2008 (7) TMI 776 - AT - Central Excise

Summary

Issues:
Prayer to dispense with pre-deposit of duty and penalty amount; Applicability of Rule 10 of Central Excise Valuation Rules; Classification of buyers as related persons under Section 4 of the Act; Requirement of unconditional stay; Determination of duty liability.

Analysis:
The appellant sought to dispense with the pre-deposit of duty and penalty amount totaling Rs. 67,71,696/-, contending that the clearance to their inter-connected undertaking was at a lower price compared to independent parties. The appellant argued that the Commissioner erroneously applied Rule 10 of the Central Excise Valuation Rules, which is only relevant when sales are to related undertakings as per specific clauses of Section 4(3) of the Act. The appellant's position was that since their buyers were inter-connected undertakings but not covered by the specified clauses, Rule 10 should not be invoked, and the transaction value under Section 4 should be considered as the assessable value. The appellant requested an unconditional stay.

In response, the Departmental Representative (DR) contended that the clearance to specific buyers, acknowledged as inter-connected undertakings, was indeed at a lower price. The DR argued that since more than 90% of sales were to these inter-connected undertakings, the rejection of transaction value by the lower authorities was justified.

Upon considering the arguments, the Tribunal observed that Rule 10 might not be applicable as it pertains to sales exclusively through inter-connected undertakings. In this case, sales were made to both inter-connected undertakings and independent wholesale buyers, making Rule 10 inapplicable. The Tribunal noted that inter-connected undertakings fall under the definition of related persons as per Section 4 of the Act, thereby necessitating the application of Central Excise Valuation Rules. Specifically, Rule 4 mandates adopting the value of goods sold for delivery closest to the removal of goods under assessment. The Tribunal estimated the duty liability to be around 15-16 lakhs if this rule was applied.

After finding no merit in the appellant's case and considering the absence of arguments on financial conditions, the Tribunal directed the appellant to deposit Rs. 20 lakhs within 8 weeks, following which the pre-deposit of the remaining duty amount and penalty would be waived. Compliance was scheduled to be reviewed on a specified date.

In conclusion, the Tribunal's decision centered on the interpretation of relevant provisions regarding valuation rules, related persons, and the determination of duty liability, ultimately requiring a partial pre-deposit from the appellant pending further proceedings.