No under-valuation when partially processed goods sold to sister concern were ultimately cleared on value sold to independent buyers.

PJ/Case Law/2014-15/2235

Case: - STARINDUSTRIES LTD Vs COMMISSIONER OF CENTRAL EXCISE, MUMBAI-III

Citation: -2014-TIOL-1224-CESTAT-MUM

Brieffacts: -Briefly stated facts of the case are that, M/s. Star Industries Ltd., Thane, is a manufacturer of PVC sheets/films, etc. They are clearing the PVC sheets to independent buyers after undertaking the process of printing, embossing, etc. and on payment of duty on the price approved by the excise authorities. They are also clearing the same PVC filaments/sheets in jumbo rolls without undertaking the activity of printing/embossing, etc. to their sister unit at Daman. The price declared for clearance to the Daman unit is less by Rs. 3/- per unit sold. At the Daman unit after undertaking the process of printing, embossing, etc., the finished products are cleared by including the cost of printing, embossing, etc. and at the price which is equal to such goods cleared from the unit at Thane. The department's contention is that there is no evidence that the goods cleared to the Daman unit are semi-finished or partially processed and, therefore, the appellant should have discharged excise duty liability on the films/sheets cleared to the Daman unit at a price which is at par with those sold to independent buyers.

This issue had come up earlier and the lower appellate authority vide order dated 31/10/2000 had remanded the matter back to the adjudicating authority on the ground that the appellant's claim, that differential duty demanded is already included by their Daman unit in the assessable value of PVC sheets cleared by it, should be ascertained from the jurisdictional Range Office of the Daman unit and thereafter, the same should be evaluated and the duty demands re-determined. In pursuance to the said remand order, the adjudicating authority once again considered the matter afresh. He also caused verification with the jurisdictional incharge of the Daman unit and as per the enquiry report received from the Assistant Commissioner of Daman, vide letter dated 26/09/2011, it was found that the unit at Daman had undertaken the process of printing, embossing, etc. and they had discharged excise duty liability by adding a value of Rs.3/- per unit sold at Daman. In view of this report from the jurisdictional Assistant Commissioner at Daman, the adjudicating authority came to the conclusion that there is no undervaluation and the duty liability has been correctly discharged. Accordingly, he dropped the proceedings.

The said order was reviewed by the jurisdictional Commissioner, who filed an appeal before the lower appellate authority on the very same grounds which were originally taken in the show cause notice and on such appeal, the lower appellate authority has passed the impugned order allowing the department's appeal.

Appellant’sContention:- The learned counsel for the appellant submits that the appellant, M/s. Star Industries Ltd., Thane, is a manufacturer of PVC sheets/films, etc. They are clearing the PVC sheets to independent buyers after undertaking the process of printing, embossing, etc. and on payment of duty on the price approved by the excise authorities. They are also clearing the same PVC filaments/sheets in jumbo rolls without undertaking the activity of printing/embossing, etc. to their sister unit at Daman. The price declared for clearance to the Daman unit is less by Rs. 3/- per unit sold. At the Daman unit after undertaking the process of printing, embossing, etc., the finished products are cleared by including the cost of printing, embossing, etc. and at the price which is equal to such goods cleared from the unit at Thane. As such, there is no under valuation by them and the demand is not sustainable.

Respondent’scontention: - The department's contention is that there is no evidence that the goods cleared to the Daman unit are semi-finished or partially processed and, therefore, the appellant should have discharged excise duty liability on the films/sheets cleared to the Daman unit at a price which is at par with those sold to independent buyers.

Reasoningof Judgment:- From the review of order of the Commissioner, it is seen that there is no fresh grounds urged and the ground mentioned in the show cause notices were reiterated. The said show cause notices have already been disposed of by the appellate authority vide order dated 31/10/2000. If the Revenue was aggrieved of the said order, then it should have filed appeal before the Tribunal against the said order. Having failed to do so, Revenue cannot file another appeal before the lower appellate authority on the very same grounds urged in the show cause notices which had already been disposed of. The lower appellate authority also, without verifying the correct facts has come to the conclusion that there is no categorical reply from the respondents that they had cleared semi-finished goods to their Daman unit. The fact that the appellant had taken this matter in appeal against the order passed by the adjudicating authority and the matter was remanded back to the adjudicating authority, itself reveals that the appellant had taken this ground earlier. Therefore, the finding of the lower appellate authority in the impugned order in this regard is completely without any basis and without understanding the factual matrix involved. In view of the above position and in view of the categorical finding by the adjudicating authority that the unit at Daman had discharged excise duty liability after undertaking the processing on an additional value of Rs.3/- per unit, we uphold the appellant's claim that what they had cleared to Daman unit was semi-finished PVC filament/sheets without printing or embossing.
In view of the above, Tribunal find that the impugned order is not sustainable in law. Accordingly, Tribunal set aside the same and allowed the appeal.

Decision:-Appeal allowed.

Comment:- The gist of the case is that when partially processed goods are sold to sister concern and the sister concern sells the final goods on payment of duty on the price at par with independent buyers, no undervaluation can be alleged on the unit transferring the semi-processed goods. Also, as the credit of duty paid by the transferring unit is admissible to the sister unit, the entire exercise is revenue neutral.

Prepared By:-Priya Jain

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PJ/Case Law/2014-15/2235

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