Excise Appeal No.10991 of 2014
(Arising out of OIO-SUR-EXCUS-002-COM-037-13-14 dated 03/12/2013 passed by
Commissioner of Central Excise, Customs and Service Tax-SURAT-II)
Sun Pharmaceuticals Industries Ltd
VERSUS
C.C.E. & S.T.-Surat-ii
With
Excise Appeal No.10992 of 2014
(Arising out of OIO-SUR-EXCUS-002-COM-038-13-14 dated 03/12/2013 passed by
Commissioner of Central Excise, Customs and Service Tax-SURAT-II)
Sun Pharmaceuticals Industries Ltd
VERSUS
C.C.E. & S.T.-Surat-ii
APPEARANCE:
Shri A B Nawal, Cost Accountant & Ms. Nidhi Nawal, Advocate for the Appellant
Shri Ghanasyam Soni, Joint Commissioner (AR) for the Respondent
CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR
HON’BLE MEMBER (TECHNICAL), MR. RAJU
Final Order No. A/ 10108-10109 /2023
DATE OF HEARING: 14.09.2022
DATE OF DECISION: 13.01.2023
RAMESH NAIR
These appeals are directed against the common order-in-original
dated 03.12.2013. The issue involved in both the appeals is same and hence
both the appeals are taken together and a common order is passed.
1.1 The facts in brief are that the appellant is a 100% EOU and cleared
their excisable goods to their sister concern units on payment of duty as DTA
sale. As per department the value of the DTA clearances was lower than the
value of identical goods cleared to other related units as compared to
clearances of the same products made to other unrelated buyers. The
appellant & their sister concern units & other related units were falling under
the definition of related person as defined in sub rule 2 of Rule 2 of Customs
Valuation (Determination of Value of imported goods) Rules, 2007. The price
of the clearance made to sister concern units & other related units appears
to have influenced and the price was not the sole consideration in such
transaction in as much as the difference in value was huge, hence as per
Section 14 of Customs Act, 1962 when there is no sale or the buyer and
seller are related, or price is not the sole consideration or in any other case,
then the manner of valuation of the goods was to be determined by
proceeding sequentially through Rule 3 to 9 of Customs Valuation Rules.
Accordingly, show cause notices were issued to the Appellant and the
Learned Commissioner vide impugned order confirmed the demand for
central excise duty along with interest. Penalty of an equal amount was also
imposed. Aggrieved with the impugned order, the present appeals have
been filed.
- Shri A B Nawal & Ms. Nidhi Nawal, Learned Counsels for the appellants
submits that the present order has been passed without giving opportunity
to file defence submission of SCN dated 04.04.2013. Learned Commissioner
ought to have appreciated each transaction of DTA sale is separate
assessment and therefore adjudication also ought to have been based on
separate findings and not on earlier replies and submission.
2.1 He submits that the transaction has taken place between related
parties but such relationship did not influence the transaction value, the
same was determined after negotiation and price is decided between the
parties after giving due account to all the business aspects. While clearing
the goods in DTA the value is arrived at cost of production plus reasonable
profit, which approximates and nearly equal to the transaction value of
identical goods in terms of Valuation Rules after adjusting the quantity
discount in accordance with Rule 3(3)(b) of the valuation Rules 2007. Rule
3(3)(b) provides that in sale between related person, the transaction value
shall be accepted whenever the importer demonstrate that the declared
value of finished goods being valued, closely approximates to one of the
following values ascertained at or or about the same time. While determining
the differential duty, shelter of sub-rule 3(3)(b) has been taken but at the
same time reservation given in the same rule was not considered by
department. To calculate the differential duty department resorted to sub
rule 4(1)(a) of Customs Valuation (Determination of Value of imported
Goods) Rules 2007. But department failed to take note of all the provisions
of Rule 4.
2.2 He also submits while calculating differential duty, transaction value of
identical goods was compared but without giving due attention to the
difference between the quantities sold to related buyers and independent
buyers and considered the highest price for calculating the duty demand as
against the lowest to be considered in terms of provisions of Act and rules
thereof. It is to be appreciated that in case of the sale to related buyers the
quantity sold is substantially higher. Department while demanding the
differential duty has not specified the reference of invoice for which rate is
compared, in some cases comparison is made with the related party’s value
only. Department has not followed the Customs Valuation (Determination of
Value of Imported Goods) Rules, 2007 while considering rate of identical
goods sold to non-related parties, highest rate has been taken for
comparison whereas in terms of Rule 4(3) the lowest value should be
considered when there is more than one value available.
2.3 He further submits that if there is a substantial difference in quantity
of disputed clearances with the value of identical goods, the value cannot be
compared for the purpose of valuation. Here, in this case, huge quantity is
cleared to related parties than to independent buyers hence value of
identical goods considered by the department is not comparable and not
sustainable in law.
2.4 He placed reliance on the following decisions in support of above
submission:-
COMMISSIONER V. TAVADEC INDUSTRIES PVT. LTD. – 2003
(151)ELT A308(SC)
TAVADEC INDUSTIRES PVT. LTD. VS. COMM. OF CUSTOMS –
2002(145)ELT 548 (TRI. BANG.)
BUYING OVERSEAS VS. COMMISSIONER OF CUSTOMS,
MUMBAI – 2015(317)ELT 264 (TRI. MUMBAI)
EXCIDE INDUSTRIES LTD. VS. COMMISSIONER OF
CUSTOMS(I), MUMBAI, 2015(317)ELT 264(TRI-MUMBAI)
KOMET PRECISION TOLLS INDIA PVT. LTD. VS. COMM. OF
CUS (A), BANGALORE – 2009(245)ELT 737 (TRI. BANG)
COMMISSIONER OF CUSTOMS & C.EX. INDORE VS. HINGORA
INDUSTRIES LTD. 2009(235)ELT 256 (TRI. DEL)
EICHER TRACTOR VS. COMMISSIONER OF CUSTOMS,
MUMBAI 2000(122)ELT 321(SC)
CADILA HEALTCARE LTD. VS. COMMISSIONER OF C.EX.
VADODARA 2008(224)ELT 108(TRI. AHMD.)
MARK AUTO INDUSTRIES LTD. VS. COMMISSIONER OF
CUSTOMS. NEW DELHI 2003 (162)ELT 261 (TRI. DEL)
COMMISSIONER OF CENTRAL EXCISE, ROHTAK VS. SAI
SALES CORPORATION 2012(278)ELT 197 (TRI. DEL)
D.R. POLYMERS LTD. VS. COMMISSIONER OF CUSTOMS, ICD,
NEW DELHI -2004(166)ELT 393(TRI. DEL)
EBRO ARMATUREN INDIA PVT. LTD. VS. COMMR. OF C.EX.
BANGALORE-I 2021(375)ELT 259 (TRI. BANG.)
VINTEL DISTRIBUTORS PVT. LTD. VS. COMMISSIONER OF
CUSTOMS (SEA), CHENNAI 2002 (149) ELT 145 (TRI.
CHENNAI)
COMMISSIONER OF CENTRAL EXCISE, NAGOUR VS.
MORARJEE BREMBANA LTD. 2015(318)ELT 600 (SC)
COMMISSIONER OF CUSTOMS, MUMBAI VS. FORSOC CHEM
(I) LTD. 2003 (161)ELT 1129 (TRI.-MUMBAI)
2.5 He also submits that in the present matter partial demand is barred by
limitation. The department is well aware about the clearances to sister
concern and they have started the enquiry much before the first letter of
enquiry was issued 25.07.2011 & from that date department is well aware
about the fact but show cause notice was issued much later i.e. on
20.09.2012 i.e after one year from the date of knowledge and hence the
demand is hit by limitation to the extent of Rs. 68,43.291/- He placed
reliance on the following decisions:-
COMMISSIONER OF C.EX., PUNE VS. EMCURE
PHARMACEUTICAL LTD. 2016(342)ELT 172 (BOM)
RELIANCE INDUSTRIES LTD. VS. COMMISSIONER OF C.EX.
& CUS. RAJKOT -2009(244)ELT 254 (TRI. –AHMD)
MOTOROL SPECILAITY OILS LTD. VS. COMMISSIONER OF
C.EX. & CUS., VADODARA 2009(243)ELT 449 (TRI. AHMD)
HEWLETT PACKARD INDIA SALES (P) LTD. VS. COMMR. OF
CUSTOMS, BANGALORE -2009(241)ELT 545 (TRI. BANG.)
SIYARAM METAL PVT. LTD. VS. C.C.E, RAJKOT
2009(239)ELT 147 (TRI. AHMD.)
TITAN ENERGY SYSTEMS LTD. VS. COMMISSIONER OF
C.EX., HYDERABAD 2009(236)ELT 705 (TRI. BANG,)
- Shri Ghanasyam Soni, learned Joint Commissioner (AR) for the
department reiterates the findings of impugned order.
- We have given careful consideration to the rival submissions and
perused the records. We find that the Learned Commissioner has gone only
on the basis that the buyer and seller are related in terms of Rule 2(2) of
CVR, and proceeded to judge transactions in terms of valuation rule ibid.
However, in terms of Rule 3 (3)(a) of CVR, where the buyer and seller are
related, the transaction value shall be accepted provided that the
examination of the circumstances of the sale of the goods indicate that the
relationship did not influence the price. Neither the show cause notice
issuing authority nor the adjudicating authority have given reasons to hold
that how the relation has indeed affected the price. The declared prices
cannot be reviewed without any evidence to the effect that the relation
between the appellant and the related buyer which has influenced the
declared price or to the effect that there was a flow back of money between
the appellant and related buyers.
4.1 We find that proviso under Rule 3 (3)(b) provided that in applying the
values used for comparison, due account shall be taken to demonstrate a
difference in commercial levels, quantity levels, adjustments in accordance
to provision of Rule 10 and cost incurred by the seller in sales in which he
and the buyer are not related. In the present matter the grievance of the
Appellants is also that difference in commercial levels, quantity levels was
totally ignored by the Learned Commissioner. Further submission made by
the appellants and judicial decisions relied upon by the appellant before him
was not considered.
4.2 Under the circumstances, we find that the case needs to go back to
the adjudicating authority for a proper examination of all the facts of the
case, the submissions of the appellants including case laws in this regard
and to pass a speaking and reasoned order as per law.
- In view of the above, the adjudicating authority is directed to consider
the issue afresh, as per our observations as above, and to pass an order
after giving an opportunity to the appellants. The appeals are thus allowed
by way of remand.
(Pronounced in the open court on 13.01.2023)
(RAMESH NAIR)
MEMBER (JUDICIAL)
(RAJU)
MEMBER (TECHNICAL)
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