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TMI Blog2020 (1) TMI 894X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 8 of the Valuation Rules ibid. Since Rule 8 of the valuation Rule is applicable only in the case where the goods are captively consumed, which is contrary to the fact that for the earlier period, the demand has been made by invoking the provisions of Section 4(1)(a) read with 5 of Central Excise Valuation (Determination of Price of Excisable Goods), 2000 we are not in position to uphold the demand confirmed in isolation in the present case even for the post period. Matter remanded back to Commissioner for re-adjudication of the issue for the period April 2013 to September 2013 - appeal allowed by way of remand. - Excise Appeal No. 85261 of 2016, 87109 of 2016 - A/87263-87264/2019 - Dated:- 3-10-2019 - HON BLE DR. D.M. MISRA, MEMBER (JUDICIAL) AND HON BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) Shri S.S. Gupta, C.A. and Shri Mehul Jivani, C.A., for the Appellant Shri Ajay Kumar, Additional Commissioner, Authorised Representative for the Respondent ORDER PER: SANJIV SRIVASTAVA These two appeals are directed against two orders in original as detailed below, of the Commissioner Central Excise, Belapur. 1.2 Appeal No E/87109/2016-DB ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Navi Mumbai under Section 11AB upto the period 07.04.2011 (Section 11AA w.e.f 08.04.2011) of the Central Excise Act, 9144. iii. I impose a penalty equivalent to fifty percent, of amount of demand confirmed i.e. ₹ 11,50,80,441/- (Rupees Eleven Crore Fifty Lakhs Eighty Thousand Four Hundred and Forty One Only) upon M/s S P Fabricators Pvt Ltd., A-417, TTC Industrial Area, MIDC, Mahapa Navi Mumbai under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC(1) (c) of the Central Excise Act, 1944. iv. However, if M/s S P Fabricators Pvt Ltd., A-417, TTC Industrial Area, MIDC, Mahapa, Navi Mumbai pays the amount of confirmed demand along with the interest as detailed above, within thirty days of receipt of this order, then the penalty imposed on them shall be reduced to 25% of the duty determined at (j) above, in terms of Section 11AC(1)(C) of the Central Excise Act, 1944. If the same is not paid within 30 days of the communication/ receipt of this order, then said option will not be available to them and they will be liable to pay the amount of penalty of ₹ 05,75,40,220 (Rupees Five Crore Seventy Five Lakhs Forty Thousand Two Hundred and Twenty only. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 2008 to March 2013 on transportation charges paid for the transportation of the goods from factory to the Customer premises under Rule 5 of Central Excise Valuation Rules, 2000, read with Section 4(1)(a) of the Central Excise Act, 1944. 2.4 During the course of adjudication of that Show Cause Notice, Appellants submitted CAS-4 certificate to substantiate their claim that the cost of transportation has been included in the cost of production while determining the value under Rule 8 read with rule 11 of Central Excise Valuation Rules, 2000. These CAS-4 Certificates were referred by the Commissioner to J D Cost for verification (on 4th April 2014) and determination of the cost of production. Vide hi report dated 05th May 2015, J D Cost revalued the entire cost of production and compute that there was short payment of duty of ₹ 11,50,80,441/-. 2.5 Commissioner accordingly adjudicated the case vide his order dated 03.10.2015 (issued on 04.11.2015) confirming the demand of ₹ 11,50,80,441/- along with interest and penalty. 2.6 Another Show Cause Notice dated 19th August 2015 was issued to the appellant demanding duty of ₹ 8,39,55,676 for the period from 2009- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m)] Demand is time barred as the Show Cause Notice has been issued on 27th November 2013 for demanding duty short paid during the period November 2008 to March 2013 by invoking extended period of limitation. Since the appellants were under bonafide belief that cost of transportation from the factory to the site is not to be included in the assessable value. Also from the beginning they had been clearing the goods by determining the value under Rule 8 on the basis of CAS-4 certificate. This fact was throughout mentioned on the returns filed by the appellant hence department was throughout ware of the manner of valuation of the goods adopted by them. Hence the necessary ingredients to invoke extended period of limitation as provide by Section 11A are missing and hence the demand is time barred. Even if the J D Cost report is to be accepted then various elements of expenses which have been included in the J D Cost report could not have been added for determination of cost of production. Also there are certain quantification errors in the J D Cost report e.g. the value of clearances to project site is to be considered only whereas J D Cost has considered value of entire clearance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id excisable goods for period November 2008 to March 2013, as required under the provisions of Rule 6 of Central Excise Rules, 2002 c) They have failed to pay correct Central excise duty leviable on the said goods as required under the provisions of Rule 4 read with Rule 8, Rue 6 of Central Excise Rules, 2002. 6. The assessee in their monthly returns other statutory returns filed with the department, has neither informed the department about the non inclusion of transportation charges in the assessable value of goods cleared from Mahapa factory to installation sites nor the method valuation adopted by them for the payment of duty in respect of such clearances. These facts came to the knowledge or the department only during the course of Audit. Further they have intentionally undervalued the goods cleared to their installation sites, by not adding the transportation cost to the assessable value, which are essential to determine the proper and correct assessable value of the said goods. Thus, it appears that the assessee had deliberately suppressed the said vital facts an intention payment to evade payment of appropriate Central Excise duty, and therefore the differenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice of Excisable Goods) Rules, 2000 read with clause (a) of sub section (1) to Section 4 of the Central Excise Act, 1944, or otherwise. Thereafter in para 47 to 50 he discusses the issue vis a vis the provisions of Act and Rules ibid, and thereafter in para 51 concludes as follows: 51. Thus, place of removal, in a present case, become determinative factor for the purpose of valuation. In the present case place of removal is various sites/ premises of the buyer where installation works is done. Here in this case, even though goods are cleared from factory rate to sites, there is contract price available for determination of transaction value and hence it can be considered as sale. Therefore, I find that Section 4(1)(a) of the Central Excise Act, 1944, is clearly applicable in this case. Ultimately provision of Rule 5 of the Central excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 is also correctly applicable in this case. Hence, I do not find any merits in assessee s contention that since in the present case there is no sale, the provision of section 4(1)(a) of the Act and Rule 5 of Central excise Valuation (Determination of Price of Excisable Good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well known to them right from the beginning. During the entire course of preparation of the verification report, they have not made any argument about addition of other elements of overheads into the cost of production and enhancement of scope of the Show Cause Notice in the matter. The verification of CAS 4 submitted by the assessee has been conducted by the J.D. Cost after their going through the whole report Hence I do not find any merit in the argument of the representative of the assessee that the scope of the SCN is restricted to the issue of inclusion of transportation cost from the factory up to the sites. 58. It is also worthwhile to state that, the J.D. Cost's verification report lead to the enhancement of duty liability over and above the demand notice under consideration, since the 'assessee is associated during the entire course of verification process and there was no objection raised by them in anticipation impending enhanced duty liability. Hence it is opined that, the Principal of Natural Justice has been adequately observed by associating the assessee in the entire process and handing over the communication, report originating from J.D. Cost. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present case, as can be seen from the extract quoted from the show cause notice, which is the foundation of the Demand made by the Department, Lean Gas is a by-product which emerges when LPG is extracted from natural gas. If the case of the Department itself in the show cause notice was that Lean Gas is a by-product, then we fail to understand as to the basis for denying the benefit of Modvat credit to the assessee during the relevant period (October 1998 to January 1999) under Rule 57D. Same view was reiterated by the Hon ble Apex Court again in the case of Precision Rubber Industries (P) Ltd [2016 (334) ELT 577 (SC)]:- 10.Our attention has also been drawn to Commissioner of Central Excise, Nagpur v. Ballarpur Industries Ltd. [2007 (215) E.L.T. 489 (S.C.)] wherein this Court held in Para 21 that it is well settled that the show cause notice is the foundation in the matter of levy and recovery of duty, penalty and interest. This view was reiterated in Commissioner of Central Excise v. Gas Authority of India Ltd. [2008 (232) E.L.T. 7 (S.C.)] in Para 7 of the order. 11. In so far as the present appeal is concerned, it is the case of the Revenue in the show cause no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned in such manner as may be prescribed. 8. It further appears that the assessee was aware of the provisions under Section 3 of the Central Excise Act, 1944 read with Section 4 of the Central Excise Act, 1944. The assessee were undervaluing the goods cleared to the sister units at Bangalore and Chennai. The assessee was not at liberty to assess the duty arbitrarily and in capricious manner in violation of the provisions under Section 3 of the Central Excise Act, 1944 read with Section 4 of the Central Excise Act, 1944. They were required to arrive at the correct costing of the goods and pay duty on the value in terms of the Rule 8 of the Central Excise Valuation Rules, 2000. Thus they have contravened the provisions of Section 3 of the Central Excise Act, 1944 read with Section 4 of the Central Excise Act, 1944. 9. Now, therefore, the said assessee is hereby required to show cause to the Commissioner of Central Excise, Belapur Commissionerate, having his office situated at 1st floor, CGO Complex, CBD, Belapur within 30 days from the receipt of this notice as to why :- a) The Central Excise duty of ₹ 8,39,55,676/-( Rupees Eight Crore Thirty Nine Lakh Fifty Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2015 has given his final verification report in this regard. In his report, he has arrived cost of production and Central Excise duty for the year 2010-11 to 2012-13. He has calculated the differential Excise duty on the basis of his verification which is as under- 1. 2009-10 : ₹ 4,76,24,804/- 2. 2010-11 : ₹ 1,58,11,649/- 3. 2011-12 : ₹ 1,03,05,166/- 4. 2012-13 : ₹ 1,01,99,491/- 15. The J.D.(Cost) has prepared his costing report after taking into consideration all elements of costing of the goods, whereas the issue involved in the present SCN issued to the assessee is regarding valuation of the goods cleared by the assessee to their sister unit located at Chennai and Banglore. In this context, I find that on the issue of non inclusion of transportation charges from factory gate to the work site as pointed out in the EA 2000 Audit, Show Cause cum Demand Notice was issued to the assessee. In that case, matter was referred to the J.D.(Cost) for verification. After verification of all the aspects of costing, the J.D. (Cost) has given his report dated 05.05.2015. The same is also relied upon in the present SCN. Based on his report d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d hold that various elements of overheads including transportation charges from factory to sites (as per J. O. Cost verification report in the matter) have not been included in the cost of production 1 assessable value by the assessee during the period from 2008- 09 to March 2013 resulting into short payment to the tune of ₹ 11,50,80,4411- during the period from Nov-200B to March- 2013. 4.8 In para 17 (refer para 1, supra), Commissioner has category held in respect of overlap in the demand proposed in this Show Cause Notice and demand confirmed by him in his earlier order. When the First Show Cause Notice was issued on the basis of EA 2000 Audit making certain charges against the appellant, then how can another show cause notice have been issued on the basis of same EA 2000 Audit for the same period which is contrary to the first show cause notice. In the first Show Cause the value is sought to be determined in terms of Section 4(1)(a) read with Rule 4 and 5 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, whereas in the present show cause notice demand is sought to be made by invoking Rule 8 of the Valuation Rules ibid. In our view s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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