- (1.) CHALLENGE in this appeal is to the judgment of the customs, Excise, and Gold (Control) Appellate Tribunal, New Delhi (in short the 'cegat) allowing the appeal filed by the respondents (hereinafter referred to as the 'assessee' ). Before the CEGAT challenge was to the order passed by the commissioner of Central Excise, Allahabad.
(2.) FACTUAL background in a nutshell is as follows : the respondents are having two manufacturing units - a distillery at Captainganj and a chemical factory at Barabanki. In their distillery the respondents manufacture ethyl Alcohol-Denatured (for short 'sds' ). The stock of SDS is transferred to their barabanki unit where it is wholly consumed in the manufacture of specified chemicals. Under the order of the adjudicating authority the differential duty demand of rs. 14,89,61,104. 00 was confirmed on the entire quantity of SDS transferred from captainganj unit to Barabanki unit during the period from April 1994 to december 1999. Aggrieved by the above, the assessee filed the appeal before CEGAT. Show cause notices were issued for different periods as follows : JUDGEMENT_7565_AIR(SCW)_2007Html1.htm Excise duty was levied on SDS for industrial consumption w. e. f. 1. 3. 94. The respondents were paying excise duty at the time of transferring the stock of SDS to their Barabanki unit and modvat credit of the duty paid was availed in the Barabanki unit. The assessable value had been arrived at by the respondents on costing basis in terms of Rule 6 (b) (ii) of the Central Excise Valuation Rules, 1975 (in short 'valuation Rules') during the relevant period. In the show cause notice, it was alleged that the assessable value has to be fixed in terms of Rule 6 (b) (i) and not under Rule 6 (b) (ii ). It was then proposed to fix the assessable value on the basis of the price at which SDS was sold by the following manufacturers for different years :- JUDGEMENT_7565_AIR(SCW)_2007Html2.htm Thereafter, by a corrigendum dated 14. 1. 2000 sale price fixed at Rs. 14. 25 was correeted as Rs. 15/ -. On this basis the differential duty demand, as mentioned Was made. the respondents contended before the adjudicating authority that the entire quantity of SDS manufactured at its distillery is being consumed at Barabanki unit for manufacture of specified articles Molasses which is the major raw material for manufacture of SDS was obtained by the respondents at controlled rate in terms of the provision of U. P. Molasses Control Order, 1964 but other distilleries manufacturing ethyl Alcohol for non-specified purposes had to purchase molasses at market determined prices. Therefore, there could be no comparison between the cost of production of SDS by the respondents and M/s. Saraiya Distillery, one of the manufacturers whose selling price had been relied upon in the show cause notice. Respondents determined the assessable value of SDS for the purpose of Section 4 (1) (b)of the Central Excise Act, 1944 (in short the 'act') on costing basis as it had no sale of SDS. The cost fixation was undertaken annually on the basis of the previous year's Balance Sheet for determining the value and discharge duty since the Balance sheets are finalised only in the month of September for the year ending on 31st march. On receipt of the finalised Balance Sheet in September, the value determined on the basis of the earlier Balance Sheet was being revised. If the revision was upward, differential duty was discharged on the increased value. The price declarations filed effective from 1. 3. 1994 along with the questionnaire was approved by the Central Excise authorities. With effect from 1. 4. 1994, when Rule 173c of the central Excise Rules, 1944 (in short the 'rules') was amended the respondents filed the declarations under Rule 173c also.
(3.) THE actual value on which the respondents cleared SDS during the period in question is as under : JUDGEMENT_7565_AIR(SCW)_2007Html3.htm The respondents further contended that proposal in the show cause notice to fix the assessable value on the basis of the highest price at which one of the manufacturers sold SDS on particular date is totally illegal. It was further contended that for the period from April 1999 to December 1999 the respondents had paid on a higher assessable value than what was proposed in the show cause notice. Therefore, there is no basis for demanding differential duty during this period. The adjudicating authority did not accept the contentions raised by the respondents. The Commissioner of Central Excise, therefore, confirmed the differential duty demand of Rs. 14,89,61,104/- and imposed penalty amount equal to the duty demand by invoking Section 11 AC;