Batch No.PDEL0381 and as evident from the name of the supplier it is proved beyond doubt that the input is procured indigenously used in the manufacture of METADOXINE. 22. We find that the entire work sheet submitted by the appellant for 57 invoices which is generated by the system and combined with BMR and the Appellant's contended that in the same sequence the entire quantity of inputs can be tallied and traced back to the final product manufactured and cleared in respect of each invoice. 23. It is pertinent to see that the same set of documents discu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Cost Account so as to ensure that imported inputs, if common, are not used in the manufacture of the final products to be cleared in DTA. But the intention is certainly not to insist upon separate machinery, separate godowns and separate branches of manufacturing process (which would amount to establishing a separate factory within the factory) before extending the benefit of the above-said Circular. As evident from the above circular, the Board has categorically clarified that jurisdictional officer need to satisfy themselves that the goods in DTA have been manufactured wholly out of indigenous raw material. The said circular also empowers the adjudicating authority to engage Cost Accountant if necessary and get the input and output norms fixed for both indigenous and imported goods. 25. In this regard, it is pertinent to state that the CBEC had already implemented special mechanism to verify the ERP data or SAP etc. through Excise Audit 2000 (EA-2000) for consumption of raw materials and manufacture of final products which are maintained in any ERP system. In the Excise Audit (EA 2000) Procedure, the Board has empowered the jurisdictional officers to carryout Compu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption Notfn No.20/2003 Condition No.(3) is set aside and remanded to the adjudicating authority with the above directions. 27. As regards the limitation issue raised by appellant, in respect of same appeal No.E/18/2008, since the main demand itself is remanded to the adjudicating authority, that authority is directed to examine the issue on limitation while deciding the case in de novo. 28. We now propose to discuss the second issue on valuation. The adjudicating authority in his impugned orders compared the FOB price and enhanced the transaction value for the DTA clearances. Whereas the appellant contended that the majority of goods were cleared to sister unit on stock transfer basis and they had arrived the transaction value by taking the computed value. We find that the adjudicating authority rejected the appellant s transaction value of ₹ 609/- but has taken the FOB price of ₹ 1450 in respect of unrelated DTA clearance and adopted FOB price of ₹ 2267/- in respect of stock transfer to their sister units. In this regard, we find that this issue has been settled by various Tribunal decisions wherein the Tribunal held that FOB value of export cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of exemption. The relevant portion of Tribunal s order in the case of Micro Inks (supra) is reproduced asunder :- 10. We are unable to accept the contentions raised by the ld. Departmental Representative and the findings recorded by the adjudicating authority for more than one reason. Firstly, it is the fact that the inter unit clearance from EOU to DTA are not exempted from payment of sales tax by the State Government by any notification and revenue unable to bring on record any notifications issued by the State Government or otherwise to indicate that inter unit transfers from EOU to DTA are exempted. It is an admitted fact that whenever there is an inter unit transfer, it is not sales transacations and hence the sales tax/CST/VAT may not get attracted does not mean ipso facto, it is an exemption granted by the State Government. In the absence of any notification granting exemption for specified products by the State Government from levy of sales tax on the finished goods cleared from 100% EOU, it would be incorrect to hold that the goods were exempted from sales tax, more so when the appellant has discharged the sales tax on the same products which were cleared to independ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , for determining the Excise duty payable on aggregate value of customs duty by inclusion of SAD, whether should be taken into account or not while answering such a reference, Larger Bench has held that the assessee in that case was availing sales tax exemptions in respect of sales from their unit located in the notified backward area, as has been specified in the order of exemption granted to them by the State Government of U.P. It would be not out of place to note that the State Government of U.P. had specifically granted exemption from leviable of sales tax on the goods which were manufactured in a notified area, hence the Larger Bench came to the conclusion that for discharge of excise duty, the SAD has to be included. The terms of reference to the Larger Bench being totally different than the facts of the issue which is raised in these appeals; in our view the reliance placed by the Revenue on the ratio of the Larger Bench decision will not carry their case any further. The ratio of the above decisions squarely applies to the present case as majority of the goods are supplied on stock transfer basis. Therefore, the demand on account of special additional duty are set asid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would not include the education cess and S H cess. Thus, the intention of the legislature was never to charge education cess on education cess. In fact this is not permissible from very mode of this levy as prescribed in Section 91 of the Finance Act, 2004 and Section 136 of the Finance Act, 2007, as when a new tax is introduced as surcharge on the existing levies, the base on which the new levy as surcharge is to be calculated will include only the existing levies, not the new levy. If the Revenue s stand is accepted, and on the sum of Basic customs duty and Addl. Customs duty, first cess on imported goods under Section 94 of Finance Act, 2004 and Section 139 of Finance Act, 2007 is charged as duty of customs and on the aggregate of duties of customs, cess on excisable goods, under Section 93 of Finance Act, 2004 and Section 138 of Finance Act, 2007 is charged, it would amount to charging education cess on education cess for which there is no sanction in law. Apex Court in case of Jain Brothers v. U.O.I., reported in (1970) 77 ITR 107 has held that there can be no objection for double taxation if the legislature has distinctly enacted it, but while interpreting general words o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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