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TMI Blog2024 (3) TMI 1100X X X X Extracts X X X X X X X X Extracts X X X X ..... SSIONER OF INCOME-TAX, AP COMMISSIONER OF INCOME-TAX (CENTRAL) , CALCUTTA [ 1974 (10) TMI 3 - SUPREME COURT] by the Hon'ble Supreme Court was also considered to arrive at the conclusion that cost of raw material at Jamshedpur would also remain as cost of material consumed at Tarapur, by removing the notional profit. It is however worth mentioning, here that no finding is available in those two judgments that Rule 6 of Valuation Rules, as existing then was similar to Rule 8 of the Valuation Rules, 2000. It would not be a breach of judicial propriety to give a finding that Appellant is liable to pay the duty, interest and penalty as demanded in the Show-cause notice that was also confirmed by this Tribunal - Appeal dismissed. - DR. SUVENDU KUMAR PATI, MEMBER (JUDICIAL) AND MR. ANIL G. SHAKKARWAR, MEMBER (TECHNICAL) Shri Shriram Shridharan, Advocate with Shri Dev Shanmukh, Advocate for the Appellant Shri Shambhoo Nath, Special Counsel, Authorised Representative for the Respondent ORDER In this second round of litigation before the Tribunal legality of the orders passed by the Commissioner in confirming demand as per Rule 8 of the Central Excise Valuation Rules, 2000, on the basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rivali unit. However, while computing the assessable value, it had taken the cost of production of Jamshedpur plant and ignored the assessable value calculated at 110% on the ground that it was inter-plant transfer on which notional profit was added, which was not to be computed to arrive at the cost of production of wire rods. Respondent-Department is of the view that assessable value on input invoices of Jamshedpur plant, which were worked out at 110% of the cost of production of inputs (billets) received from their Jamshedpur plant, is to be taken into consideration for payment of duty and accordingly, basing on audit report that observed short levy of Central Excise duty from May 2003 to December 2006, January 2007 to December 2007, January 2008 to June 2008 and July 2008 to December 2008 involving an amount of ₹5,73,58,264/-, 1,47,10,893/-, 74,60,687/- and 65,57,303/- respectively, periodic show-cause cum-demand notices were issued to the Appellants proposing duty, interest and penalty even for the extended period. Appellant failed to succeed in the adjudication process as well as before the CESTAT on this valuation issue and went on appeal to the Hon'ble High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of order of Hon'ble High Court is presented by the parties before the Tribunal. The order being placed before this Tribunal on 10.11.2023 by the Appellant, it is to be disposed of preferably by 09.05.2024. 5. At this juncture, it is required to be placed on record that against the referral order dated 11.02.2014 passed by Chennai Bench in ITC Ltd., Respondent-Department has preferred a Civil Appeal bearing No. 001648/2015 before Hon'ble Supreme Court of India. Again after the order of the Larger Bench of CESTAT was passed on 12.02.2016, another Civil Appeal bearing No.009166/2016 was preferred by the Respondent-Department before the Hon'ble Supreme Court. Against order dated 28.02.2023 by which ITC Ltd. final judgment was delivered, Civil Appeal No. 000087/2024 was filed and against order of same Chennai Bench of the Tribunal passed on 16.03.2023 disposing of another appeal of ITC Ltd. filed for the subsequent period, Civil Appeal No. 889/2024 was filed before the Hon'ble Supreme Court. In submitting the above information sought orally from the parties, learned Counsel for the Appellant also made a fair submission, with reference to status report downloaded fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sents the correct position of law for which these four appeals of this Appellant may be decided in confirmity to the Larger Bench findings, as has been directed by Hon ble Bombay High Court. 7. Per contra, Learned Special Counsel for the Respondent- Department Mr. Shamboo Nath submitted that decision of this Tribunal was based on an analysis of the provision existing prior to amendment made to the Central Excise Act with effect from 01.07.2000 in respect of Section 4 and its amendment provision vis.a vis. Rule 6 of the Central Excise Valuation Rules, 1975 that was in force till Central Excise Valuation (determination of price of excisable goods), Rules 2000 was brought in and it was compared with the existing Rule 8, interpretation of which has resulted in passing of divergent opinions by two Division Benches of this Tribunal. He further submitted that the core point that material consumed includes cost of material, duties and taxes etc. was being ignored by the Division Bench at Chennai while passing the order in Eveready Industries India Ltd. and also by the Larger Bench. Taking duties and taxes, even ignoring freight and insurance etc., if cost of the Appellant-Company located u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect, it was held that cost of material should not be the assessable value while acknowledging that in the case of Union Carbide of India ltd. vs Collector of Central Excise, Calcutta reported in 2003 (158) E.L.T. 15 (SC) it was held that cost of production would be actual cost of production together with Notional Profit but in para 3 of the said order a contrary finding is available, the relevant portion of which is quoted here under The corporate overheads and notional deemed profit taken into account for the limited purpose of computing the assessable value for payment of duty at Navi Mumbai Plant is not to be taken into account while working out the cost of production at National Carbon Plant. (Underlined to emphasise) 9.1 With due respect to the observations made by the Hon ble Division Bench, we are constrained to observe that the said observation that corporate overheads and notional deemed profit should not be taken into account while working out the cost of production is not based on any Circular Order or precedent decision even after adopting the method prescribed in Circular dated 13.02.2003 meant for the post-period that such computation is to be made in accordance w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent Rule 8 for which definition of cost in CAS-4 as contained in Para 5.1 would determine the cost of material received at Tarapur unit and as per Rule 8 it would be 115/110% of the cost of production of Billets and not cost of raw material consumed for manufacturing of Billets. Further, justification is given in the same order as to non-acceptance of Revenue neutrality situation since it would result in loss of interest accrued in favour of the Government of India payable on duties post clearance of goods and also nonacceptance of Appellant s plea against invocation of extended period. 11. The Larger Bench of this Tribunal took note of the findings of both the orders and proceeded with individual analysis of the provision of law and it s application on payment of duties vis-a-vis valuation of goods in case of inter-plant transfer that was not amounting to sale. We would be failing in our duty in not reproducing the reasonings given in the said judgments, which is vividly reflected in para 4.3 to para 11 of the said order - 4.3 Section 4 of the Act sets out principles of valuation of excisable goods for the purpose of charging duty of excise. Section 4 of the Act, to the extent r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of captively consumed goods will hence forth be done strictly in accordance with CAS-4 . 6. CAS-4 sets out Cost Accounting Standards for the cost of production for captive consumption. To the extent relevant and material for the purposes of our primary analysis of the scope of Rule 8 of the Valuation Rules and in the context of the Board Circular (supra), suffice it to note that CAS-4 was developed to bring about uniformity in principles and methods used for determining the cost of production of excisable goods used for captive consumption and the standards and the disclosure requirements set out therein facilitate better transparency in the valuation of excisable goods used for captive consumption. Paragraph 3.2 of CAS-4 provides that the cost of production will include various cost components which stand defined in CAS-1 and that CAS-4 standard must be read in conjunction with CAS-1 Standard. Para 4.1 defines cost of production as consisting inter alia of material consumed . Para 4.2 defines captive consumption as consumption of goods manufactured by one division or unit and consumed by another division or unit of the same organization or related undertaking for manufacturing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required value of such goods to be reckoned as 115% of the cost of production and since 5-8- 2003 at 110% of such cost for remittance of excise duty. The Bhadrachalam unit was remitting excise duty accordingly and undisputedly. 9 . The issue is whether the cost of production of the goods - the packaging material that is manufactured by the Chennai unit of the appellant should be computed at 115%/110% of the cost of production/manufacture of the raw material procured from its Bhadrachalam Unit or at the actual cost of such raw material since there was only a stock transfer and not a sale of these goods by the Bhadrachalam Unit to the Chennai unit. 9.1 The answer to the issue turns upon interpretation of Rule 8, in particular on the expression cost of production of manufacture of such goods , in the said Rule. 10 . On facts, invoices were raised by Bhadrachalam unit reflecting the total cost of raw materials stock transferred to the Chennai unit at 115%/110% of the cost of production of the Bhadrachalam unit i.e. at value on which excise duty was remitted. To comply with AS-17 Standards, the Chennai unit reckoned the value of the raw material procured from its Bhadrachalam unit at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vs. Commissioner of Income Tax by the Hon'ble Supreme Court was also considered to arrive at the conclusion that cost of raw material at Jamshedpur would also remain as cost of material consumed at Tarapur, by removing the notional profit. It is however worth mentioning, here that no finding is available in those two judgments that Rule 6 of Valuation Rules, as existing then was similar to Rule 8 of the Valuation Rules, 2000. In this connection it would be appropriate to reproduce the finding of the Division Bench of Mumbai making a distinction between both the provisions and offering reasoning and to why Union Carbide of India ltd. decision would not be applicable in the existing case. The relevant portion of the said judgment made in para 13 is reproduced below. Therefore, the cost of billets at Tarapur unit would be 115/110% of the cost of production of billets. So far as the Hon ble Supreme Court s decision in the case of Union Carbide (supra) is concerned, the decision relates to Rule 6(b)(ii) of the erstwhile Central Excise Valuation Rules, 1975, which is reproduced below :- (ii) if the value cannot be determined under subclause (i), on the cost of production or manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eady Industries India ltd, we would be at loss to go with the finding of the Larger Bench though rule of precedent would dictate adherence to the decision of the majority but when the same would provide a ratio for its acceptance. In the instant case reasoning and the findings seem to be contradictory to each other and it would be difficult to accept the same even as an obiter. It would be, worthwhile, to quote Lord Denning to justify the reason of not following the decision of the Larger Bench, which is not even contrary to the direction of the Hon ble Bombay High Court granting us liberty to take into consideration all contentions and decide the case in the light of Larger Bench decision (Not necessary following it as a binding precedent) apparently for the reason that the same was appealed before the Hon ble Apex Court. 14. Lord Denning (In CHO 2008:16) once said All that I am against is too rigid application, a rigidity which insists that a bad precedent must necessarily be followed. In addition, he stated that an erroneous decision on a point of law can again be perpetuated forever. (Denning, 1979:299). 14.1 Further he had also criticized the binding effect of such precedent i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the fact that the Larger Bench decision has not yet attained finality, in view of admission of appeal preferred against the said decisions before the Hon'ble Supreme Court together with the direction of Hon ble Bombay High Court to dispose of the appeal within 6 months which may not be possible if this matter is further referred to a still Larger Bench by an Interim Order of the Tribunal that would also be contrary to the direction of Hon ble Allahabad High Court passed in Xerox India Ltd. cited Supra, we are of the collective conclusion that it would not be a breach of judicial propriety to give a finding that Appellant is liable to pay the duty, interest and penalty as demanded in the Show-cause notice that was also confirmed by this Tribunal vide its earlier order dated 22.03.2013, hence the order. THE ORDER 16. The appeals are dismissed and the order passed by the Commissioner of Central Excise, Thane-II vide Order-in-Original No. 10/PD/Th-II/2007 dated 28.11.2007, Order-in-Original No. 15/PD/Th-II/2008 dated 25.09.2008, Order-in-Original No. 25/PD/Th-II/2009 dated 20.05.2009 and Order-in-Original No. 15/KLG/Th-II/2009 dated 12.11.2009 are hereby conformed. (Order prono ..... X X X X Extracts X X X X X X X X Extracts X X X X
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