MRF LIMITED Vs. COMMISSIONER OF CENTRAL EXCISE, HYDERABAD

JUDGEMENT

(1.) THIS appeal is filed by M/s. MRF Ltd. against Order -in -Original No. 10/2001, dated 29 -8 -2001, passed by the Commissioner of Customs and Central Excise, Hyderabad.

(2.) SHRI S. Ignatious, ld. Advocate appearing for the appellants pleaded that M/s. MRF are manufacturing intermediate product, namely, Compound Rubber (without butyle) falling under sub -heading 4005.00 of Central Excise Tariff Act, 1985 for captive consumption in manufacture of goods within the factory and are also clearing these goods to their other units on payment of duty on the value arrived at on costing certificate issued by the Cost Accountant in terms of Rule 6(b)(ii) of Central Excise (Valuation) Rules, 1975. The Cost Audit Group of Central Excise have conducted cost audit and noticed that the appellants have adopted lesser values to the extent of Rs. 5.56 for one kg of compound rubber during the period from 10/95 to 9/96 resulting in short -levy of the Central Excise duty. Based on the report of the Cost Audit Group, a show cause notice was issued to the appellants and the Commissioner confirmed the demand of duty amounting to Rs. 59,12,041/ - and imposed penalty of Rs. 26,116/ - under Section 11AC and Rs. 50,00,000/ - under Rules 173Q of the Central Excise Act, 1944. The ld. Advocate pleaded that in this case the period covered by show cause notice is from 10/95 to 9/96 and the show cause notice was issued on 28 -9 -2000 which is clearly time -barred and the appellants have not suppressed any facts with an intention to evade payment of duty. He stated that during the relevant period, the value of the goods was determined on the basis of cost construction method under Rules 6(b)(ii) as per instructions relevant at that time. However the Cost Audit Group determined the value for the said period based on the Boards Circular F. No. 258/92/96 -CX, dated 30 -10 -1996. He stated that since the disputed period is only from 10/95 to 9/96, they had not included overheads including advertisement, interest, etc. in the cost of production as it was first time clarified by the above said Circular. They have only added the cost of material labour cost and the profit as was prevalent at that time. Secondly, the goods manufactured by them were being cleared to their other factories for internal consumption for manufacture of the final products. Even if they have paid the duty at higher price they would have got the same as Modvat credit in their other units. Therefore, they have no intention to avoid the payment of duty. He relied upon the Tribunal decision in case of P.T.C. Industries Ltd. v. Commissioner of Central Excise, Jaipur reported in 2003 (159) E.L.T. 1046 wherein it was held that sale of goods by one unit to other unit of same assessee under Modvat Scheme is revenue neutral as whatever duty paid in one unit is available in the next unit as credit. Therefore, demand under Section 11A in such cases are unwarranted and suppression of facts cannot be alleged in this case. He also referred to the decision of this Bench in case of Smithkline Beecham Consumer Health Care Ltd. v. CCE, Visakhapatnam, reported in 2003 (59) RLT 180 (CESTAT - Bang.) wherein it was held that -

(3.) SHRI L. Narasimha Murthy, ld. SDR for Revenue has stated that the reason for application of extended period is given by the Commissioner in his order in Para 6(iv), wherein he observed that -