2007 (9) TMI 494 - AT - Central Excise

Settlement Commission - Exclusive jurisdiction - Appeal by Department to CESTAT - Demand - Quantum of - Valuation - Demand - Additional recovery

Summary

Issues Involved:
1. Reduction of Duty Demand
2. Method of Valuation
3. Revenue Neutrality
4. Jurisdiction of Settlement Commission
5. Maintainability of Appeals

Issue-wise Detailed Analysis:

1. Reduction of Duty Demand:
The appeals challenge the reduction of the duty demand by the Commissioner from Rs. 21,48,55,018/- to Rs. 16,43,99,648/-. The Revenue's grievance is that the Commissioner reduced the demand without discussing the method of valuation adopted by the DGCEI and allowed a 10% discount without any discussion or basis.

2. Method of Valuation:
The Revenue argued that the method adopted by the DGCEI was based on data retrieved from computer printouts, accounts, and files for a large number of invoices, proportionately worked out for actual values. The Commissioner's reduction of the demand was criticized for not addressing the assumptions and parameters used by the Revenue in their calculations. The Tribunal noted that the Commissioner allowed a 10% discount without any material basis or discussion, which had the effect of reducing the duty demand.

3. Revenue Neutrality:
The Revenue contended that the concept of revenue neutrality was wrongly invoked contrary to the provisions of Rule 57-E(3) of the Central Excise Rules, 1944. The Commissioner's observation on revenue neutrality ignored the rule that revenue neutrality does not apply in cases of fraud, collusion, or suppression of facts. The Tribunal emphasized that the Commissioner needed to reconsider the issue of revenue neutrality in light of these provisions and the findings of massive under-valuation and suppression of facts.

4. Jurisdiction of Settlement Commission:
The respondents argued that the Commissioner's order dated 30th July 2004 was declared non est by the Settlement Commission on 31st May 2005, and thus, no appeal could be entertained against such an order. However, the Tribunal held that the Settlement Commission acquired exclusive jurisdiction only after admitting the applications for settlement, which was done on 31st May 2005, long after the Commissioner had passed the adjudication order. The Tribunal also noted that the Settlement Commission's observation that the Commissioner's order was non est did not affect the Tribunal's appellate jurisdiction.

5. Maintainability of Appeals:
The Tribunal rejected the preliminary objection raised by the respondents regarding the maintainability of the appeals. It held that the appeals filed by the Revenue were maintainable under Section 35-B(1)(a) of the Act. The Committee of Chief Commissioners had the statutory power to direct the filing of appeals, and the Settlement Commission's order did not impair the Tribunal's jurisdiction.

Conclusion:
The Tribunal allowed the appeals by way of remand, directing the Commissioner to reconsider the limited issues raised by the Revenue concerning the reduction of the demand and corresponding penalties. The Commissioner was instructed to take a fresh decision after hearing the parties, addressing the method of valuation, the basis for the 10% discount, and the issue of revenue neutrality in accordance with the relevant provisions.