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TMI Blog2019 (8) TMI 382X X X X Extracts X X X X X X X X Extracts X X X X ..... g. It specifically includes only wafer biscuits falling under tariff heading. If the intention of the notification was to exempt wafers also, it would have said so. The assessees products are not described as wafer biscuits by the assessee themselves either to the department or in any of the documents or to the ultimate consumers on their wrappers. Thus, we find nobody in the chain of trade from the manufacturer to the ultimate consumer know the products as wafer biscuits but know them only called as coated wafers - It is not for this Tribunal to enlarge the scope of an exemption notification meant for wafer biscuits to cover coated wafers as well - Even if it is held that wafers could possibly be broadly considered as wafer biscuits, the matter is definitely not free from doubt/ambiguity - the assessee is not entitled to the benefit of exemption notification No. 03/2006. What value should be adopted for reckoning the Central Excise duty? - inclusion of Dealer s margin, RD Markup and Post Manufacturing expenses in assessable value - HELD THAT:- It is not in dispute that the assessee is manufacturing the goods on job work basis and are therefore covered by Rule 10A of Central Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 11AC need to be set aside. Penalty under Rule 26 upon Mondelez - HELD THAT:- The elements of fraud, collusion, wilful misstatement, suppression of facts or violation of act of Rules with an intent to evade payment of duty, have not been established - penalty do not sustain. Appeal filed by Little Star are partly allowed as above by way of remand for the limited purpose of verification of nature of post manufacturing expenses and re-determining the duty and interest excluding any demand for extended period of limitation. X X X X Extracts X X X X X X X X Extracts X X X X ..... SE, SEALING WAFERS, RICE PAPER AND SIMILAR PRODUCTS Kg Nil 1905 10 00 Crispbread Kg Nil 1905 20 00 -Gingerbread and the like -Sweet biscuits; waffles and wafers: Kg Nil 1905 31 00 Sweet biscuits Kg 6% 1905 32 -Waffles and wafers -Communion wafers: 1905 32 11 Coated with chocolate or containing chocolate Kg 12.5% 1905 32 19 Other Kg 12.5% 1905 32 90 Other Kg 12.5% 1905 40 00 Rusks, toasted bread and similar toasted products Kg Nil 1905 90 Other: Kg Nil 1905 90 10 Pastries and cakes Kg 6% 1905 90 20 Biscuits not elsewhere specified or included Kg 6% 1905 90 30 Extruded or expanded products, savoury or salted Kg Nil 1905 90 40 Papad Kg Nil 1905 90 90 Other Kg Nil 4. Initially, a show cause notice dated 08.11.2011 was issued to the appellants covering the period October 2009 to September 2010 proposing to classify the product under 1905 3211 and demanding appropriate amount of differential duty. It was also proposed in that show cause notice that the product deserved to be valued under section 4A instead of Section 4 of Central Excise Act, 1944. Thereafter, another show cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excisable goods which are produced or manufactured in India as, and at the rates, set forth in Schedule-I of the Central Excise Tariff Act ……….". (b) The term 'Excisable goods' has been defined as "goods specified in the first schedule and the second schedule to the central Excise Tariff Act as being subject to a duty of excise and includes salt" (Section 2(d) of the Act). The duty of excise is leviable either based on quantity (specific rate of duty) or value (ad valorem rate of duty) as specified in the tariff. However, in respect of the goods which are notified under section 4A of the Central Excise Act, the duty is levied based on the retail sale price with some abatement. (c) Section 5A of Central Excise Act empowers the Central Government to grant, by notification, exemptions from the Central Excise duties. These exemptions can be either full or partial and can be either conditional or unconditional. (d) To sum up, if any excisable goods are manufactured or produced in the country, they are chargeable to Central Excise duties at the rates set forth in the schedules to Central Excise Tariff Act, 1985, read with any exemption notifications that may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d hence they described the product as coated wafers. The relevant entry (Sl.No. 19) in exemption notification 3/2006 reads as follows: "EFFECTIVE RATES OF DUTY FOR GOODS OF VARIOUS CHAPTERS GENERAL EXEMPTION No. 46 Exemption and effective rate of duty for specified goods of Chapters 1 to 24 - in exercise of the powers conferred by Sub Section (1) of Section 5A of the Central Excise Act, 1944 (1 of 1944), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts excisable goods of the description specified in column (3) of the Table below and falling within the Chapter, heading or sub heading or tariff item of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as the Central Excise Tariff Act), as are given in the corresponding entry in column (2) of the said Table, from so much of the duty of excise specified thereon under the First Schedule to the Central Excise Tariff Act, as is in excess of the amount calculated at the rate specified in the corresponding entry in column (5) of the Table aforesaid. Explanation. - for the purposes of this notification, the rates specified in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a kind eaten with ice cream. * A thin piece of something. 'wafers of smoked salmon' Synonyms 1. A thin disc of unleavened bread used in the Eucharist. 2. Electronics A very thin slice of a semiconductor crystal used as the substrate for solid-state circuitry. Synonyms 3. (also wafer seal) a disc of red paper stuck on a legal document as a seal. 4. historical A small disc of dried paste used for fastening letters or holding papers together. VERB [WITH OBJECT] archaic * Fasten or seal (a letter or document) with a wafer. Derivatives wafery adjective. Origin Late Middle English from an Anglo-Norman French variant of Old French gaufre (see goffer), from Middle Low German wāfel 'waffle'; compare with waffle. Compare with WAFFLE." He further cited description of "waffles and wafers" in the HSN as under: "Waffles and wafers, which are light fine bakers' wares baked between patterned metal plates. This category also includes thin waffle products, which may be rolled, waffles consisting of a tasty filling sandwiched between two or more layers of thin waffle pastry, and products made by extruding waffle dough through a special machine (ice crea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utor; or (iv) they are so associated that they have interest, directly or indirectly, in the business of each other. Explanation.-In this clause- (i) "inter-connected undertakings" shall have the meaning assigned to it in clause (g) of section 2 of the Monopolies and Restrictive Trade Practices Act, 1969 (64 of 1969); and (ii) "relative" shall have the meaning assigned to it in clause (41) of section 2 of the Companies Act, 1956 (1 of 1956); (c) "place of removal" means - (i) a factory or any other place or premises of production or manufacture of the excisable goods; (ii) a warehouse or any other place on premises wherein the excisable goods have been permitted to be deposited without payment of duty; (iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory;] from where such goods are removed; 4[(cc) "time of removal", in respect of the excisable goods removed from the place of removal referred to in sub-clause (iii) of clause (c), shall be deemed to be the time at which such goods are cleared from the factory; (d) "transaction value" means ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l mutatis mutandis apply for determination of the value of the excisable goods : Provided that the cost of transportation, if any, from the premises, wherefrom the goods are sold, to the place of delivery shall not be included in the value of excisable goods. Explanation. - For the purposes of this rule, job-worker means a person engaged in the manufacture or production of goods on behalf of a principal manufacturer, from any inputs or goods supplied by the said principal manufacturer or by any other person authorised by him." 12. Little Star have, indeed, paid the duty on the value at which the principal manufacturer Mondelez has sold the goods to their buyers. Since Mondelez gets such goods manufactured by a large number of firms across the country, they have a uniform method of pricing the goods which is set out in the price list prepared by them. This price list has been re-produced in the impugned Order-in-Original No. 09/2012-Adjn. (Commr.) CE, dt. 26.03.2012 at para 20.13, which is as follows: 13. The entire demand has been raised based on the figures indicated in this price list itself. As can be seen, the price list indicates the consumer end price and various margi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duces copies of agreements which they had with their re-distributors in support of his contention that they indeed had re-distributors who were given a margin. 14. As far as the first period covering October 2009 to September 2010 is concerned, he would submit that the first show cause notice issued by the Department on 08.11.2010 and the second one on 08.11.2011 invoking the extended period of limitation under section 11A. Section 11A of Central Excise Act permits invocation of extended period only if the elements necessary for invoking the extended period namely fraud, collusion, wilful misstatement, suppression of facts or violation of the provisions of the Act or Rules with an intent to evade payment of duty are present. It is on record that all facts are presented before the department. The returns were filed periodically and honestly by them. The first show cause notice dated 08.11.2010 was issued within the normal period of limitation proposing to classify the products under different tariff heading and valued them as per Section 4A based on retail sale price. This shows that the department was fully aware of what they are doing and they have taken a particular view and is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st and penalty, all proceedings in respect of penalty against other persons, if any, in the said proceedings shall also be deemed to be concluded.] [(2) Any person, who issues- (i) an excise duty invoice without delivery of the goods specified therein or abets in making such invoice; or (ii) any other document or abetsin making such document, on the basis of which the user of said invoice or document is likely to take or has taken any ineligible benefit under the Act or the rules made there under like claiming of CENVAT credit under the CENVAT Credit Rules, 2004 or refund, shall be liable to a penalty not exceeding the amount of such benefit or five thousand rupees, whichever is greater.]" 16. Ld. Counsel would submit that none of the elements necessary for invocation of Rule 26 as above have been proved or established in their case, therefore the penalty imposed on Mondelez under Rule 26 needs to be set aside. He would draw the attention of the Bench to para 23.2 of the impugned order which reads as follows: "Regarding penalty proposed on M/s Cadbury India Limited under Rule 26, it is seen that they are the principal manufacturers of the impugned goods. The said r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore no penalty can be imposed under Rule 26 of Central Excise Rules, 2002. 18. Ld. DR reiterates the statements and arguments made in the impugned order. He agrees that the only two points of dispute on merit are (a) whether the appellants are entitled to the benefit of exemption notification 3/2006 (Sl.No. 19) for "Cadbury perk with glucose energy" manufactured by them and (b) whether the dealer's margin, re-distributors margin, post manufacturing expenses have to be included in the assessable value or otherwise. There is no dispute regarding the classification of the product or that it deserves to be asserted under section 4 and Rule 10A of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. On the first point of availability of exemption notification, he asserts that a plain reading of the exemption notification shows that it is not available to all goods which may fall under chapter heading 1905 3290 but to only "wafer biscuits". If the intention had been to give the benefit of exemption to any goods which falls under the heading, the description of the goods in the notification would have been "all goods" similar to some other entries in the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fora including by the Hon'ble Apex Court. In view of the conflicting decisions, the matters were referred to the Constitutional Bench of Hon'ble Apex Court in the case of Commissioner of Customs (Import) Mumbai vs. Dilip Kumar & Company & others as reported in [2018-TIOL-302-SC-CUS-CB)] in which the Hon'ble Apex Court held as follows: "To sum up, we answer the reference holding as under: (1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. (2) When there is ambiguity in exemption which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue. (3) The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export case (supra) stands overruled." 19. He would submit that any exemption notification being an exception to the general rule that tax must be paid at the rates in the tariff, must be interpreted strictly. If there is an ambiguity as to whether an e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow that it is intended to cover all products covered by the tariff heading 1905 3290 or wafers (coated or uncoated) falling under tariff heading. It specifically includes only wafer biscuits falling under tariff heading. If the intention of the notification was to exempt 'wafers' also, it would have said so. The assessees' products are not described as 'wafer biscuits' by the assessee themselves either to the department or in any of the documents or to the ultimate consumers on their wrappers. Thus, we find nobody in the chain of trade from the manufacturer to the ultimate consumer know the products as 'wafer biscuits' but know them only called as coated wafers. It is not for this Tribunal to enlarge the scope of an exemption notification meant for 'wafer biscuits' to cover 'coated wafers' as well. Even if it is held that 'wafers' could possibly be broadly considered as wafer biscuits, the matter is definitely not free from doubt/ambiguity. Under these circumstances, in terms of ratio laid down by the Hon'ble Apex Court in the case of Dilip Kumar and Company & others, we have no option but to hold that the assessee is not entitled to the benefit of exemption notification No. 03/200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e elements which the Ld. Adjudicating Authority sought to include in the assessable value i.e. the Dealer's margin, RD Markup and Post Manufacturing expenses. As far as the dealer's margin is concerned, the Ld. Adjudicating authroity felt that there is no dealer and the dealer's premises are the assessee's own premises. From the sample contract with the dealer produced by the Ld. Counsel for the appellant before us, we are convinced that there are indeed dealers. Therefore the dealer's margin cannot be included in the assessable value. We further find that in a commodity which costs ₹ 2/- per piece, it is inconceivable that M/s Mondelez was selling these goods directly to individual retailers across the country. Therefore, there is no room for disallowing dealer's margin as a deduction. 24. As far as the RD Mark up is concerned, the Ld. Commissioner considered this to be an R&D cost and Ld. Counsel for the appellant clarifies that this is a margin given to the re-distributors. There is no evidence on record to show that this actually pertains to R&D expenses. Therefore, inclusion of R&D mark up in the assessable value is not sustainable and it deserves to be set aside. 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds to uphold the penalties imposed upon them (Mondelez), as we have already held that the elements of fraud, collusion, wilful misstatement, suppression of facts or violation of act of Rules with an intent to evade payment of duty, have not been established. In view of the above, the appeals are disposed of as under: ORDER (I) The benefit of Exemption Notification No. 3/2006 (Sl.No. 19) meant for wafer biscuits is not available to the appellant (Little Star) as their products are not wafer biscuits. (II) The dealer's margin and RD Mark up are not includable in the assessable value of the products manufactured by the assessee (Little Star). (III) As far as the post manufacturing expenses are concerned, the matter is remanded to the original authority to enable the assessee (Little Star) to establish that these pertain to the cheque discount charges as asserted by them or any other expenses not covered by Section 4. (IV) The demand for the extended period of limitation is unsustainable and is consequently set aside. (V) The demand and interest in all appeals have to be recomputed as above and for this limited purpose of computation, the matters are remanded to the or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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