2011 (2) TMI 591 - AT - Central Excise

Valuation - Goods removed for destruction - Since, the goods are not marketable by the assessee for the reason that the brand names of the goods were transferred to Coca Cola - Hence, the assessee had no option, but to destroy the goods - When the goods are not marketable, the question of comparable prices does not arise since the comparison of prices can take place only when the goods are marketable - Thus, the Commissioner s (Appeals) finding that as the goods were destroyed on account of non-marketability, the comparable prices cannot be adopted - Hence, reject the appeal filed by the department.

Summary

Issues:
1. Time limit for raising show-cause notice and duty demand.
2. Assessment of duty based on comparable prices for destroyed goods.

Analysis:

Issue 1: Time limit for raising show-cause notice and duty demand
The appeal was filed against the order-in-appeal issued by the Commissioner (Appeals) regarding the demand for differential duty amounting to Rs. 2,85,958. The Commissioner (Appeals) held that the show-cause notice issued after the destruction of goods was time-barred as the department had knowledge of the short levy when the goods were destroyed on 29-11-1994. The six-month period for raising the show-cause notice expired on 28-5-1995, but the notice was issued on 3-6-95 without alleging any suppression of facts to evade duty. The Commissioner (Appeals) emphasized that since there was no marketability of the destroyed goods and they were destroyed due to non-marketability, comparable prices could not be adopted. The department contended that the notice was not time-barred as it was issued within the six-month period from the relevant date of filing returns. However, the Tribunal agreed with the Commissioner (Appeals) that the demand was time-barred due to the non-marketability of the goods at the time of destruction.

Issue 2: Assessment of duty based on comparable prices for destroyed goods
The department appealed against the order of the Commissioner (Appeals) arguing that the duty demand was not time-barred and that the adoption of comparable prices for the destroyed goods was justified. The Tribunal acknowledged the department's submission regarding the time limit for issuing the notice but emphasized that since the goods were not marketable due to the transfer of brand names to another company, the question of adopting comparable prices did not arise. The Tribunal agreed with the Commissioner (Appeals) that in cases where goods are not marketable, comparable prices cannot be applied. Therefore, the appeal filed by the department was rejected based on the non-marketability of the goods, rendering the adoption of comparable prices inappropriate in this scenario.

In conclusion, the Tribunal upheld the decision of the Commissioner (Appeals) that the demand for duty was time-barred and that the assessment of duty based on comparable prices for the destroyed goods was not applicable due to the non-marketability of the goods.