2006 (7) TMI 427 - AT - Central Excise

Summary

Issues:
Valuation of product "Epichlorohydrin" supplied to a related company, applicability of Central Excise Valuation Rules, imposition of duty, penalty, and interest.

Valuation Dispute:
The appeal involved a dispute regarding the valuation of "Epichlorohydrin" supplied by the appellant to a related company. The Department questioned the valuation method applied by the appellant, asserting that they were related persons under Section 4(3)(b)(iv) of the Central Excise Act. The Department demanded duty based on the cost of production as the assessable value of the goods supplied, leading to show-cause notices and differential duty demands. The Tribunal, in a previous order, held the appellant and the related company to be "related" and directed valuation under Section 4(1)(b) of the Act. The Commissioner, following the Tribunal's direction, determined the value using the Cost Construction Method under Rule 8, resulting in a demand of over Rs. 4.4 crores against the appellant.

Applicability of Valuation Rules:
The Tribunal found that Rules 8, 9, and 10 were not applicable to the case and directed valuation under Rule 11 of the Valuation Rules. The Commissioner, in line with the Tribunal's direction, determined the assessable value using the Cost Construction Method from Rule 8. The appellant argued that the Commissioner should have accepted the price at which they sold the product to the related company as the basis for valuation under Rule 11. However, the Tribunal upheld the Commissioner's method, stating that the Commissioner's approach fell within the scope of Rule 11 and was based on the available data provided by the appellant.

Penalty and Interest Imposition:
The Commissioner imposed a penalty on the appellant under Rule 25 of the Central Excise Rules, 2002, citing violations of Rule 4 and 6. However, the Tribunal found that the penalty was unjustified as there was no evidence of incorrect assessment or non-payment of appropriate duty by the appellant. The Tribunal ruled that the appellant must pay interest on duty under Section 11AB of the Act but set aside the penalty imposed by the Commissioner.

In conclusion, the Tribunal upheld the duty demand against the appellant, finding the valuation of goods to be correctly done in accordance with Rule 11. The penalty imposed by the Commissioner was set aside, while the requirement to pay interest on duty under Section 11AB was upheld.