2011 (2) TMI 862 - AT - Central Excise

Valuation - Application of Rule 4 or Rule 7 of the Central Excise (Valuation) Rules, 2002 - Imposition of personal penalty and confirmation of interest - Goods were being cleared by assessee from their factory gate to the depots by discharging their duty liability on the basis of estimated price at which such goods were likely to be sold from the depots - A view was entertained that the price at which the coils were being sold from the depots was in some cases, higher than the price at which the duty was discharged at the time of stock transfer from factory - As such, the appellants entertained a view that, in terms of the Rule 7 of the Central Excise (Valuation) Rules, 2002, the appellants were required to pay duty at the time of clearances of the coils from the factory at the price which were prevailing at the depot for the similar goods, taking into account the price of greatest aggregate quantity - the learned advocate held that it is the entire clearances which have to be taken into account and the assessee s liability has to be arrived at accordingly - The Revenue cannot pick only those matters where the goods were sold at higher rates from the depot and ignore the clearances which were ultimately sold at a lower value, though the duty was paid at the higher assessable value - Hence , that such excess payment and short payment have to be neutralised, the learned advocate relied upon the Tribunal decisions in the case of M/s. Vinir Engineering Pvt. Limited vs. CCE 2004 -TMI - 52742 - CESTAT, SOUTH ZONAL BENCH, BANGALORE - Set-aside the impugned order and remand the matter to the Commissioner for re-examining the above aspects and also the aspect of limitation - Appeal is thus allowed by way of remand.

Summary

Issues:
- Interpretation of Rule 7 of Central Excise (Valuation) Rules, 2002
- Application of Rule 4 of Valuation Rules
- Contention on demand limitation
- Assessment of duty liability on goods sold from factory gate and depots
- Consideration of entire clearances for duty calculation
- Adjustment of excess duty payment against short duty payment
- Remand for re-examination of neutralization and limitation aspects

Interpretation of Rule 7 of Central Excise (Valuation) Rules, 2002:
The appellant, engaged in manufacturing various products, including coils, argued that Rule 7 was incorrectly applied to them for determining duty liability on goods sold from depots. They contended that Rule 4 should apply to clearances from both factory and depot. Despite their submissions, the Commissioner confirmed a duty demand, penalty, and interest. The appellant challenged this decision.

Application of Rule 4 of Valuation Rules:
The appellant emphasized that Rule 4 should govern the valuation of goods sold from both factory gate and depots, not Rule 7. They asserted that the Revenue's selective consideration of clearances from depots at higher prices for duty calculation was flawed. Citing tribunal decisions, the appellant argued for neutralizing excess and short duty payments across clearances.

Contention on demand limitation:
During adjudication, the appellant raised concerns about the demand's limitation period. Despite their objections, the Commissioner upheld the duty demand, penalty, and interest. The appellant sought a re-examination of the limitation aspect.

Assessment of duty liability on goods sold from factory gate and depots:
The Tribunal acknowledged the appellant's argument that duty liability assessment should consider all clearances, not just those with higher selling prices from depots. The Tribunal agreed that duty calculations must encompass all clearances to determine the actual liability accurately.

Consideration of entire clearances for duty calculation:
The Tribunal concurred with the appellant's assertion that the Revenue should not cherry-pick clearances with higher selling prices for duty demands. It directed a re-examination by the Commissioner to ensure a comprehensive assessment of duty liability based on all clearances made by the appellant.

Adjustment of excess duty payment against short duty payment:
Citing tribunal precedents, the appellant argued for offsetting excess duty payments against short payments to determine the actual duty liability accurately. The Tribunal supported this argument, emphasizing the need for neutralization of excess and short payments across clearances.

Remand for re-examination of neutralization and limitation aspects:
Ultimately, the Tribunal allowed the appeal by remanding the matter to the Commissioner for a thorough re-examination of neutralization against excess payments and the limitation aspect. The Tribunal directed a comprehensive assessment of duty liability based on all clearances and emphasized the importance of considering all transactions to determine the correct duty liability.