2008 (2) TMI 766 - AT - Central Excise

Valuation - Penalty - Quantum of - Shortage of goods - stock transfer - Held that - Rule 8 will apply only when none of the goods are sold but are taken for captive consumption. In a case where comparable values are available, Rule 4 of the Central Excise (Valuation) Rules, 2000 is adequate to deal with such cases which requires value of comparable goods to be taken as the basis for valuation of part of the goods not sold - we set aside the impugned order which has confirmed differential duty on the ground of wrong valuation - appeal allowed - decided partly in favor of appellant.

Summary

Issues Involved:
1. Valuation of impugned gases supplied to sister unit on stock transfer basis.
2. Shortage of stocks leading to duty demand and penalty imposition.

Issue 1: Valuation of Impugned Gases
The first issue revolves around the valuation of impugned gases supplied to the appellant's sister unit on a stock transfer basis. The Department proposed a valuation based on 115% of the cost, which the appellant contested. The appellant argued that a significant portion of the gases was sold to independent buyers at arm's length prices, suggesting that the valuation should be based on the price of comparable goods sold to outside parties. The tribunal found merit in this argument, emphasizing that Rule 8 of the Central Excise (Valuation) Rules, 2000 applied by the Department was not suitable in this scenario. Rule 8 is applicable when goods are not sold but consumed internally, whereas in this case, substantial sales to independent buyers existed. Therefore, the tribunal held that Rule 4 of the Central Excise (Valuation) Rules, 2000, which allows using the value of comparable goods for valuation when sold, should be applied. Consequently, the tribunal set aside the order confirming differential duty due to incorrect valuation.

Issue 2: Shortage of Stocks and Penalty Imposition
The second issue pertains to the shortage of stocks, resulting in duty demand and penalty imposition by the Lower Authorities. The appellant accepted the duty demand and paid it without dispute. However, the tribunal considered the penalty amount of Rs. 1,67,166/- to be excessive, especially since the appeal was allowed concerning the valuation issue. Therefore, the tribunal reduced the penalty to Rs. 10,000, acknowledging that a penalty was warranted for the stock shortage. Ultimately, the tribunal partially allowed the appeal, reducing the penalty amount in consideration of the circumstances surrounding the shortage of stocks.

In conclusion, the Appellate Tribunal CESTAT, Kolkata, addressed the issues of valuation of impugned gases supplied to a sister unit and the penalty imposition related to a shortage of stocks. The tribunal ruled in favor of the appellant regarding the valuation issue, emphasizing the need to consider comparable goods' value for valuation purposes. Additionally, the tribunal reduced the penalty amount imposed for the stock shortage, recognizing the circumstances and adjusting the penalty accordingly.