2011 (4) TMI 532 - AT - Central Excise

AECL was receiving inputs from BAL which under-valued the landed cost by not including expenses on account of Sales Tax freight insurance loading/unloading charges and handling charges and that BAL was charging only the basic price of such inputs equal to basic price charged by the original manufacturer of the said inputs to BAL. - allegation of undervaluation - Held that - Commercial invoice has been issued by M/s BAL which shows the price the freight and Sales Tax have also been charged extra. Therefore the allegation in the SCN is not based on the commercial invoice which is relevant for arriving at the costing of the finished goods cleared by M/s AECL. - decided in favour of Assessee.

Summary

Issues: Valuation of Aluminium Castings based on purchase price of Aluminium Ingots, Allegations of under-valuation, Central Excise duty payment, Imposition of penalties and interest

Valuation of Aluminium Castings based on purchase price of Aluminium Ingots:
The issue involves the valuation of Aluminium Castings manufactured by a company, based on the purchase price of Aluminium Ingots supplied by another company. The Aluminium Castings are used as motor vehicle parts and classified under specific sub-headings of the Central Excise Tariff Act, 1985. The dispute arises from the allegation that the purchase price of Aluminium Ingots supplied by the second company did not include additional expenses like Sales Tax, freight, insurance, loading/unloading charges, and handling charges. This alleged under-valuation led to a reduction in the landed cost of the inputs, affecting the overall valuation of the finished goods. The Central Excise authorities contended that the expenses incurred by the supplying company, in addition to the price, should be loaded into the assessable value for the payment of Central Excise duty.

Allegations of under-valuation:
A show-cause notice was issued, alleging that the supplying company was charging depressed prices for the Aluminium Ingots, which in turn affected the valuation of the finished goods. The notice further claimed that both companies were aiding each other to keep production costs at a minimum and discharge Central Excise duty at a lower value. The notice proposed the recovery of a differential duty amount, along with penalties and interest, under specific provisions of the Central Excise Act and Rules. Penalties were also proposed on the individuals associated with the companies. The adjudicating authority upheld the allegations and confirmed the demands, penalties, and interest. The appellants challenged this order.

Central Excise duty payment:
The dispute also revolves around the payment of Central Excise duty on the Aluminium Castings manufactured using the allegedly under-valued Aluminium Ingots. The authorities contended that the Central Excise duty should be paid on the assessable value that includes the additional expenses incurred by the supplying company. The appellants, on the other hand, argued that the allegations of under-valuation were baseless and that the price charged for the Aluminium Ingots was not undervalued.

Imposition of penalties and interest:
The case involved the imposition of penalties and interest under various sections of the Central Excise Act and Rules. The authorities imposed penalties on the companies and individuals involved, citing violations related to under-valuation and alleged mutual business interests affecting Central Excise duty payments. The appellants challenged the imposition of penalties and interest, arguing that the allegations were not substantiated and that the demands were not sustainable based on the facts presented.

In the final judgment, the Appellate Tribunal set aside the impugned order, allowing the appeals with consequential relief. The Tribunal found that the show-cause notice was not based on the correct valuation of the Aluminium Ingots supplied, rendering the demands and penalties unsustainable. The Tribunal also noted discrepancies in the adjudication process, where the submissions and documentary evidence provided by the appellants were not considered adequately. The judgment highlighted the importance of correct valuation for Central Excise duty payment and emphasized the burden of proof on the appellants, which they failed to discharge.