2002 (9) TMI 741 - AT - Central Excise

Summary

Issues: Valuation of PCB assemblies under Central Excise Valuation Rules based on cost of production vs. value of comparable goods; Allegation of short-levy of Central Excise duty and penalty imposition; Resistance to proposals during adjudication proceedings; Contesting duty demand on merits and time-bar grounds.

The dispute in this case revolves around the valuation of PCB assemblies manufactured and cleared by the appellant to their depots between June 1996 and January 2000. Initially, the valuation was done based on the cost of production under Rule 6(b)(ii) of Central Excise Valuation Rules. However, a show cause notice was issued, alleging that comparable goods produced by the appellant were being sold on an ex-factory basis, necessitating the valuation of the PCBs based on the value of such comparable goods under Rule 6(b)(i) of the Valuation Rules. The notice indicated a short-levy of Central Excise duty exceeding Rs. 63 lakhs, proposing duty recovery and penalty imposition due to alleged suppression of facts by the appellant to evade duty payment. Despite resistance by the appellant during adjudication, the Commissioner of Central Excise upheld the allegations, leading to the appeal.

Regarding the merits of the case, the appellant argued that the comparison between the Generic PCBs removed to depots and the Customized PCBs sold ex-factory was incorrect. The appellant emphasized that Generic PCBs require customization processes, such as burn-in, vibration, and environmental stress simulation, to be suitable for specific use in UPS systems, unlike Customized PCBs which are ready for fitment. Technical opinions and detailed information were presented to support the distinction between the two types of PCBs. The appellant contended that the adoption of the value of Customized PCBs for Generic PCBs was legally unsustainable, citing relevant Tribunal decisions and provisions of the Central Excise Valuation Rules.

Another point raised by the appellant was the difference in prices, highlighting that Customized PCBs sold for repair purposes should not be used to value parts in general due to significant price variations between parts for original equipment manufacture and repair. On the question of time-bar, the appellant argued against the allegation of suppressing material facts, stating that both types of clearances were documented and known to the department, with the belief that the value of one type could not be applied to the other.

In contrast, the Respondent argued that both Generic and Customized PCBs fell under the same code number and were essentially the same, with the only distinction being the need to modify Generic PCBs for specific use. The Respondent contended that the assessment should be based on the value of comparable goods under Rule 6(b)(i), suggesting a remand for adjustments if needed. The Respondent also alleged that the appellant suppressed the fact that both types of PCBs shared the same code number and made claims based on cost of production after concealing the sale of comparable goods.

The Tribunal found substantial differences between Customized PCBs and Generic PCBs, supported by evidence and expert opinions presented by the appellant. It was concluded that the two types of PCBs could not be compared for valuation purposes, and spare parts were generally priced higher than original equipment. Additionally, the Tribunal accepted the appellant's argument that there was no intent to evade duty through suppression of facts, as both types of PCBs were cleared under approved central excise documents. Consequently, the extended period for recovery under the proviso to Section 11A was deemed unavailable to the department, leading to the allowance of the appeal in favor of the appellant with consequential relief.