Rachna Gupta ORDER
Rachna Gupta, Member (J)
1. This order disposes of the 4 appeals. Issue being common to all of them, the details of 4 of these appeals are as follows:-
2. The appellants herein are aggrieved of respective Order-in-Appeals.
3. The relevant facts for the purpose are that the appellants are engaged in manufacture of sponge iron, ingots, billets and silicon manganese. They are availing the credit of Cenvat duty paid on inputs, capital goods and Service Tax paid on input services in terms of Cenvat Credit Rules, 2004 (CCR herein). During the course of scrutiny of ER-I Return of the appellants, Department noticed that the appellants were transferring the manufactured Silico-manganese to their Depot i.e. M/s. Vandana Global Ltd. Nagapur, for further sales to their customers. However, they were paying duty at the time of removal. The Department while relying upon Section 3 (ccc) of Central Excise Act, 1944 (hereinafter called as CEA), alleged that since the place of removal in case of excisable goods shall be deemed to be in reference to the time at which such goods were cleared from the factory the valuation at which duty was payable with reference to the value was not available at the time of removal when the appellant have actually paid the excise duty. Accordingly, it was alleged that the appellants were not discharging their duty liability on finished goods so cleared through Depot as per the provisions of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2007. Resultantly, the demands as mentioned in the chart above were proposed vide the show cause notices as mentioned above. The said demands in four of these appeals have been confirmed not only by the respective Order-in-Original but also vide respective Order-in-Appeals as well except for the show cause notice dated 26 May, 2015 in Appeal No. E/51245/2017 that the original adjudicating authority dropped the demand. However, the Commissioner (Appeals) restored the proposed demand. Resultantly, all the four appeals are before this Tribunal.
4. We have heard Shri A.K. Prasad, ld. Counsel for the appellant and Shri H.C. Saini, ld. D.R. for the Revenue.
5. It is submitted on behalf of the appellant that the demand has been confirmed based on Rule 7 of Central Excise Valuation Rules 2007 as the substantial sale of the finished goods of appellant was made at their factory gate itself i.e. in Raipur for the sale from the Depot. It is submitted that the definition of place of removal has got amended w.e.f. 31.03.2003 so as to include a warehouse or a Depot including premises of a consignment agent from where the excisable goods are to be sold after their clearance from the factory. It is therefore, impressed upon that Rule 7 still insisting only the factory gate as the place of removal is in clear contradiction to the aforesaid amendment in the Act itself. Hence, cannot be relied upon rather, need to be declared ultra-vires. It is submitted that Department has wrongly invoked the said Rule 7 despite that there were the guidelines issued by the Department itself in Circular No. 354/81/2000 - TRU dated 30th June, 2000 indicating under what circumstances Rule 7 can be invoked and also how the value has to be arrived under the said Rules. The appellant has relied upon M/s. Ispat Industries Ltd. v. CCE, Nagpur - MANU/CM/0145/2017 : 2018 - TIOL - 1576-CESTAT (Mum.) and Greaves Cottons Ltd. v. CCE, Chennai - 2017 (7) GSTN 350 (Tri.- Chennai). The order accordingly, is prayed to be set aside and appeal is prayed to be allowed.
6. Ld. DR, while rebutting these arguments has submitted that the adjudicating authorities below have given a speaking findings that sale of finished goods of the appellant through the Depot is very much covered under the frame work of Rule 4 (1) B... of the Central Excise Act, 1944 read with Rule 7 of Valuation Rules 2000. Appellant accordingly has been required to pay the impugned respective differential duty. It is submitted that while arriving at the said decision the adjudicating authority below has even relied the settled case law in this respect wherein it is held that where there is no sale at factory gate valuation has to be done in accordance with Rule 7 of the Central Excise Rules, 2000. The orders have been duly justified and the appeals in hand are prayed to be dismissed.
7. After hearing both the parties and perusing the entire record, we are of the opinion as follows:-
8. It is an apparent fact that the appellants were transferring the Silicon Manganese so manufactured by them to their Depot for further sales to their customers but were paying duty at the time of removal. The question for adjudication therefore is as to whether the appellants have paid the duty at the time of removal from the factory with intention to resort to under valuation of excisable goods and with intent to evade the payment of respected cenvat duty for the respective period in dispute.
9. For the purpose, it is foremost relevant to know what the place of removal is. Section 4(c) of CEA defines place of removal as follows:-
(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;
[(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;]
Clause (cc) thereof defines the time of removal. In respect of the excisable goods removed from the place of removal as mentioned in 4 (c) as:
"It shall be deemed to be the time at which such goods are cleared from the factory."
10. The bare perusal of both these provisions makes it clear that the place of removal is not merely confined to the factory/the place of manufacture but also includes a warehouse and even a Depot provided no duty at the time of shifting was paid and that the goods are sold after their clearance from the factory but from the place from where such goods are removed.
11. For the present case, it is apparent and admitted fact that before removing goods from the appellants factory in Raipur to their Depot in Nagpur the appellants have paid the Excise Duty. In the given scenario the definition of transaction value acquires importance for the adjudication of the above question. Section 4 (d) of CEA defines transaction value means;
"The price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods.]"
12. Thus, it becomes clear that the value is a normal price that is the price at which such goods are ordinarily sold by the assessee to a buyer where the buyer is not the related persons and the price is the sole consideration as it was held by Hon'ble Apex Court in the case of Tata Iron and Steel Co. Ltd. v. Collector of Central Excise - MANU/SC/0883/2002 : AIR 2003 (SC) 144. The above discussed definitions clarifies that if the goods are not sold at the factory gate or at the warehouse but they are transferred by the assessee to its Depots or consignment agents or any other place for sale, the assessable value in such case for the goods cleared from the factory/warehouse shall be the normal transaction value of such goods at the Depot etc. at or about the same time on which the goods are being valued are removed from the factory or the warehouse and it is only in this situation that Rule 7 of the valuation Rules 2000 can be invoked, as has been invoked by the Department and confirmed by the Adjudicating authorities below in the present case. But we observe that the differentiating fact of the present case is that the appellants are not removing the entire manufactured Silicon Manganese to their Deport rather they are selling the major portion thereof from the factory itself and the remaining is being transferred to the Depot to be sold to the further buyers. If we have a look at Rule 7, it reads as follows:-
"Where the excisable goods are not sold by the assessee at the time and place of removal but are transferred to a Depot, premises of the consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the place of removal and were the assessee and the buyer of the said goods are not related and the price is the sole consideration for the sale, the value shall be normal transaction value of such goods sold from such other place at or about the same time and where such goods are not sold at or about the same time at the nearest time to the time of removal of goods under assessment."
13. The bare perusal makes it clear that Rule 7 is invokable only in the case where the goods are not sold by the manufacturer/assessee from the factory, which basically is the place of removal. It is in that case only that the transaction value has to be considered as the value at which the manufactured product is sold from the Depot to its buyer. That too, at or about the same time. As already discussed above, the Silicon Manganese is simultaneously sold from the factory/place of manufacture itself that too the major portion of the manufacture and it is only the part produced which has been shifted to Depot for further sale to the buyers. The question of invoking Rule 7 of Valuation Rules, 2000 is absolutely irrelevant and also illegal. Tribunal, Chennai CESTAT in a decision in the case of Bharat Petroleum Corporation Ltd. v. CCE, Chennai - 2010 (261) ELT 695 while relying upon a Larger Bench decision of Tribunal in Ispat Industries Ltd. v. CCE, Raigarh - 2007 (209) ELT 185 has held that the transfer of part of production to another plant of the same assessee and balance production sold to independent buyers would not attract Rule 7 of Valuation Rules when the manufactured product is also sold to the customers even at the time and place of removal. It was held that not even Rule 8 of the Valuation Rules is applicable to the situation as the said Rule is also applicable only in a situation where entire production of a particular commodity is captively consumed. The Larger Bench had held that in a case as the one in hand the value as per Rule 4 of the Valuation Rules has to be accepted.
14. In view of the entire above discussion, we are of the opinion that the Department has wrongly invoked Rule 7 of Valuation Rules. The transaction value in the present case is the value at which the Silicon Manganese has been sold by the appellant at its factory gate, while transferring the unsold portion thereon to the Depot. Apparently and admittedly, the excise duty has been paid by the appellant at the said value. The question of alleged short payment does not at all arise. The orders under challenge are therefore, set aside. The appeals are hereby allowed with consequential benefit, if any.
[Pronounced in the open Court on 15.11.2018]
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