Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  Missing seized records must be considered while testing ITC claim; duplicate GST demands ordered corrected: Delhi High Court. *  GST appeal can’t be rejected without addressing taxpayer’s grounds: Allahabad High Court. *  Surplus IGST credit can offset CGST, SGST shortfall: GSTAT. *  GST refund can’t be denied when cancelled airfares are returned with tax: GSTAT. *  3 Hearing notices issued within 2 minutes: Gujarat High Court flags portal flaw, seeks report. *  GSTR-9, GSTR-9C filing for FY 2025-26 enabled; pending GSTR-1 and GSTR-3B must be filed first. *  Dupattas are exempt fabrics, can’t be taxed as fibres at 4%: Madras High Court. *  Full transitional credit allowed on capital goods received after GST rollout: GSTAT denies Rs. 6.99 lakh export duty credit. *  GST return mismatch alone can’t justify fraud proceedings: GSTAT orders fresh adjudication under section 73. *  Supplier found non-existent later can’t alone justify input tax credit denial: GSTAT. *  GST interest stops once tax reaches government account, can’t run until return filing: GSTAT. *  Cancelled flat booking- GST refund can’t be denied without excluding COVID period from limitation: GSTAT. *  India notifies rules of origin for India–New Zealand FTA. *  Incomplete E-bike kits classifiable as complete vehicles, but not eligible for CKD duty concession: CESTAT. *  Same GST rate on main input and output can’t by itself bar inverted duty refund: GSTAT. *  Unjust enrichment doesn’t apply to customs refunds from assessments finalised before July 13, 2006: Gujarat High Court. *  CENVAT credit can’t be denied solely because plant And machinery are embedded in earth: Karnataka High Court. *  DFIA exports ineligible for RoDTEP benefits; customs directs repayment with applicable interest. *  Second E-Way bill alone doesn’t prove another supply: GSTAT. *  Bail denied in Rs. 1.19 crore fake GST refund case over risk of accused absconding again: Punjab and Haryana High Court. *  GST registration can be restored after revocation deadline if outstanding dues are paid: Gauhati High Court. *  Multiple GST proceedings over same suppliers: Calcutta High Court directs dept. to share findings for adjudication. *  E-Governance portal services not OIDAR, fixed deposit interest not taxable: CESTAT. *  Rs. 500 Stamp duty required on authority letters for CAs, CMA and GST practitioners in Pune GST division.  *  Rs. 1.10 crore GST refund must be paid in cash after business closure: Allahabad High Court. *  Godown rent attracts 18% GST even when used exclusively for exempt agricultural warehousing: AAR. *  GST portal launches "Multi-State Registration" facility: one master TRN for registration applications across multiple States/UTs. *  RoDTEP scheme extended till 31st December, 2026.  *  Mere disagreement with order can’t override Rs. 20 lakh appeal limit: GSTAT. *  Customs interest can’t be backdated before confiscation liability is determined; nearly 8 year period excluded: Delhi High Court.
Subject News *  GST summons: anticipatory bail maintainable without arrest order, but relief denied in evasion case: Allahabad High Court. *  GST Appeal can’t be decided without hearing taxpayer’s objections to fresh evidence: Allahabad High Court. *  GST ITC can’t be reversed merely because supplier grants discount without reducing tax liability: GSTAT. *  Mere quoting of GST provision is not a valid charge: GSTAT quashes ITC denial. *  Personal hearing mandatory before adverse GST order, even without taxpayer’s request: Rajasthan High Court. *  Parallel bail pleas without full disclosure amount to abuse of process Rs. 43.08 crore GST case sent for fresh hearing: Supreme Court. *  GST refund based on unchallenged advance ruling can’t be recovered using later circular: GSTAT. *  Payment of GST alone doesn’t end interest and penalty liability when tax and interest remain unpaid beyond 30 days of notice: GSTAT. *  GST demand over builders’ 80% procurement rule requires reasoned adjudication: GSTAT. *  Eligible ITC doesn’t automatically entitle taxpayers to compensation cess refund on domestic sales: GSTAT. *  GST confiscation order passed before reply deadline invalid: GSTAT. *  GST interest can’t be retained after tax refund on delayed export receipts: Punjab & Haryana High Court. *  GST appeal can’t be dismissed over pre-deposit shortfall without opportunity To respond: Bombay High Court. *  DGGI SCN can’t be challenged before reply and adjudication:Chhattisgarh High Court. *  GST input tax credit can’t be denied solely due to supplier’s retrospective registration cancellation: GSTAT. *  GST notice must explain fraud allegations; merely repeating section 74 Is not enough:  Himachal Pradesh High Court. *  Audit detection alone can’t justify GST fraud penalty; specific suppression must be proved: GSTAT. *  GST order uploaded only under ‘Additional Notices’ tab without separate intimation set aside: Calcutta High Court. *  Service Tax appeal can’t be rejected for missing pre-deposit proof when payment is already recorded: CESTAT. *  SGST dept. can’t hear appeal against CGST order: Calcutta High Court. *  Mere dispatch of tax order can’t prove service or make appeal time-barred: CESTAT. *  Dealer incentives can’t be taxed merely on ledger entries: CESTAT. *  DGFT orders quashed for failure to supply DRI letter relied upon in SCN: Bombay High Court. *  GST penalty u/s 122(1A) can’t apply to Pre-2021 transactions; unregistered beneficiaries also covered: Delhi High Court. *  Expired E-way bill caused by wrong PIN code can’t justify GST penalty without intent to evade tax: GSTAT. *  Used railway rails can’t be taxed as track material without proof they are fit for reuse: CESTAT. *  Earlier DGGI notice doesn’t bar separate GST demand on different issue: Delhi High Court. *  ITC dispute involves no question of law: GSTAT directs appeal to Vice-President. *  Earlier DGGI notice doesn’t bar separate GST demand On different issue: Delhi High Court. *  No E-way bill required for interstate goods movement in november 2017: GSTAT quashes detention and penalty.  

Comments

Print   |    |  Comment

PJ/CASE LAW/2014-15/2432

Whether allegation of under-valuation of intermediate product is valid when duty on final product is paid on MRP basis?

Case:- HINDUSTAN UNILEVER LTD. VERSUS COMMISSIONER OF C. EX., MUMBAI-I
 
Citation:-2014 (308) E.L.T. 716 (Tri. - Mumbai)
 
Brief facts:- The appellant is in appeal against the impugned order wherein duty demand of Rs. 1,70,40,080/- has been confirmed along with interest and equivalent amount of penalty on account of undervaluation.
Brief facts of the case are that the appellant is manufacturer of soap and like products and having several units for manufacturing of their final product and they are also getting the products manufactured through job workers. The appellant is having one unit at Sewri, Mumbai. From Sewri, the appellant had cleared the Unfinished Soap Noodles to their sister unit at Goa on a price of Rs. 47,250 per MT, on the basis of cost construction method. It is also seen that the appellant has cleared the same goods to M/s. Aquagel Chemicals P. Ltd., Rs. 28,600/- per MT. In these circumstances, an investigation was carried out and a query was raised by the Superintendent of Central Excise through a letter dated 25-11-2003 regarding the issue of under-valuation/sale pattern while supplying Unfinished Soap Noodles to M/s. Aquagel Chemicals P. Ltd. The said letter was replied vide letter dated 9-1-2004 and thereafter the Superintendent of Central Excise vide letter dated 30-1-2004 pointed out that such contracted sale price formed the sole and only consideration for sale. Thereafter, on 14-1-2008 a show cause notice was issued for demanding differential duty on account of under-valuation of the goods sold to M/s. Aquagel Chemicals P. Ltd. The show cause notice was adjudicated and an impugned order was passed. Aggrieved by the said order, the appellant is before the Tribunal.
 
Appellant’s contention:- Shri M.H. Patil, learned Advocate appearing for the appellant submits that in this case a query was raised in November, 2003 and the same was replied on 9-1-2004 therefore, the show cause notice issued to them by invoking extended period of limitation is not sustainable as the same was issued on 14-1-2008. He further submits that the period in this matter is January, 2003 to December, 2003 and their pricing pattern remained the same for the subsequent period also and the same has been accepted by the department therefore, the allegation of suppression of facts does not arise. The learned Advocate also submits that M/s. Aquagel Chemicals P. Ltd., was buying the said goods from other independent suppliers also on the similar price. Therefore, the allegation of undervaluation is not sustainable. He also submits that as M/s. Aquagel Chemicals P. Ltd., is manufacturing soaps and like products and clearing the said goods to the dealers of the appellant and paying duty under Section 4A of the Central Excise Act i.e. MRP less abatement. Therefore, the question of under-valuation is not sustainable as whole exercise is Revenue neutral. Hence, the learned Advocate prays that the impugned order should be set aside and the appeal be allowed.
 
Respondent’s contention:- the learned AR appearing for the Revenue strongly opposes the contentions of the learned Counsel and submits that they have not supplied the copy of contract entered between the appellant and M/s. Aquagel Chemicals P. Ltd., therefore, they suppressed the fact. Accordingly, the lower authority has rightly invoked the extended period of limitation. With regard to sale pattern for the subsequent period, the learned A.R. submits that he has no knowledge of the subsequent period whether the sale pattern is allowed or not. On merits he submits that as per Rule 6 of the Valuation Rules, there may be some flow of cash to the appellants from M/s. Aquagel Chemicals P. Ltd., therefore, the clearance of the goods to M/s. Aquagel Chemicals P. Ltd., is influenced. In these circumstances, he prays that the impugned order is to be upheld.
 
Reasoning of judgment:- In this case, the appellants are clearing “soap noodles” to M/s. Aquagel Chemicals P. Ltd., at lower price than on which they were clearing the goods to sister unit. The Hon’ble Tribunal also observed that M/s. Aquagel Chemicals P. Ltd., is independently purchasing these soap noodles from independent suppliers on similar price. They also find that duty is payable on finished goods on MRP basis as per Section 4A of the Central Excise Act. Therefore, even if it is presumed that the appellant had supplied the soap noodles to M/s. Aquagel Chemicals P. Ltd., at lower price but the appellant is receiving the finished goods on payment of duty under Section 4A of the Act. When duty is paid on finished goods on MRP basis, the question of under-valuation on the intermediate product supplied by the appellant does not arise. As on the finished goods duty has been paid as per Section 4A of the Central Excise Act, 1944 therefore, on merits the appellant is having a good case. They further find that the appellant has disclosed their selling pattern to the department through a letter dated 9-1-2004 and the Superintendent of the Central Excise has examined the same and thereafter he referred the matter to the Dy. Commissioner for his consideration on 30-1-2004 observing that selling price is the only consideration. In these circumstances, they also hold that in this case the show cause notice issued by invoking extended period of limitation, is barred by limitation. They also note the fact that for subsequent period the selling pattern of noodles to M/s. Aquagel Chemicals P. Ltd., is same and no proceedings have been initiated by the department against the appellant. Therefore, the appellant is having a goods case in their favour.
With these observations, they set aside the impugned order and allow the appeal with consequential relief, if any.
 
Decision:- Appeal allowed.
 
Comment:- The facts of the case are that the intermediate product has been cleared to sister concern at a price lower than the price at which goods are cleared to another sister unit. The said sister concern is independently purchasing such goods on a similar price from independent supplier and the finished goods were cleared by paying duty on MRP basis under Section 4A of Central Excise Act, 1944. It was concluded that when duty on final product is being paid on MRP basis, the question of undervaluation of intermediate product does not arise.
 
Prepared by:- Monika Tak

Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com