2010 (1) TMI 957 - AT - Central Excise

Provisions of Rule 8 of Central Excise Valuation Rules are attracted only where the excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufacture of other articles and the value shall be 110% of the cost of production or manufacture of such goods. Therefore, once there are sales to independent buyers, provisions of Rule 8 will not apply.

Summary

Issues: Liability of interest on payment of differential duty under Section 11AB of Central Excise Act, 1944. Interpretation of Central Excise Valuation Rules in the context of goods sold to independent buyers.

Liability of Interest on Payment of Differential Duty:
The case involved a dispute regarding the liability of interest on the payment of a differential duty by the respondent, even though the Commissioner (Appeals) had held that the duty was paid correctly as per the provisions. The Revenue contended that interest is leviable as per Section 11AB of the Central Excise Act, 1944, irrespective of the reason for the delayed or deferred payment of duty. The Revenue relied on the decision of the Hon'ble Supreme Court in the case of M/s. SKF India Ltd., emphasizing that interest is applicable whenever a differential duty has been paid. However, the Tribunal noted that the differential duty was not required to be paid by the respondents as per the interpretation of the Central Excise Valuation Rules. The Tribunal agreed with the Commissioner (Appeals) that since the principal duty itself was not liable to be paid, the question of levying interest on the differential duty did not arise. The Tribunal distinguished the facts of the present case from the decision in M/s. SKF India Ltd., concluding that interest was not applicable in this scenario.

Interpretation of Central Excise Valuation Rules:
The Tribunal delved into the interpretation of the Central Excise Valuation Rules in the context of goods sold to independent buyers by the respondents. The Commissioner (Appeals) had held that Rule 8 of the Central Excise Valuation Rules, which determines the value of excisable goods used for further manufacture, was not applicable when there were sales to independent buyers. Instead, the value had to be determined as per Rule 4 of the Valuation Rules. The Tribunal supported this interpretation, referencing a Larger Bench decision in the case of M/s. Ispat Industries Ltd. v. CCE, Raigad. The Tribunal agreed that in situations where the excisable goods are sold to independent buyers, the valuation has to be done in accordance with Rule 4. This interpretation influenced the conclusion that the differential duty was not payable by the respondents, leading to the rejection of the Revenue's appeal.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the decision of the Commissioner (Appeals) and emphasizing that interest on the payment of differential duty was not applicable in this case due to the correct application of the Central Excise Valuation Rules and the absence of liability for the principal duty itself.