2007 (2) TMI 461 - AT - Central Excise

Demand of duty - valuation - freight charges - Show Cause Notices - Penalty levied - HELD THAT - During the period when the depot is also a place of removal, the appellants have stated that they had paid the differential duty demanded on account of the cost of transportation. The appellants have made another point that the department, while calculating the value for depot sales, has adopted the maximum price available on a date prior to the date of sale or after the sale instead of arriving at the normal Transaction Value in terms of Rule 7 as clarified by the Board by taking the value at which the greatest aggregate quantity of the goods have been sold on a date prior to the date of clearance from the factory gate. Further, the greatest aggregate quantity is the largest quantity of identical goods sold on a particular day. If the department had taken the highest price available after the date of clearance, it is not correct. The appellants have contended that in terms of the correct legal position, they have paid the correct duty. In fact, in respect of Show Cause Notice dated 21-4-2004, the impugned order has demanded Rs. 10,36,732/- and the appellants had already paid that amount. As regards, the Show Cause Notice dated 27-1-2004, the Adjudicating Authority has confirmed a demand of Rs. 12,63,496/-. However, the appellants had paid an amount of Rs. 10,36,749/-. In view of the appellants explanation for payment of the above amount, no further demand will arise. As regards the first Show Cause Notice, the appellants have paid all the amounts not hit by time-bar. Thus, no further duty is payable by the appellants. Therefore, no penalty is leviable. The penalty imposed on the Director is also not sustainable. Hence, we allow the appeals.

Issues:
1. Confirmation of demands on account of valuation.
2. Invocation of the longer period for demand of excise duty.
3. Justification for invoking the longer period.
4. Correctness of duty payment based on Transaction Value.
5. Application of Central Excise Valuation Rules for depot sales.
6. Imposition of penalty and its sustainability.

Issue 1: Confirmation of demands on account of valuation
The appellants contended that duty should be paid based on the Transaction Value post-July 2000. They argued that the Department miscalculated the duty by not considering the actual realization made by Consignment Agents and not reducing the cost of transportation from the factory to the Consignment Agents' premises. The appellants also highlighted their compliance with Compounded Levy Scheme and the correct application of Rule 7 for depot sales. They emphasized that they paid duty on the total realization from customers, indicating no intention to evade payment.

Issue 2: Invocation of the longer period for demand of excise duty
The Department invoked the longer period for the demand of excise duty, alleging suppression of facts by the appellants. However, the Tribunal found no justification for invoking the longer period as no suppression of facts was established. The Tribunal noted that duty payment based on Transaction Value was correctly done by the appellants, especially regarding sales from the depot and Consignment Agents' premises.

Issue 3: Justification for invoking the longer period
The Tribunal observed that the Department's calculation of duty for depot sales did not align with the correct legal position. The appellants had paid the demanded amounts, and no further duty was payable. Consequently, the Tribunal concluded that no penalty was leviable, and the penalty imposed on the Director was deemed unsustainable.

Issue 4: Correctness of duty payment based on Transaction Value
The appellants argued that the Department's method of arriving at the Normal Transaction Value was flawed, as it did not consider the greatest aggregate quantity of goods sold. They maintained that their duty payment was accurate, and any differential duty payable would amount to the same value already paid by them.

Issue 5: Application of Central Excise Valuation Rules for depot sales
The Tribunal clarified the correct application of Rule 7 and Rule 5 of the Central Excise Valuation Rules for depot sales, emphasizing the need to consider the cost of transportation when goods are sold at a place other than the place of removal. The Tribunal upheld the appellants' approach of reducing the price by the transportation cost for such sales.

Issue 6: Imposition of penalty and its sustainability
The Tribunal found that no further duty was payable by the appellants, leading to the conclusion that no penalty was justifiable. The penalty imposed on the Director was also deemed unsustainable, resulting in the appeals being allowed by the Tribunal.

This judgment from the Appellate Tribunal CESTAT, Bangalore, involved a detailed analysis of various issues concerning the demand of excise duty, valuation methods, invocation of the longer period, and the correctness of duty payment. The Tribunal scrutinized the appellants' contentions, the Department's calculations, and the legal provisions to reach a decision favoring the appellants. The correct application of Central Excise Valuation Rules and the absence of suppression of facts were crucial factors in the Tribunal's ruling, ultimately leading to the allowance of the appeals and the dismissal of penalties.

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