2003 (12) TMI 569 - AT - Central Excise

Summary

Issues: Alleged undervaluation of goods cleared between July 1991 to June 1995, application of Rule 6(b)(ii) for determining the value of goods, contention regarding duty paid on materials used in manufacturing, applicability of Section 4(1)(a) for valuation, margin of profit calculation, extended period of limitation, imposition of penalty, applicability of Section 11AB for interest, determination of duty payable.

In this case, the appellant, engaged in manufacturing motor cycles, scooters, and auto rickshaws, faced allegations of undervaluing goods cleared between July 1991 to June 1995. The notice claimed under valuation on two counts: first, for not including Central Excise duty paid on raw materials in the cost of manufacture, and second, for not applying the value under Section 4(1)(a) for certain items. The notice invoked the extended period of limitation due to alleged suppression of facts.

The appellant contended that duty paid on materials used in manufacturing should not be part of the cost, citing a Tribunal decision. The Commissioner disagreed, stating that the value under Section 4(1)(a) should determine the value of goods. However, he acknowledged no suppression of facts and set aside the extended period of limitation for certain issues. The Commissioner also ruled that actual profit, not a notional profit of 10%, should be applied, confirming the demand for the entire period and imposing a penalty and interest under Section 11AB.

Regarding the appellant's argument that Rule 6(b)(ii) should apply even when the value under Section 4(1)(a) is available for captively consumed goods, the Tribunal held such a contention unacceptable. The Tribunal emphasized that the Valuation Rules aim to determine the value closest to Section 4(1)(a) and upheld the Commissioner's decision to apply the value under Section 4(1)(a) for such goods.

For goods where Rule 6(b)(ii) applied, the Tribunal affirmed that the actual profit should be considered. It accepted the appellant's argument that the extended period of limitation should not apply due to past orders and the availability of Modvat credit, limiting the demand to the normal period. Consequently, the provisions of Section 11AB for interest were deemed inapplicable, and the matter was remanded to determine the duty and penalty.

Ultimately, the appeal was allowed, and the impugned order was set aside, providing clarity on the valuation principles, profit calculation, and limitation periods in excise duty matters.