2008 (9) TMI 713 - AT - Central Excise

Summary

Issues Involved:
1. Alleged under-valuation of manufactured goods and over-valuation of bought-out goods by KBEPL.
2. Alleged clandestine removal of excisable goods by KBEPL in the guise of bought-out goods from KC Goa.
3. Non-payment of CENVAT duty on escalation bills raised by KBEPL.

Summary:

Issue 1: Under-Valuation and Over-Valuation
KBEPL allegedly under-valued manufactured goods and over-valued bought-out goods to evade CENVAT duty, involving a duty of Rs. 3,73,39,200/-. The Commissioner verified contracts and found over-valuation of bought-out goods at the expense of manufactured items. The Cost Auditor's analysis, based on KBEPL's General Ledger and Audited Annual Accounts, indicated that KBEPL shifted the burden of under-valuation to bought-out items, resulting in negative value addition for manufactured goods. The Tribunal found KBEPL's defense unconvincing, noting that the composite contract did not isolate trading from manufacturing, and the price break-up provided by KBEPL could not be considered the 'transaction value' u/s 4(1)(a) of the Central Excise Act, 1944.

Issue 2: Clandestine Removal of Excisable Goods
The Commissioner concluded that KBEPL clandestinely removed excisable goods from their Satara factory, falsely showing them as bought-out from KC Goa, involving a duty of Rs. 1,02,67,856/- + Education Cess of Rs. 1900/-. KBEPL contended that no notice was issued to KC Goa and argued that the Department failed to prove excess consumption of raw materials or actual manufacturing activities at Satara. However, the Tribunal noted that the audit period did not cover the entire period in question and found no satisfactory rebuttal from KBEPL against the evidences recorded by the Commissioner. The Tribunal held that the payment of duty at Goa could not offset the duty payable at Satara.

Issue 3: Non-Payment of CENVAT Duty on Escalation Bills
KBEPL raised escalation bills on two sugar factories due to increased input costs but did not pay the corresponding CENVAT duty, involving a duty of Rs. 36,09,438/-. The Commissioner relied on the Tribunal's decision in M/s. Pre-stressed Concrete Poles v. CCEx, Chandigarh, holding that unpaid parts of the price must be included in the assessable value. KBEPL argued that no duty crystallizes until the customer accepts the escalation bills. The Tribunal found that KBEPL failed to provide evidence showing whether the escalation bills were honored or rejected, thus the amount covered would form part of the assessable value.

Limitation:
The Tribunal upheld the invocation of the extended period of five years u/s 111A(1) of the Central Excise Act, 1944, due to suppression of information and manipulation of accounts by KBEPL with the intent to evade duty.

Order:
KBEPL was directed to pre-deposit Rs. 2 Crores towards duty within eight weeks. Upon compliance, the pre-deposit of the balance amounts of duty, interest, and penalties would be waived, and recoveries stayed pending appeal disposal. Failure to comply would result in vacation of stay and dismissal of appeals.

Compliance Report Date:
21-11-2008

Pronouncement Date:
17-9-2008