2016 (2) TMI 1099 - AT - Central Excise

Sales made to its subsidiary unit M/s RAL - stock transfer or sales on commercial basis - Rule 8 of the Central Excise Valuation Rules, 2000 - The Department had confirmed the demand against the appellant on the ground that there was no stock transfer of goods to the sister unit M/s RAL and the goods were sold on purely commercial considerations; thus, the valuation provisions contained in Section 4 (1)(a) ibid will be applicable for determination of the transaction value, as against the claim of appellant for the valuation as provided under Rule 8 ibid - Held that - it is an admitted fact on record that goods were sold by the appellant to M/s. RAL at the price at which it had sold similar goods to other buyers. Since there was no stock transfer of goods for consumption by the appellant or on its behalf by others in the manufacture of other articles, the situation is not governed under the provisions of Rule 8 ibid and the valuation provisions contained in Section 4 ibid will be applicable for determination of the transaction value for the purpose of charging duty of excise. Extended period of limitation - Held that - adoption of Rule 8 for determination of value by the appellant can be said to be on entertaining a reasonable doubt, for which extended period of limitation, in our opinion, cannot be invoked. There is no element of mensrea involved in the case - The particulars, which formed basis of demand were all maintained and recorded in books of the appellant and were furnished to the Department - the pre-conditions for applicability of the proviso to Section 11A ibid cannot be said to be existing - extended period not invoked. Appeal allowed in favour of the appellant on the ground of limitation alone.

Issues:
- Valuation of goods for the purpose of charging duty of excise under Central Excise Act, 1944 and Central Excise Valuation Rules, 2000
- Invocation of extended period of limitation for confirming duty demand
- Allegation of suppression of facts by the appellant leading to the issuance of show cause notice
- Applicability of the proviso to Section 11A of the Central Excise Act, 1944 for invoking the extended period of limitation

Valuation of Goods:
The case involved a dispute regarding the valuation of goods for charging duty of excise. The appellant contended that the assessable value should be determined under Section 4(1)(b) of the Central Excise Act, 1944 read with Rule 8 of the Central Excise Valuation Rules, 2000, as the goods were sold to a related entity. However, the Department argued that the valuation should be based on Section 4(1)(a) of the Act as there was no stock transfer, and the goods were sold on commercial considerations. The Tribunal upheld the Department's view, stating that the appellant could not unilaterally switch between valuation methods based on convenience.

Extended Period of Limitation:
The Department invoked the extended period of limitation for confirming the duty demand, alleging suppression of facts by the appellant. The appellant argued that the show cause notice was time-barred as the relevant facts were disclosed within the normal period. The Tribunal noted that the appellant had disclosed the sale transaction and valuation method to the Department, and there was no element of fraud or suppression. Relying on various judicial precedents, the Tribunal held that the extended period of limitation could not be invoked in the absence of wilful misstatement or suppression of facts.

Allegation of Suppression of Facts:
The show cause notice alleged suppression of facts by the appellant. The Tribunal emphasized that suppression cannot be claimed when the relevant facts forming the basis of the demand were already known to the Department. Citing legal precedents, the Tribunal concluded that suppression must involve intentional and deliberate concealment of material facts not already within the Department's knowledge. As the appellant's modus operandi was known to the Department, the proceedings were deemed time-barred due to the absence of suppression.

Applicability of Proviso to Section 11A:
In analyzing the applicability of the proviso to Section 11A of the Central Excise Act, 1944, the Tribunal referred to various Supreme Court judgments. These judgments established that the extended period of limitation cannot be invoked when the Department had prior knowledge of relevant facts and the appellant did not engage in wilful misstatement or suppression. Based on these principles, the Tribunal ruled in favor of the appellant, holding that the proceedings were barred by limitation.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant solely on the ground of limitation, emphasizing the importance of adherence to statutory timelines and the absence of intentional suppression of facts.

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