2007 (3) TMI 614 - Commissioner - Central Excise

Summary

Issues Involved:
1. Valuation of Brass Scrap.
2. Application of Balance Sheet values for tax assessment.
3. Revenue neutrality and duty evasion.
4. Applicability of extended period under Section 11A of the Central Excise Act, 1944.
5. Imposition of penalties on Appellants.

Detailed Analysis:

1. Valuation of Brass Scrap:
The primary issue was whether the valuation of Brass Scrap by the appellant was correct. The department argued that the value per Kg. of Brass Scrap shown in the balance sheets was higher than the value shown in invoices used for clearance. The appellant contended that the value of Brass Scrap cannot be equated with the value of Brass Rods, as Brass Scrap undergoes multiple processes before becoming Brass Rods.

2. Application of Balance Sheet Values for Tax Assessment:
The department used the values from the balance sheets to determine the assessable value of the Brass Scrap, treating these values as cum-duty prices. The appellant argued that the higher prices in the balance sheets were due to a wrong nomenclature, reflecting the value of Brass Rods rather than Brass Scrap. They cited judgments (CCE, Vapi v. Blue Blend (I) Ltd. and Beekaylon Synthetics v. CCE, Surat) to support their argument that balance sheet values alone do not prove under-valuation without evidence of additional consideration.

3. Revenue Neutrality and Duty Evasion:
The appellant argued that the entire exercise was revenue-neutral because the duty paid on Brass Scrap was availed as Cenvat credit by job workers, who in turn paid duty on the converted Brass Rods, which was again availed as Cenvat credit by the appellant. The court agreed, stating that there was no revenue loss to the department and no advantage to the appellant from under-declaring the value of Brass Scrap. This was supported by precedents like Kores (India) Ltd. v. Commissioner of C.Ex., Hyderabad and Indian Aluminium Co. Ltd v. CCE, Belgaum.

4. Applicability of Extended Period under Section 11A of the Central Excise Act, 1944:
The department sought to apply the extended period under Section 11A, alleging suppression of facts by the appellant. The appellant argued that all relevant particulars were declared in invoices, statutory records, and RT-12 returns, and were subject to periodic audits by the department. The court found that due to revenue neutrality and the transparent record-keeping by the appellant, the suppression of facts with intent to evade duty could not be established, thus the extended period was not applicable.

5. Imposition of Penalties on Appellants:
The adjudicating authority had imposed penalties on both appellants. The appellant No. 2 argued that as a salaried employee, he should not be penalized. The court, considering the lack of evidence for duty evasion and the revenue-neutral nature of the transactions, set aside the penalties on both appellants.

Conclusion:
The court set aside the impugned order, holding that the demand of duty did not sustain on merits or on the issue of time bar. Consequently, the penalties imposed on both appellants were also set aside, and the appeals were allowed with consequential relief.