Ramesh Nair, Member (J)
1. The following issues are involved in the present appeal:-
(i) Whether for the period prior to December 2013, assessable value for excise duty on goods cleared to sister unit for captive consumption is required to be determined under Rule 8 of the Central Excise Valuation Rules, 2000 at 110% of the cost of production or under Rule 4 of the Central Excise Valuation Rules, 2000 at the value at which same goods are cleared to independent buyers
(ii) Whether the demand of duty is sustainable when the entire situation is revenue neutral in nature.
(iii) Whether the extended period of limitation can be invoked in the facts of the present case.
2. Shri Anand Nainawati, Learned Counsel appearing on behalf of the Appellant submits that even though the confirmation of demand on merit is correct, the same is not sustainable on the ground of revenue neutrality. He submits that any differential excise duty paid by their Clinker Unit would be available as cenvat credit to the grinding unit. Since the grinding unit is using the Clinker as input for manufacture of dutiable goods i.e. Cement, therefore, on the ground of revenue neutrality itself, the demand is not sustainable. He placed reliance on the following judgments:-
• Mahindra & Mahindra Ltd vs. CCE , Mumbai - 2019 (368) ELT 105 (Tri. Mum) Affirmed by the Hon’ble Supreme Court in 2019 (368) ELT A41 (SC)
• CCE Surat-II vs. Gujarat Glass Pvt Ltd - 2013 (290) ELT 538 (Guj.)
• CCE, Mumbai vs. Special Steel Ltd - 2015 (329) ELT 449 (Tri. Mum) Maintained by the Hon’ble Supreme Court in 2016 (334) ELT A123
2.1 He further submits that entire demand is barred by limitation as the demand for the period March, 2011 to November, 2013 was raised vide Show cause notice dated 18.03.2016, thus, the entire demand is beyond normal period of limitation. He submits that the appellant have been filing their monthly returns from time to time declaring all the required details as per the statutory form. Further, the appellants were also audited from time to time. No objection was raised by the department on the manner of valuation of goods cleared to their grinding unit at any point of time during these audit , even during the audit conducted after amendment to Rule 8 of Valuation Rules with effect from 01.12.2013.the appellant submits that it is a settled law that extended period of limitation cannot be invoked when the appellants have been audited from time to time and monthly returns have been filed regularly by the appellant. Reliance was placed on the following judgments:-
• CCE, Bangalore vs. Pragathi Concrete Products (P) Ltd - 2015 (322) ELT 819 (SC)
• Apex Electricals Pvt Ltd vs. Union of India - 1992 (61) ELT 413 (Guj.)
• Cadila Pharmaceuticals Ltd vs. CCE – 2017 (9) ELT 694 (Guj.)
• CCE, Indore vs. ZYG Pharma Pvt Ltd - 2017 (358) ELT 101(MP)
• Vandana Global Ltd vs. CCE, Raipur - 2022 (12) TMI 450- CESTAT New Delhi
2.2 He further submits that further omission to inform does not amount to suppression of fact and the appellants are under the bonafide belief that the goods are liable to be valued at cost of production method in view of the CBEC’s Circular No. 354/81/2000-TRU dated 30.06.2000. He submits that since the demand is barred by limitation there is no need to go into the merit of the case as upheld by the Hon’ble Allahabad High Court in the case of CCE vs. Monsanto Manufacturers Pvt Ltd - 2014 (35)STR 177 (All.)
2.3 Without prejudice to the above, he further submits that the appellant have correctly valued the goods cleared to the Grinding unit under Rule 8 of Valuation Rules at 110% of the cost of production in support he placed reliance on the following board circular:-
• CBEC’s Circular No. 354/81/2000-TRU dated 30.06.2000
• 643/34/2002-CX dated 01.07.2002
3. Shri Rajesh Nathan, Learned Assistant Commissioner (AR) appearing on behalf of the Revenue reiterates the finding of the impugned order.
4. We have carefully considered the submission made by both sides and perused the records. From the facts and records of the case we are of the view that this appeal can be disposed of on limitation itself without going into the merits of the case. We find that as per the department the issue on merit is that the appellant was supposed to pay the excise duty on the goods cleared from their clinker unit to the grinding unit not on the cost construction method i.e. 110% of cost of manufacturing but on the transaction value of the same goods sold to the independent buyers. The appellant submitted that the goods in question i.e. clinker manufactured and supplied to their own grinding unit where the same is used in the manufacture of cement and the cement so manufactured is cleared on payment of duty, therefore, whatever duty paid on the clinker the same is available as cenvat credit to the clinker unit. Therefore, since there is no gain or loss to the appellant, the situation is revenue neutral, hence, malafide intention cannot be attributed to the appellant.
4.1 Moreover, though during the relevant period i.e. March, 2011 to November,2013 both the units i.e. clinker and grinding unit were separately registered but from May, 2016 both the clinker unit and grinding unit have been granted common Central Excise registration and separate registration of clinker unit was surrendered. This shows that practically both units are one of the same. This fact reinforces the claim of the appellant that the situation is revenue neutral. In the identical facts where the department had alleged under valuation of goods sold to the sister concern, the Hon’ble High Court of Gujarat in the case of C.C, Vadodara Vs. Ineos ABS Ltd – 2010(254) ELT 628 (Guj.) has upheld the order of the CESTAT setting aside the demand entirely on the ground of Revenue neutrality, without going into the issue of valuation.
4.2 On the identical issue this CESTAT in the case of Max Specialty Ltd vs. CC & ST Ludhiana – 2021(375) ELT 420 (Tri. Chan.) has set aside the demand on the grounds of Revenue neutrality. On the issue of Revenue neutrality the appellant’s case is supported by the following judgments cited by the appellant :-
• Mahindra & Mahindra Ltd vs. CCE , Mumbai - 2019 (368) ELT 105 (Tri. Mum) Affirmed by the Hon’ble Supreme Court in 2019 (368) ELT A41 (SC)
• CCE Surat-II vs. Gujarat Glass Pvt Ltd - 2013 (290) ELT 538 (Guj.)
• CCE, Mumbai vs. Special Steel Ltd - 2015 (329) ELT 449 (Tri. Mum) Maintained by the Hon’ble Supreme Court in 2016 (334) ELT A123
4.3 In view of the above this is a clear case of revenue neutrality, therefore, suppression of facts or any malafide intention with intent to evade the payment of duty cannot be attributed to the appellant, consequently the demand is not sustainable on limitation. Moreover, the period involved is March, 2011 to November,2013 for which the show cause notice was issued on 18.03.2016, thus, the entire demand is beyond the normal period of limitation. We find that the appellant have been filing their monthly return from time to time declaring all the details in the returns and the fact is on record that the appellants are clearing clinker to their own grinding unit, valuing the goods under Rule
8 i.e. 110% of the cost of manufacture. It is also observed that even when rule 8 was amended with effect from 01.12.2013 then also the department has not woken up to issue the show cause notice, therefore, it is absolutely clear that there is no suppression of fact on the part of the appellant. In this regard the following judgments, which were relied upon by the appellant directly support their case on limitation.
• CCE, Bangalore vs. Pragathi Concrete Products (P) Ltd - 2015 (322) ELT 819 (SC)
• Apex Electricals Pvt Ltd vs. Union of India - 1992 (61) ELT 413 (Guj.)
• Cadila Pharmaceuticals Ltd vs. CCE – 2017 (9) ELT 694 (Guj.)
• CCE, Indore vs. ZYG Pharma Pvt Ltd - 2017 (358) ELT 101(MP)
• Vandana Global Ltd vs. CCE, Raipur - 2022 (12) TMI 450- CESTAT New Delhi
4.4 We further find that as per the Board Circular No. 354/81/2000-TRU dated 30.06.2000, the board has clarified as under :-
"21. As a measure of simplification, it has been decided to value goods which are captively consumed on cost construction method only as there have been disputes in adopting values of comparable goods. The assessable value of captively consumed goods will be taken at 115% of the cost of manufacture of goods even if identical or comparable goods are manufactured and sold by the same assessee.”
4.5 From the above clarification the board was also of the view that in case of clearance of goods by the assessee and use thereof for captive consumption, the valuation has to be done on 115% of the cost of manufacture of the goods even if identical or comparable goods are manufactured or sold by the same assessee and this circular was further reiterated vide CBEC’s Circular No. 354/81/2000-TRU dated 30.06.2000. Therefore, the appellant has acted upon the above circular, for this reason also no malafide can be attributed to the appellant.
4.6 On the identical issue on merit the Hon’ble Allahabad High Court in the case of CCE vs. Monsanto Manufacturer Pvt Ltd- 2014 (35)STR 177 (All.) has held that once the court has come to the conclusion that the extended period of limitation could not have been invoked there would be no occasion to enquire merit of the issue. Therefore, we are of the view that as per the discussion made herein above, the entire demand is clearly time bar, therefore, we need not to address the issue on merit i.e. manner of valuation of goods in question. Therefore, we are of the clear view that the entire demand is hit by limitation, hence, not sustainable.
5. Accordingly, the impugned order is set aside on the ground of limitation. Appeal is allowed with consequential relief. CO also stand disposed of.
