2003 (1) TMI 360 - AT - Central Excise

Summary

Issues:
1. Duty demand confirmation on Bhopal Unit with penalties and interest.
2. Grounds for duty demand: under-valuation leading to short levy due to suppression of facts.
3. Contestation of duty demand on limitation and merits grounds.
4. Merits of the case: comparison of goods sold to unrelated parties with inter-unit transfer prices.
5. Interpretation of BHEL's Sales Norms for inter-unit pricing.
6. Analysis of comparable goods for valuation under Central Excise Valuation Rules.
7. Conclusion: Appeal allowed on the ground of limitation.

Analysis:
1. The judgment concerns the confirmation of duty demand, penalties, and interest on M/s. Bharat Heavy Electrical Ltd.'s Bhopal Unit for goods supplied to other units during April 1995 to March 1999. The duty demand was raised due to under-valuation at the time of clearance, invoking the extended period of limitation under Proviso to Section 11A of the Central Excise Act, alleging suppression of facts.

2. The appellants contested the duty demand on the grounds of limitation and merits. They argued that there was no suppression of facts, as goods were cleared with proper invoices and valuation was based on agreed prices with the receiving unit. They maintained that the valuation method used was standard for inter-unit transactions and not intended to evade duty payment.

3. On the merits of the case, the appellants presented evidence of comparable goods sold to unrelated parties, showing that the inter-unit transfer prices were reasonable. The judgment analyzed BHEL's Sales Norms, indicating that inter-unit pricing should not exceed market prices by more than 10%, suggesting the original valuation was within acceptable norms.

4. The judgment delved into the valuation of comparable goods under Central Excise Valuation Rules, emphasizing that assessable value should be based on the price of comparable goods with adjustments or the cost of production. It critiqued the impugned order for considering overall profit for assessing value, stating that it was not warranted.

5. Ultimately, the judgment concluded that the original valuation was standard, and the appellants did not suppress facts or evade duty payment. By comparing prices for different buyers and inter-unit transactions, it was found that the appeal succeeded on the ground of limitation, indicating that the Revenue did not have a strong case on merits.

6. In light of the above analysis, the appeal was allowed, providing consequential relief to the appellants. The judgment highlighted the importance of adhering to valuation norms and ensuring transparency in transactions to avoid disputes over duty demands.