CENTRAL EXCISE

33. Whether Cenvat credit is available on inputs which are used outside factory premises but near the factory premises?

Held – Yes.

Whether there is any difference between the scheme of Modvat scheme and Cenvat scheme under Central Excise rules?

Held – No.

The appellants availed Cenvat credit on explosions and other inputs used in quarrying limestone, which was in turn used for the manufacturer of cement clinkers. The limestone mines were situated at some distance away from factory premises of the appellants. The claim was disallowed by the department as the inputs were not used within factory premises.

The department argued that the old Modvat scheme and new Cenvat rules are different and in the new rules there is no corresponding Rule to Rule 57J. They relied on the decision in case of J.K. Udaipur Udyog Ltd. 171 ELT 289. (S.C.).

The appellants argued that the Modvat scheme and the Cenvat scheme are similar and relied on the decision of Jaypee Rewa Cement 133 ELT 3 (S.C.).

The Hon'ble Supreme Court went thru the provision of Modvat and Cenvat and concluded that scheme of Modvat and Cenvat are not different. They found that rule 57J of Modvat scheme is replaced with Rule 57AB of Cenvat scheme. They overruled the judgment of J.K. Udaipur Udyog and approved the judgment in the case of Jaypee Rewa Cement 133 ELT 3 (S.C.).

The claim of the appellants was allowed.

Vikram Cement vs. CCE Indore [194 ELT 3 (S.C.)].

34. Can an additional ground on an issue of fact not specifically pleaded in the lower court be taken up at a higher court?

Held – No.

The Customs department did not allow the dealer assessee to clear the goods imported by it on licence on the ground that licence was obtained fraudulently. The dealer assessee filed a writ in Delhi High Court, which allowed them to clear the goods pending the outcome.

The Delhi High Court allowed the writ in favour of dealer assessee as there was no investigation against the dealer assessee on the basis of the judgment of Titan Medical Systems Pvt Ltd. vs. CCE 151 ELT 254 (S.C.).

The Customs department went in appeal before the Division Bench against the decision of Single judge. The Division Bench also dismissed their appeal.

The Customs department then went ahead before the Supreme Court. In the Supreme Court the department argued that the licence itself had expired and the application for transfer of licence was rejected by the department.

The dealer assessee argued that this point was not raised at any stage before High Court either before Single judge or Divisional Bench. Again no action till the date of hearing was ever taken on the dealer assessee.

The court held that, since the issue of fact had not been specifically pleaded in answer to writ petition, no interference with decision of lower court could be made.

CCE New Delhi vs INDO EXIM [194 ELT 19].

35. Whether Cenvat credit can be availed on medicines sold under "house mark" and not brand name especially when in medicines they are sold under product names described in pharmacopoeia and not under patent or proprietary medicaments?

Held – No.

The dealer assessee was engaged in the manufacture of pharmaceutical products. They classified the goods for clearance under home consumption in Chapter 3003.20 at NIL rate but for exports they classified under Chapter head 3003.10 chargeable to duty as patent or proprietary medicaments. They also claimed Cenvat credit on those goods.

The dispute is on the correct classification of the medicaments manufactured of by the assessee dealer. The department contends that the marks put on packs are mere house mark and are not brand names while the assessee dealer contend that these were brand names.

The Tribunal following the decision in the case of Astra Pharmaceuticals Pvt. Ltd. vs. CCE Chandigarh 75 ELT 214 (S.C.) held that the marks put on the packages were only house marks and not a brand name or a trade mark having patent or proprietary rights. The medicines were being marketed in the names specified in pharmacopoeia, again it was not rebutted that export order was received in generic name and not under brand names and hence the Cenvat claim was disallowed.

[CCE A’bad vs Core Healthcare Ltd. 194 ELT 113]

36. When can the transaction value method of valuation as per sec. 14(1) of Customs Act be discarded? When the valuation of the goods imported differ substantially with that of the department any equitable method can be used to arrive at value for charging Custom duty?

Held – Yes

The assessee imported goods and declared them as Trichloro 1-3-5. On verification it was found that these goods are "Cyan Uric Chloride". The goods were of Chinese origin imported from UAE.

The Customs department ascertained that large value of Cyan Uric Chloride of Chinese origin was imported at a price of US $ 1860 PMT during that period. The price declared by the appellant came to only $ 500 PMT.

The lower authorities valued the consignment at US $ 1860 PMT, treating the same as comparable price of the same or similar goods.

The Commissioner (Appeals) rejected the claim of the assessee to value it, at the transaction value declared by them.

In the matter before the Tribunal the assessee contended that in the absence of any allegation of appellants paying any amount over and above the invoiced price to the suppliers, the declared value should have been accepted by the authorities below, for assessment purposes. He further states that in the light of the decision of the Hon’ble Supreme Court in the case of Eicher Tractor Ltd. vs. Commissioner of Customs, Mumbai - 2000 (122) ELT 321 (S.C.), the authorities below were required to accept the declared value under Rule 4 of the Customs Valuation Rules, 1988 instead of determining the value under Rule 5 on the basis of comparable goods.

The department on the other hand contended that:–

1. The value declared by the appellants is equivalent to US $ 500 which is ridiculously low and unrealistic compared to the comparable imports of the same origin during the same period at prices ranging from US $ 1860 to US $ 1950. He also states that the impugned goods of Chinese origin have been imported from Ajman and Dubai in UAE and no invoices from the manufacturer have been produced. As such, the Hon’ble Supreme Court’s decision in the case of Commissioner of Customs, Bombay vs. Shibani Engineers Ltd. [1996 (86) ELT 453 (S.C.) is squarely applicable to this case wherein it was held that Customs authorities are right in rejecting declared values which are totally unrealistic.
    

2. The decision of the Hon’ble Supreme Court in Eicher Tractors Ltd. vs. Commissioner of Customs, Mumbai-2000 (122) ELT 321 (S.C.) is distinguishable as in that case the impugned goods was one time sale of five years old stock on which discount of 77% on the list price was allowed. The Hon’ble Supreme Court’s decision in that case, to accept the declared price with 77% discount on 5 years old stock being one time sale cannot be applied to the present case. In the case of Eicher Tractor (supra), the Hon’ble Supreme Court was satisfied that the same discount would have been offered to any one else wishing to buy same stock and hence there was no question as to why the declared value in question was not acceptable under Rule 4(1) of the Customs Valuation Rules, 1988. The present case has no similarity whatsoever to the case of Eicher Tractors.
    

3. In the case of Rajkumar Knitting Mills (P) Ltd vs. Collector of Customs, Bombay – 1988 (98) ELT 292 (S.C.) the three Judges Bench of the Hon’ble Supreme Court has held as follows:–
   
   "The words "ordinarily sold or offered for sale" have to be read along with the words which precede and the words that follow these words. If thus read these words meant that for purpose of assessing the value it is necessary to ascertain the price at which the said or like goods are sold or offered for sale for delivery at the time and place of importation and exportation in the cases of international trade. The words "ordinarily sold or offered for sale" do not refer to the contract between the supplier and the importer, but to the prevailing price in the market on the date of importation or exportation."
   
   The learned SDR contends that in Rajkumar Knitting Mills (supra), the three Judges Bench of the Hon’ble Supreme Court have interpreted section 14 (1) of the Customs Act, 1962 and the same is binding on Courts and Tribunals as words in the said section 14(1) have not undergone any change till date.
    

4. In Pan Asia Enterprises vs. Collector of Customs, Bombay - 1995 (79) ELT 322 (Tribunal), it was held that declared values are not acceptable if the same are grossly undervalued. This decision of the Tribunal has been upheld by the Hon’ble Supreme Court by dismissing the civil appeal vide Pan Asia Enterprises vs. Collector -1997 (94) ELT A59 (S.C.).
    

5. Plast Fab vs. Collector of Customs -1993 (66) ELT 441 (Tribunal) has held that valuation has to be in accordance and subject to the provision section 14(1) of the Customs Act, 1962 when goods are invoiced in a 3rd country and declared value is much below the value of comparable goods. In that case declared value was $ 950 PMT against the value of comparable goods which was $ 1675 PMT.

The Tribunal observed that ordinarily the price of Chinese goods brought from UAE should be more than goods imported directly on account of the trader’s margin and higher freight compared to similar goods imported from China directly. On the country, the price declared is equivalent to US $ 500 only as against contemporaneous imports of comparable goods imported from China in the price range of US $ 1860 to US $ 1950.

The transaction value has been defined to be actual price paid or payable. The declared value may not represent the transaction value in every case. When the declared value is ridiculously low compared to the ordinary competitive price of comparable goods contemporaneously imported, such declared values cannot be adopted as customs value. In such cases, the transaction value method is clearly inapplicable as the declared value does not conform to the requirement of the said section 14(1). Valuation by adopting value of comparable goods contemporaneously imported is an equally efficacious method of valuation. Such valuation is also perfectly legal as has been held by the Hon’ble Supreme Court and various Tribunal Benches vide various decisions cited by the learned SDR.

The argument that in the absence of any evidence of the appellants remitting any amount over and above the invoiced price, other methods of valuation cannot be adopted is not acceptable. In fact, where evidence of extra payment is available, then the transaction value method itself would be adequate to deal with such a case. Since transaction value is defined as the actual price paid or payable, the customs value would in such cases be the invoice price plus the extra payments made and the transaction value method would still be applicable. On the other hand, where the declared value is ridiculously low and does not correspond to the ordinary competitive price in international trade, then the other methods of valuation under the Rules are to be used to arrive at the customs value as has been done in this case adopting the lowest of the values of comparable contemporaneous imports.

The appeal of the appellant was dismissed.

Gira Enterprise vs. CCE A’bad [194 ELT 92 (Tri-Mum)]