Sun Pharmaceuticals Industries Ltd VERSUS C.C.E. & S.T.-Surat-ii

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.

  1. 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,)

  1. Shri Ghanasyam Soni, learned Joint Commissioner (AR) for the

department reiterates the findings of impugned order.

  1. 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.

  1. 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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