2002 (3) TMI 695 - AT - Central Excise

Summary

Issues Involved:
1. Assessable Value Determination
2. Comparable Market Price
3. Application of Valuation Rules
4. Suppression and Penalty

Detailed Analysis:

1. Assessable Value Determination:
The primary issue was the determination of the assessable value for Pig Iron manufactured by the appellant (KFIL) on a conversion basis for M/s. Mukund Limited (ML) and M/s. Kalyani Steels Limited (KSL). The Commissioner concluded that KFIL had adopted lower assessable values for the subject clearances on a conversion basis compared to the values for clearance of goods sold to independent customers. The Commissioner ordered that the normal price at which the assessee sold Pig Iron to independent customers should be the basis for assessable value for clearances to ML and KSL.

2. Comparable Market Price:
KFIL adopted an assessable value claimed to be based on the "comparable market price" of similar goods manufactured by other manufacturers, such as M/s. SAIL and M/s. Kirloskar Ferrous Industries Ltd. However, this basis was unsubstantiated. The Commissioner found that the value of identical goods cleared from KFIL's factory should be the assessable value for goods manufactured on a job work basis for ML and KSL, as per Section 4(1)(a) of the Central Excise Act.

3. Application of Valuation Rules:
The Commissioner applied Rule 7 read with Rule 6(b)(i) of the Central Excise (Valuation) Rules, 1975, to determine the assessable value. The Tribunal referred to the Supreme Court's decision in the Ujagar Prints case, which clarified that the valuation of job work goods should not include the trader's profit. The Tribunal concluded that the valuation should be based on costing data as per the Ujagar Prints case rather than the sale price of goods sold on account of KSL by KFIL to independent buyers.

4. Suppression and Penalty:
The Commissioner imposed a penalty of Rs. 1,24,32,358 on KFIL under Section 11AC of the Central Excise Act and Rule 173Q(1) of the Central Excise Rules, 1944, for allegedly adopting lower assessable values. Additionally, penalties of Rs. 5 lakhs each were imposed on the Chief Executive Officer, Vice President (Finance), DGM (Finance), and Executive (Finance) of KFIL under Rule 209A of the Central Excise Rules, 1944. The Tribunal decided to remand the matter back to the adjudicator to determine the valuation as per the Ujagar Prints case and left the question of suppression and penalty open for reconsideration.

Conclusion:
The Tribunal set aside the Commissioner's order and allowed the appeals for de novo consideration, directing that the valuation should be based on costing data as per the Ujagar Prints case and not on the sale price of goods sold to independent buyers. The issues of suppression and penalties were left open for further determination based on the revised valuation.