2010 (4) TMI 951 - AT - Central Excise

Valuation of warehoused goods removed after withdrawal of warehousing facility - whether the duty is payable on the stocks lying on the date of withdrawal of warehouse provisions or on the different transactions values adopted at the time of removal of goods from the warehouses subsequent to withdrawal of warehousing facility from 5-9-2004 to 30-9-2004? Held that - The assessable value of petroleum products cleared from the refineries on or after 6-9-2004, is to be determined under Section 4 of the Central Excise Act, 1944 read with the Valuation Rules - no storage losses are permitted in the export warehouses/tanks whether intermediate or at AFS including those with such mixed storage. Further, the export warehousing under Notification No. 46/2001-C.E. (N.T.), dated 26-6-2001 does not cover removal of goods from one export warehouse to another. The duty liability on the goods in the warehouses after the withdrawal of warehousing facility could be discharged in terms of provisions of Rule 8 of the Central Excise Rules, 2002 could indicate that duty liability can be paid by the appellant on 5th of the following month. Such determination of the duty can arise only when the goods are cleared from the warehouses. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Determination of duty liability on stocks lying in warehouses following the withdrawal of warehousing provisions.
2. Applicability of transaction value for duty calculation.
3. Validity of penalties imposed.

Detailed Analysis:

1. Determination of Duty Liability on Stocks Lying in Warehouses:
The primary issue was whether the duty on stocks lying in warehouses as of 5/6-9-2004 should be paid immediately based on the value prevalent on that date or on the transaction value at the time of removal from the warehouses. The appellant argued that the duty should be paid based on the transaction value at the time of removal, as per Section 4 of the Central Excise Act, 1944. The lower authorities, however, contended that the entire stock should be treated as cleared on 5-9-2004 and duty should be paid based on the value as on that date.

2. Applicability of Transaction Value:
The appellant relied on the Board's Circular dated 4-9-2004, which stated that the assessable value of petroleum products cleared from refineries on or after 6-9-2004 should be determined under Section 4 of the Central Excise Act, 1944. The appellant argued that this should also apply to goods cleared from warehouses. The circular specified that the transaction value should be the basis for duty payment, and the appellant had paid duty accordingly for each clearance from 5/6-9-2004 to 30-9-2004.

3. Validity of Penalties Imposed:
The appellant contended that since they had paid duty based on the transaction value, the demand for differential duty was not sustainable, and consequently, the imposition of penalties and interest was also not justified. The lower authorities had imposed a penalty of Rs. 5,00,000/- under Rule 25 of the Central Excise Rules, 2002, which the appellant argued was unwarranted.

Judgment Analysis:

Duty Liability on Stocks:
The Tribunal found that the Adjudicating Authority had relied on the Board's Circular dated 4-9-2004 and a subsequent clarification dated 4-1-2005, which indicated that duty was liable on stocks lying in warehouses as of the midnight of 5/6-9-2004. However, the Tribunal noted that the circular also stated that the assessable value should be determined under Section 4, which supports the appellant's position that duty should be based on the transaction value at the time of removal from warehouses.

Transaction Value:
The Tribunal agreed with the appellant that the transaction value should be the basis for duty payment. It was observed that the first sale transaction took place in the warehouses on or after 6-9-2004, and thus, the provisions of Section 4 were applicable. The Tribunal emphasized that the CBEC Circular No. 804/1/2005 dated 4-1-2005 clarified that duty could be discharged by 5-10-2004, indicating that duty liability arises upon clearance from warehouses.

Penalties:
Given that the Tribunal found the demand for differential duty unsustainable, it also held that the penalties and interest imposed were not justified. The Tribunal noted that similar issues in other Commissionerates had been resolved in favor of the assessees, and the Revenue had accepted those decisions.

Conclusion:
The Tribunal set aside the impugned order, agreeing with the appellant that duty should be based on the transaction value at the time of removal from warehouses. The appeal was allowed with consequential relief, if any. The Tribunal's decision emphasized the application of Section 4 for determining the assessable value and the consistency in applying this principle across different Commissionerates.

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