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TMI Blog2019 (3) TMI 1362X X X X Extracts X X X X X X X X Extracts X X X X ..... enrichment being applicable. Appeal allowed - decided in favor of appellant. - Appeal Nos. E/470/2012, E/509/2012 - FINAL ORDER No. 43186-43187/2018 - Dated:- 13-11-2018 - Shri Madhu Mohan Damodhar, Member (Technical) And Shri P. Dinesha, Member (Judicial) Shri Raghavan Ramabhadran, Advocate For the Appellant Shri K. Veerabhadra Reddy, ADC (AR) For the Respondent ORDER Per Shri Madhu Mohan Damodhar Both these appeals since involving identical disputes and relating to same appellant, they are taken up for common disposal. 2. Appellants are manufacturers of boiler components and valves and valve parts etc. They supply boiler components to various power projects spread all over India on contract basis under provisional assessment of duty under Rule 7 of Cenvat Credit Rules, 2002. The present dispute is about goods supplied to Chennai Petroleum Corporation Ltd. (CPCL) and Tata Power Company Ltd. (TATA). Appellants had entered into agreement with CPCL TATA for supply of boiler equipment. While most of the equipments to be supplied were manufactured by appellants and cleared to customers site on payment of duty, certain bought out items (shop made) w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Rules, 2002 was held as payable to BHEL from January 2010 on the said excess amount of ₹ 4,92,337/-. In appeal, in the resultant impugned Order in appeal No.173/2012 dt. 31.08.2012, the Commissioner (Appeals) allowed the appeal of department and directed the lower authority to decide the issue afresh for determination of duty and finalization of assessment after scrutiny of all related vendors invoices and corresponding commercial invoices. Hence Appeal No. E/509/2012 by BHEL. 3. When the matter came up for hearing, on behalf of the appellants, Ld. counsel Shri Raghavan Ramabhadran made oral and written submissions which can be broadly summarised as under : (i) For both shop made and DTS supplies, the appellant issues commercial invoices to the customers. The value of the supplies in the invoices is arrived at by multiplying the total weight of supplies made with the estimated Rate/Kg. This manner of valuation has been agreed upon by the CCE in the Office Memorandum dated 22.12.2004. (ii) Para 10 of the O.M. explicitly stated that the value mentioned in the commercial invoice issued by the appellant on the basis of Estimated Value of Goods Sold ( EVGS ) should be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce it is a well-established fact that the contract price, being the agree price between BHEL and its customers, is the transaction value. (vii) Inter-se Adjustment between duty short paid and excess paid should be allowed As per the provisions of Rule 7 of CER, 2004, the Assistant Commissioner is required to finalise the assessment by adjusting the amount of duty provisionally paid against the amount of duty finally payable by the assessee on finalization. Thus, Rule 7 mandates that wherever duty has been paid in excess, the same should be adjusted against duty short paid to determine the final amount payable, if any. The entire purpose of provisional assessment will be defeated if the same is not allowed. (viii) Reliance is placed on the decision of the Hon ble High Court of Karnataka in Toyota Kirloskar Auto Parts Pvt. Ltd. Vs CCE LTU Bangalore [2012 (276) ELT 332 (Kar)], wherein it was held as follows : If after taking into consideration the duty payable in respect of all the goods and the duty paid in pursuance of the final assessment order, if still the assesse is due in any duty, then for the short fall in payment of duty, the assessee is liable to pay int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the very same excisable goods cleared by BHEL. On perusal of the same, it is seen that that the said office order has laid down the procedure to be followed for permitting Provisional Assessment and for Finalization of Provisional Assessment. We find that the method earlier being adopted and the defects and difficulties with the said practice has been brought out by the Commissioner in paras 4 to 6 of the said office order. Paras 7 to 10 dealt with the details of study conducted, to assess whether the method presently followed was injurious to the interest of Revenue; that similar study was done in 1998 and 2001 and it was decided to continue with the method already discussed; that there are good reasons for continuing with the method. In particular, it has been noted that the total contract price is inclusive of cost of DTS items. On DTS items, excise duty was being paid by the manufacturers, based on the value at which the goods are billed to BHEL. Bills for DTS items when raised by BHEL to the customer is done on the basis of Estimated Average Value of Goods per kg (EAVGS per kg) and are called Commercial Invoices . The reasons for continuing with the present method are giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Revenue, that should be brought out on record. In response to the said interim order, Revenue submitted the clarification vide letter C.No. IV/16/83/2014-Arrears Misc. dt. 22.09.2016 as under : With respect to query of Tribunal as to the manner in which the guideline of 2004 suffers from any infirmity, Revenue has clarified that in respect of the guideline of 2004 in Point No.15, it is mentioned that .... .... .... 15. Finalization after issue of final commercial invoice under the Contract i) Full value realized from the buyer including cost escalation ii) Full value of goods cleared from other BHEL units iii) Full value of items supplied direct to site this will also be worked out on the basis of agreed EAVGS per Kg. From the above it appears that, the Guideline 2004 suggested that agreed Estimate Average value of Goods to be supplied (EAVGS) per kg may be taken for the purpose of arriving at the value of the goods supplied. Here it may be noted that even after the completion of project, adopted the estimated average value of goods to be supplied may not be appropriate for the purpose of arriving at the actual value of the goods su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emerges from the above discussions is that the manner of invoicing / pricing of DTS items done by the appellants is very much in consonance with the office order dt. 22.12.2004. It is true that the lower authorities are harbouring a view that the Estimated Average Value of Goods per kg to be supplied (EVAGS per kg) suggested to be taken for the purpose of arriving at the value of goods supplied as per para 15 of 2004 guidelines, may not be appropriate and not in line with Section 4 of the Central Excise Act, 1944 which talks about transaction value. Nonetheless even there was such a view being entertained, the said 2004 guidelines have not been rescinded or withdrawn, at least during the impugned periods. Revenue has also not undertaken any subsequent costing exercises to demonstrate that method prescribed by the guidelines suffers from any drawback. In spite of this, Revenue has argued that they can very well pick and choose invoices of these bought out items. This assertion would only translate to an obvious conclusion that Revenue finds it proper to pick up commercial invoices of DTS goods where the prices charged by BHEL are much higher than what was suffered by them and conven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for all items covered by commercial invoices are required to be done periodically, to ensure that at the time of finalization of assessment there will not be any need to check even figures with respect to any documents other than the commercial invoice. 7.5 It is also pertinent to take note that identical issue has been decided by the Commissioner of Central Excise (Appeals) Chennai-II in respect of BHEL s Ranipet unit. In the said Orders No.73 to 89/2015 (CXA-I) dt. 1.4.2005, the said order dealt with 17 appeals filed by the department against finalization orders. Nine of the appeals were rejected by the said Commissioner (Appeals) on grounds that department appeals had been filed beyond the statutory time limit. In respect of remaining eight appeals, it is seen that the Commissioner (Appeals), relying the relevant Office Memorandum dt. 22.12.2004 held that it is appropriate to allow deductions of DTS goods on the basis of commercial invoices, observing as under : 13. In this regard, I find force in the argument of Respondent who had sought for Provisional Assessment as the contracts with their customers contained price variation clause which was accorded as per law in fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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