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DIRECT TAXES - Central Excise & Customs |
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vipin jain |
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1. Freight and insurance charges not to be included in valuation of goods cleared on ex-factory price basis Facts The respondent assessee was engaged in manufacture of ‘electric meters’ and ‘parts’ thereof. These goods were mainly supplied to various state electricity boards. The value of the goods was fixed at factory gate, however, freight and insurance charges were recovered on average basis and not on actual basis. The adjudicating authority confirmed the notice on the premise that the sale had taken place at the buyer’s end, since the goods are sold at uniform prices inclusive of equalized freight and insurance charges. The respondent preferred an appeal before Commissioner (Appeals) against the above mentioned adjudication order, which was allowed. The revenue preferred an appeal against this order, which was dismissed by the Tribunal based on its decision in case of Associated Strips 2002(49) RLT 506. The revenue preferred a further appeal with the Supreme Court against the order of the Tribunal. Held At the outset, the Supreme Court observed that there were two separate contracts; one for sale of electric meters which was governed by the provisions of the Sale of Goods Act and the other for transportation of goods. It was further observed that the respondent was bound to transport the goods from the factory gate to the customer’s premises in terms of the second contract. Relying on its earlier decision in case of Escorts JCB Ltd 2002(146) ELT 31, the Supreme Court concluded that the freight and insurance charges cannot be included in the value of goods when the sale is on ex-factory basis, even when such freight or insurance is not recovered on actual basis. (CCE vs. Accurate Meters Ltd 2009(235) ELT 581 – SC) 2. Interest under Section 11AB is not leviable on duty paid in respect of supplementary invoices Facts The issue framed before the Gujarat High Court was whether any interest as prescribed under the provisions of Section 11AB of the Central Excise Act, 1944 is payable on duty paid in respect of supplementary invoices raised in terms of a price escalation clause. Held At the outset, the High Court observed that the liability of the buyer to pay the additional amount under the escalation clause was not known to the buyer at the time when the transaction took place. The liability to pay the duty in terms of Section 4 of the Central Excise Act, 1944 arose only subsequently on issuance of supplementary invoices under the escalation clause. In view of above, the High Court concluded that Section 11AB has to be read in consonance with the provisions of Section 4 of the Central Excise Act and hence, the interest under Section 11AB cannot be levied for the period prior to the time the buyer became liable to pay duty in terms of Section 4 of the Central Excise Act, 1944. (CCE vs. Chloritech Industries 2009(235) ELT 17 – GUJ HC) 3. High Court has powers to condone the delay in filing of appeals under Section 35G of the Central Excise Act, 1944 in view of Section 5 read with Section 29(2) of the Limitation Act, 1963 Facts The larger bench of Bombay High Court was constituted in order to consider the issue of whether it was empowered to condone the delay in filing the appeal under Section 35G of the Central Excise Act, 1944 which are filed beyond the prescribed period of 180 days, in view of the conflicting decisions of two division benches in cases of Shruti Colorants Ltd 2009(233) ELT 171 and Sujog Fine Chemicals (India) Ltd Order dated 13.8.2008. The issue was equally relevant for Customs Act, 1962 as Section 35G of the Central Excise Act, 1944 is pari materia to Section 130 of Customs Act, 1962. Held At the outset, it was observed
by Bombay High Court that the decision in case of Shruti Colorants Ltd (supra)
was per incurium in as much as it was rendered without considering the judgments
of Hon’ble Supreme Court in case of Mukri Gopalan (infra) and Kartik Chandra Das
(infra) wherein the scope and purport of Section 29(2) of the Limitation Act,
1963 was extensively dealt with. Section 29(2) of the Limitation Act provides
that where any special or local law prescribes the period of limitation
different from the period prescribed in the Schedule to the Limitation Act, the
period of limitation prescribed in such special or local law shall apply. It
further provided that, in such event, Section 4 to 24 (inclusive) shall apply to
the extent they are not excluded by such special or local law. Section 5 of the
limitation Act empowers a court to admit an appeal filed beyond the prescribed
period of limitation. Based on the judgment of the full bench of Bombay High
Court dealing with a similar issue in context of Section 260A of the Income Tax
Act, 1961 in case of Velingkar Brothers 2007(289) ITR 382, this Court concluded
that the power to condone the delay in filing the appeal must be read to be
existent unless there is a clear indication of its exclusion by implication. It
was further held that Section 35G of the Central Excise Act, 1944 satisfies all
conditions laid down by Apex Court in cases of Mukri Gopalan AIR 1995 SC 2272
and Kartik Chandra Das 1996(5) SCC 342 for applicability of Sections 4 to 24 of
the Limitation Act. 4. Doctrine of unjust enrichment not applicable when price stood reduced on issuance of credit and debit notes Facts The respondent was processing
man made fabrics out of the grey unprocessed fabrics. During the relevant
period, it had cleared processed fabric on payment of duty @ 55% instead of the
prevailing rate of 50%, with a deemed credit benefit @ 45% to the customers. At
a later point in time, customers issued debit notes with a view to adjust the
excess duty. In turn, Respondents issued credit note for the sake of aforesaid
adjustment. Aggrieved by the orders of the adjudicating authority and
Commissioner (Appeals), Respondent moved the Tribunal which categorically held
that the question of passing the incidence of duty to the customers does not
arise, since no duty has been borne by the customers in view of the adjustments
of duty amount through credit and debit notes. The revenue contested this order
of the Tribunal before the High Court at Rajasthan. The High Court found sufficient force in the reasoning of the the Tribunal and held that after the issuance of debit and credit note the price of the goods is price initially billed minus the amount of debit or credit note. It was further held that the burden placed by Section 12B on assessee is refutable. Once the burden is rebutted by leading evidence such as debit/credit note, it is on the revenue to prove otherwise by producing contrary evidence. (UOI V. A.K. Spintex Ltd. 2009(234) ELT 41 Raj HC) 5. Cenvat credit is admissible on plastic crates used as material handling device within the factory for internal transportation of goods Facts In view of several conflicting decisions of the Tribunal, Larger Bench of the Tribunal was constituted in order to consider the dispute as regards admissibility of credit on plastic crates used as material handling device within the factory premises for internal transportation of goods, either as capital goods (accessory thereof) or as inputs. Held After considering several judgments of the Supreme Court and Tribunal on the issue, the Larger Bench observed that an accessory may or may not be required for essential working of the main unit, but is an object which is used for convenience and effectiveness of that unit. It may be capable of being used as a common object or with number of machines. The only criteria for an object to be held as an accessory is that it should be capable of being used with a machine and should advance the effectiveness of working of that machine. Since the plastic crates aided in effective transportation of the raw materials to processing machine and that of finished goods to storage area, the Larger Bench concluded that the credit of plastic crates would be available as an accessory to capital goods. On the aspect of the availability of credit on plastic crates as inputs, the Larger Bench observed that the plastic crates are used in transporting/storing of the goods in factory of production, which is integrally connected with the manufacture of final products. In view of this observation, the Larger Bench concluded that the credit on plastic crates would also be available as inputs. (Banco Products (India) Ltd vs. CCE 2009(235) ELT 636 – T-LB) 6. Interest is required to be paid even when differential amount is paid before finalization of assessment in terms of Rule 7(4) of Central Excise Rules, 2002 Facts The appellant was engaged in manufacture of various kinds of cocoa and chocolate products at their factory at Induri, near Pune. The intermediate products manufactured and captively consumed by them were provisionally assessed. Prior to the finalization of the assessment, the appellant calculated and paid the entire differential duty on its own accord. However, the Assistant Commissioner, while finalizing the assessment, charged interest as applicable and the same was charged from the first day of the month succeeding the month for which such amount was determined. Appellant preferred an appeal against the aforesaid adjudication order, which was dismissed by the Commissioner (Appeals) passed an adverse order. Feeling aggrieved with the order of Commissioner (Appeals), the appellant moved the Tribunal. The Tribunal referred the case to a larger bench in view of several divergent judgments on the issue in question. The following questions were framed for the consideration by the larger bench: “1. Whether in case of provisional assessment under the Central Excise Rules, 2002, interest is required to be paid from the first day of the month ‘for which’ such amount is determined (on finalization of assessment) or the interest is required to be paid from the first day of the month succeeding the month ‘in which’ the assessment is finalized? 2. Whether any interest is required to be paid if the differential amount is paid before the order, under Rule 7(3) of the said Rules, is issued finalizing the assessment?” Held As regards the first question, it was held that the interest liability commences from the first day of the month succeeding the month for which the assessment was made. The findings of the Tribunal in case of Vindhya Telelinks Ltd 2008(87) RLT 366 in this regard were affirmed. It was further held that the contrary interpretation canvassed by the appellant was clearly against the mandate of Rule 7(4) of the Central Excise Rules, 2002. The larger bench answered the second question in congruence with the view taken in the first question and held that the interest under Rule 7(4) of the Central Excise Rules, 2002 would be payable even when the differential duty has been deposited prior to the finalization of the provisional assessment. (Cadbury India Ltd vs. CCE, Pune-I 2008(232) ELT 224 – T-LB) 7. Blending of Petrol/HSD with additives does not amount to manufacture Facts The appellants was bringing duty paid Motor Spirit (MS) and High Speed Diesel (HSD) to their depots/installation where a part of such MS/HSD was blended with multi-function additives and sold under brand names such as ‘Speed’, ‘Power’, ‘Turbojet’, etc. The respondent Commissioners held that the said process of blending amounted to manufacture in terms of Central Excise Act, 1944. Hence, an appeal was filed before the Tribunal. Held The Tribunal held that the
blending of MS/HSD with additives does not change the basic characteristic and
usage of MS/HSD nor does this blended MS/HSD have ISI specification separate
from unblended MS/HSD. As no new product with distinct name, character and use
emerged, the blending of additives to MS/HSD could not be termed as
‘manufacture’ in terms of Excise (Hindusthan Petroleum Corporation Ltd vs. CCE, Delhi & Rohtak 2009(234) ELT 648 T-Del) |