1. The appeal is against the order-in-original No. 13-17/COMMR/CEX/GWL/2016 dated 25.08.2016 passed by the Commissioner of Central Excise and Service Tax, Gwalior. Through the above order-in-original the adjudicating authority decided four show cause notices covering the period 2007-2008 to 2013-2014.
2. Brief facts of the case are that the appellant is engaged inter alia, in the manufacture of toilet soaps, soap noodles falling under Chapter 34 of the First Schedule to the Central Excise Tariff Act, 1985. Appellant manufacturer's sodium salt of fatty acid noodles (SSFA Noodles) of soaps of different flavours at its factory at Malanpur, which are intermediate products for the manufacture of toilet soaps. Appellant clears SSFA Noodles to its sister concerns located in tax exempted areas, who use such SSFA noodles in the manufacture of toilet soaps, which are cleared without payment of duty by availing area based exemption. During the relevant period, appellant cleared SSFA noodles on payment of duty by determining the value under Rule 8 of the Central Excise Valuation Rules, 2000 following the Cost Accounting Standard-4 methodology, on monthly basis, i.e. on the basis of 110% of the cost of production. The process followed by the appellant for determining assessable value of SSFA noodles was such that for the goods cleared to the sister concerns during a particular month, cost of the goods for the previous month was adopted. At the end of every financial year, appellant was getting the cost of production determined for the entire financial year through a Cost Accountant and if there was any short payment of excise duty based on the CAS-4 derived assessable value, the same was duly paid. However, if it was found at the end of year that excess duty has been paid refund of such excess duty was not claimed by the appellant such differential duty was paid after adjusting the excess paid with the short paid. During the audit of appellant's record, department noticed that on certain occasions, appellant had cleared SSFA noodles on price below the assessable value determined in terms of Rule 8 of the Valuation Rules based on CAS-4, i.e. 110% of the cost of production, which resulted into short payment of duty.
3. The Department was of the view that appellant will not be entitled to adjustment between short paid duty and excess paid duty, since no provisional assessments have been ordered in respect of the assessee. Accordingly, differential duty was demanded for various periods by disregarding the excess payments made by the assessee. The show cause notices for the various periods were originally adjudicated and the differential duty confirmed. However, when appeals were filed against such orders before this Tribunal, the matter was remanded back to the original authority for de novo decisions. Now, the adjudicating authority has passed the impugned order covering the periods from 2007-08 to 2013-14 in which he has confirmed the differential duty demands by taking cognizance only of the short paid duty but ignoring the excess paid duty. Being aggrieved, the present appeal is filed by the appellant.
4. With the above background, we heard Sh. Amit Jain, Ld. Advocate for the appellants and Sh. M.R. Sharma, ld. AR for the Revenue.
5. Shri Amit Jain, ld. Advocate explained the case of the appellant in detail. He submitted that inspite of the direction of the Tribunal at the time of remanding the matter the adjudicating authority has not considered the excess duties paid during the period under dispute but has confirmed the differential duty only in respect of the short paid duty. He argued that such a stand taken by the adjudicating authority is improper. He relied on the following case laws:
i) Jindal Steel & Power Ltd. vs. CCE, Raipur-I : 2016 (342) ELT 253 (Tri. Del.)
ii) Essar Steel India Ltd. vs. CCE, Raipur : 2017 (345) ELT 139 (Tri. Del.)
He submitted that these cases have been decided by the Tribunal on similar facts in which the adjustment of excess paid duty with the short paid duty has been permitted. Accordingly, he submitted that the impugned order may be set aside.
6. Ld. AR appearing for the Revenue justified the impugned order. He argued that no provisional assessments have been ordered in respect of the present issue and in the absence of provisional assessment, there is no provision of law permitting the adjustment of excess duty paid during one month with the short paid during other months.
7. We have considered the submissions made by both sides. The goods have been cleared by the appellant to their own sister unit located in tax exempted areas. Consequently, the appellant is require to pay excise duty on goods so cleared. The basis of valuation is also required to be done in terms of Rule 8 of the Central Excise Valuation Rules, 2000 following the Cost Accountant Standards (CAS-4). It is not in dispute that valuation has been done properly as per CAS-4. However, such valuation has been done on the basis of CAS-4 certificate prepared on the basis of annual cost of production. The appellant has paid duty on a month to month basis on the basis of the cost of the goods for the previous month. When the valuation is finalised on an annual basis, there has been short payment of duty in some months as well as excess payment in other months. The appellant has already paid the excess duty wherever the value as per CAS-4 is more than the value adopted for payment of duty, but after adjusting the excess paid duty in other months. Such adjustment has not been permitted by the adjudicating authority even in the de novo adjudication.
8. We are of the view that the stand taken by the adjudicating authority is untenable. An identical issue has been considered by the Tribunal in the case of Essar Steel India (supra), in which the Tribunal observed as follows:-
"5. We have heard both the sides and perused appeal records including written submission. The admitted facts of the case are that there is no sale of iron ore concentrate by the appellant and clearance to sister unit for further use is subjected to excise duty and valuation for such duty has to be worked out in terms of Rule 8 of Valuation Rules, 2000. The central point of dispute is the frequency or periodicity of costing in terms of CAS-4. The appellants followed different value during the same financial year based on revision of costing within the year more than once. The Revenue contended that the costing should be annual basis and, hence, during whichever month the value happens to be less than the average annual cost, duty was confirmed.
6. First, we consider the appellant's plea regarding the transaction value arrived at based on costing should be at the time of removal. It was submitted that the scheme of things for excise duty purposes in terms of Section 4 and Rules made there under and Central Excise Rules, the duty liability based on self-assessment has to be discharged at the time of removal of goods when the invoices are prepared. The legal position as submitted by the appellant cannot be contested. However, it is an admitted fact that the appellants themselves did not follow costing to arrive at deemed transaction value for each clearance. They have considered a period of many months and worked out the costing, in terms of CAS-4 for that period and paid duty. Thereafter, they revised said costing when there are changes in raw material cost. That being the case, we find that the reliance placed by the appellant on the principle that time of removal is relevant and, hence, annual costing is not tenable, is unsustainable. The fact remains that while the duty liability has to be discharged at the time of removal of excisable goods in a situation where there is no sale transaction and known value, the deemed transaction value has to be constructed based on costing method which necessarily will involve an averaging of cost for a period, considering all the parameters. It is neither the case of the appellant nor there is such an approved standard for arriving at cost of excisable goods for each individual clearance.
7. Now, the question remains when at the time of each clearance of excisable goods for captive consumption the exact transaction value could not be arrived at the relevant time the duty has to be paid on a provisional basis and upon arriving at the costing applying CAS-4 and the assessable value in terms of Rule 8 of Valuation Rules final determination of duty liability has to be made. In the present case, admittedly no provisional assessment was resorted to by the appellant. Hence, the determination of actual cost much later on the clearance resulted in certain adjustments and payments by the appellant.
8. The appellants referred to guidelines issued by the Institute of Cost & Works Accountants of India on CAS-4. We have perused the same. Para 8 deals with periodicity of CAS-4 Certificates. The guidelines state that the frequency of revising the certificate of cost of production will depend upon the significance in the changes in the cost due to various factors like input cost fluctuations, changes in the employee cost and other expenses. It further notes that where goods are cleared on cost of production worked out as per the audited accounts of the previous audited period, it is advisable to prepare a fresh certificate of cost of production based on the audited accounts of the period for which the goods are cleared and the differential duty is paid or taken credit of as the case may be. In such circumstances, it is advisable to compute the actual material cost as per the issue valuation adopted by the assessee for material issues. Further, in the FAQ on CAS-4 the ICAI clarified that cost determination of a product is always for a period and computed on the basis of actual accounts of the company. The costs so determined should be actual cost reconciled with the audited accounts of the company after the accounts for the period is audited.
9. On perusal of the guidelines by the ICAI, we find while arriving at costing based on CAS-4 the correct method will be to determine the same based on actual audited data as per the accounting year of the company. To that extent we find the CAS-4 cost price arrived at on annual basis by the Revenue is correct procedure.
10. The next issue for decision is on the quantification of differential duty. Even though there is no provisional assessment in the present case, the duty determination on the inter-unit transfer is made on annual costing. As such when the Department arrived at cost on annual average basis the duty liability, excess or shortage has also to be determined on such basis. It is not tenable while for arriving at per unit duty liability the whole year data is considered for costing, for total duty liability only months when short payment was noticed were considered. In other words when CAS-4 based annual costing formed basis for arriving transaction value, the overall duty liability/short payment should be arrived at after considering duty already paid during that year on such goods. We find the reasoning given by the Original Authority against adjustment of already paid duty as untenable. Section 11B has no application in such situation, when the appellant's duty lia
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bility is determined on annual CAS-4, the duty already paid during said period has to be adjusted. The question of unjust enrichment has no relevance here. There is no refund considered here. The point that the duty paid in excess in certain months has been availed as credit by sister unit hence, cannot be adjusted towards short payment also not tenable. The demand arose based on annual costing. Such cost price in terms of Rule 8 will apply to all clearances made during the relevant year. Admittedly, duty already discharged has to be considered for arriving at overall short payment. Selectively applying the said cost price only for months when the clearances were below such cost price is not legally sustainable. 9. Similar views have been expressed in the case of Jindal Steel & Power (supra). By following the decisions of the Tribunal cited above, we find that the impugned order is not sustainable and hence is set aside. 10. The appellant has claimed that they have already paid the short paid duty payable after deducting adjusting the excess. The adjudicating authority is directed to verify the same and recover only the differential, if any, after such adjustment. 11. Appeal is allowed but for the observations as above.