2006 (8) TMI 71 - AT - Central Excise

Valuation(Central Excise) - Stock transferred to another unit they used to sale inmarket at ahigher prices - Plea of assessee was inadmissible -After considering all the fact decided that valuation to be at price of later unit

Summary

Issues:
1. Determination of assessable value based on stock transfer of goods between manufacturing units.
2. Application of cost construction method for valuation of goods.
3. Invocation of extended period of limitation for demanding duty.
4. Utilization of Modvat credit for payment of duty.

Analysis:

Issue 1: Determination of assessable value based on stock transfer of goods between manufacturing units
The case involved the stock transfer of components for vacuum cleaners from one manufacturing unit to another. The Department alleged that the receiving unit sold the goods in the spares market at a higher rate, which should be considered for determining the assessable value. The original authority upheld this view, leading to a demand for differential duty. The Tribunal found that the goods were indeed sold at a higher price in the spares market, making that price the 'normal price' under Section 4(1)(a) for assessing the value of the stock-transferred goods. The Tribunal upheld the decision of the Commissioner on the valuation issue.

Issue 2: Application of cost construction method for valuation of goods
The appellants defended their valuation method using the cost construction method under Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975. However, the Tribunal noted that the Supreme Court had questioned a similar approach in a previous case where an ascertainable market price existed. In this case, since the goods were sold at a higher price in the spares market, the Tribunal agreed with the Commissioner's valuation based on the selling price for assessing duty.

Issue 3: Invocation of extended period of limitation for demanding duty
The Commissioner invoked the extended period of limitation, alleging that the appellants had suppressed vital information to evade duty payment. The Tribunal observed that the aspect of revenue neutrality was not considered in this decision. It directed the Commissioner to reconsider the limitation issue and the imposition of penalties under Section 11AC, emphasizing the need to assess the intention to evade payment of duty in a revenue-neutral situation.

Issue 4: Utilization of Modvat credit for payment of duty
The Tribunal addressed a separate appeal concerning the denial of permission to utilize Modvat credit for payment of Basic Excise Duty (BED). The Tribunal directed the original authority to review the availability of Special Excise Duty (SED) credit for payment of BED based on relevant circulars, highlighting the need for a fresh decision on this matter.

In conclusion, the Tribunal upheld the demand of duty on merits but directed a reassessment of the limitation issue and penalties. Additionally, it instructed a review of the Modvat credit utilization based on the applicable circulars.