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TMI Blog2008 (11) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmed the duty demand of Rs. 53,89,632/- raised vide various other Show Cause Notices under Section 11A of the Central Excise Act, 1944 against the PC together with interest and imposed penalty of Rs. 25 lakhs. 2. Appeal No E/771/07-Mum has been filed by M/s. Endress + Houser (India) Ltd. (hereinafter referred to Sales Centre (SC)) against the imposition of penalty of Rs. 5,00,000/- vide the Impugned Order i.e. Order-in-Original No 48-56/CEX/2006 dated 22-12-2006 passed by the Commissioner of Central Excise and Customs, Aurangabad. 3. Appeal No E/860/03-Mum has been filed by the Revenue against the Order-in-Appeal No BPS (12)1/2003 dated 16-1-2003 passed by the Commissioner of Central Excise and Customs (Appeals), Aurangabad in respect of PC. 4. Appeal No E/688/08 has been filed by PC against the Order-in-Appeal No RKR (97)20/08 dated 12-3-2008 passed by the Commissioner of Central Excise and Customs (Appeals), Aurangabad. 5. Since the issues involved in all the appeals are common, all the four appeals are being taken upon for disposal by the common order. The issues involved are as under: (i) Whether the invoice price of the flowmeters sold by the PC, (a 100% EOU) into t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value is defined as the value determined in accordance with Rule 4 of the Customs Valuation Rules. If the assessable value cannot be determined as per Rule 3(i), then Rule 3 (ii) provides that the value shall be determined by proceeding sequentially through Rules 5 to 8 of the Customs Valuation Rules. The relevant part of Section 14 of the Customs Act and Rule 3 of the Customs Valuation Rules are extracted hereunder: Section 14(1). For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force where under a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where (a) the seller and the buyer have no interest in the business of each other; or (b) one of them has no interest in the business of the other, and the price is the sole consideration for the sale or offer for sale; provided that such price shall be calculated with reference to the rate of exchange as in force ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng and accepting the prices in respect of each sale with related and unrelated customer and on which country factor discount rate is made applicable. The price at which the goods are sold by the PC to the SC is based on this inter company price list. This is evident from the statement of Mr. Shirish Limaye, Finance Controller of the PC, recorded under Section 14 of the Central Excise Act, 1944 on 21st March 2005. 16. It is submitted by the PC that where such inter company price list exists, the price of the goods as per the inter company price list is to be taken to reflect the correct sale value for the purpose of Customs Valuation in the absence of contrary evidence. In support of this, the PC placed reliance on the following decisions of the Hon'ble Tribunal: (i) Colgate Palmolive (I) Pvt. Ltd. v. Commissioner of Customs (I), Mumbai reported in 2007 (207) E.L.T. 133 (Tri.-Mumbai) (ii) Commissioner of Customs, Chennai v. Hewlett Packard Ltd. reported in 1999 (108) E.L.T. 221 (Tribunal). (iii) Procter & Gamble Home Products Ltd. v. Commissioner of Customs, Chennai reported in 2002 (144) E.L.T. 704 (Tri.-Chennai). 17. It is submitted by the PC that the selling price of the S.C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clared transaction value would have to be rejected. Once the transaction value is rejected, one will have to proceed to the remaining valuation rules, sequentially. The next rule is Rule 5, which has been adopted by the Commissioner. (v) As per Rule 5, one has to go by comparable value of identical or similar goods. In the present case, the sale value of identical goods, to unrelated buyers (the price at which SC was selling to their unrelated customers) was available and that is what has been adopted by the Commissioner. Value of no other comparable goods were available, since no identical or similar goods were being manufactured by any other 100% EOU in India-each flowmeter was made to order and no two pieces were identical or similar. Flowmeters imported by the SC from its parent company, for trading purposes in India, cannot be taken for comparison purposes as in that case the country of origin was different from the impugned goods manufactured by the PC, an EOU, Since EOUs are considered as foreign country for valuation purposes, goods supplied in India by two EOUs can only be compared, and not goods of an EOU with that of goods imported from a foreign country abroad. (vi) O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value shell be determined by proceeding sequentially through Rules 5 to 8 of the Customs Valuation Rules. 23. Where the value in terms of Rule 3(i) cannot be determined, Rule 3(ii) statutorily mandates to proceed sequentially through Rules 5 to 8 of the Customs Valuation Rules. 24. Rule 5 provides that subject to provisions of Rule 3, the value of imported goods shall be the transaction value of identical goods sold for exports to India and imported at or about the same time as the goods being valued. Thus, as per Rule 5, following two conditions are required to be cumulatively satisfied: * transaction value of identical goods should be available * the identical goods shall be sold for export to India and imported in India. In the present case, the price charged by the SC upon the customer cannot be considered as the price of identical goods. 25. Further, the sales made by the SC to the customer are domestic sales. As Rule 5 applies only where there is import of goods and not in case of a domestic sale, Rule 5 is not applicable in the present facts. 26. The Commissioner has misapplied Rule 5 to hold that the transaction value would be the price charged by the SC in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts, the SC is, post clearance of goods from EOU, selling the goods to the unrelated buyers. Hence, the assessable value is to be computed on the basis of Rule 7, by considering price at which the goods are sold by the SC to the customers, after allowing the permissible deductions as per Rule 7 and Interpretative note thereto. 34. We find that the Endress + Hauser (India) Ltd. are working as SC and Endress + Hauser Flowtec (India) Pvt. Ltd. are working as PC. SC are conducting sales activities including procurement of purchase orders etc. They are doing this for PC because both are 'related person' and SC work as mediator. The goods are cleared by the PC directly to the customers. Accordingly, the customers' names are mentioned in the invoices as the consignee. It is not the case that the SC has received the goods and thereafter sold to the customers. The sales of the goods cleared by the PC is completed when the goods are delivered to the ultimate customers to enable the buyer to take the Cenvat Credit. The transaction value between two related persons is admissible under the Customs Act provided that the value is not influenced by any other consideration. In, the instant case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Commissioner to issue a proper show cause notice before deciding the case. For issuing the show cause notice, proper quantification of duty was required and for this details/copies of invoices of the SC were required. The jurisdictional officers made a number of attempts through correspondence and even summons to procure those invoices, but without success. As for example, in statement dated 30-6-2003 Shri Ajay Bhardwaj, Sr Accounts Manager of the SC, admitted that they had not yet supplied the information/documents sought for. Eventually, the Department had to conduct searches and seize relevant documents. The searches were conducted on 7-2-2005 and show cause notice was issued thereafter. Hence, the PC cannot lake advantage of their own wrong by deliberating not supplying relevant material, and claiming the demand to be time-barred. When the Department asked the PC for the documents, why did they not supply it in time? Had they supplied the invoices on their own and in time, they could raise the point of time bar. The invoices were definitely suppressed from the Department till 7-2-2005 (the date of search). When information was suppressed from the Department, the extended per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessable value on which the duty is to be paid in accordance with Rule 7 of the Customs Valuation Rules read with the interpretative notes thereto. We set aside the penalties imposed on PC and SC on this count. The issue of imposition of the penalties on PC and SC is, however, kept open. Needless to say that the quantum of the penalties to be imposed on PC and SC will depend upon the quantum of the duty liability determined in the light of the above. Appeal Nos. E/770/07 and E/771/07 filed by the PC and SC are disposed of in the above terms. The impugned order passed by the Commissioner, i.e. Order-in-Original No. 48-56/CEX/2006 dated 22-12-2006 is modified to the above extent. 42. We find that the Central Board of Excise and Customs has issued Circular No, 362/78/97-CX dated 9-12-1997 by which it has been decided that where simultaneously different cases of the same notice (s) involving the same issue are due to be adjudicated in a Commissionerate, all such cases will be adjudicated by an officer competent to decide the cases where duty involved is of the highest amount. The same view has been reiterated by the Central Board of Excise and Customs, vide para 6 of the Circu ..... 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