2011 (1) TMI 1024 - AT - Central Excise

Undervaluation - short levy of duty - Held that - Commissioner (Appeals) has correctly recorded the facts of the case saying that 'appellant company has transferred sub-assemblies, which are in nature of semi-processed goods to their another unit situated at Pune for certain job work and returned due to tight delivery schedule. These transfers were effected on payment of duty and the receiving the factory used to take Modvat Credit. The valuation was done by the appellant on the basis of cost of manufacture and profits i.e., cost of raw material plus 15% described as transfer cost and 15% margin on the total of two'. As per Rule 57F, it is clarified that this sub-rule did not require the manufacturer to ascertain and declare the value of partly processed item and in this case the assessee has already paid the duty on the cost of inputs plus 32.25% of the cost of inputs as profits, which is definitely more than the duty required to be reversed. In this scenario, no infirmity with the impugned order, the same is upheld as appeal filed by the Revenue deserves no merits and the same is rejected.

Summary

Issues:
- Appeal against setting aside of adjudication order due to undervaluation and short levy of duty
- Applicability of Rule 6 (b) of the Central Excise (Valuation) Rules, 1975
- Consideration of submissions by the adjudicating authority
- Benefit of Rule 57F and notification No.14/96
- Failure of respondent to appear before the Tribunal

Analysis:
1. The Revenue appealed against the setting aside of the adjudication order due to undervaluation and short levy of duty. The case involved the clearance of 'Sub Assembly Kits' to a sister unit on payment of cost plus 32.25% of duty. Allegations were made against the respondent for not paying duty as per the assessable value determined under Rule 6 (b) of the Central Excise (Valuation) Rules, 1975, resulting in undervaluation and short levy of duty.

2. The respondent argued that they had correctly calculated the duty and did not contravene the provisions of the Central Excise Act and Valuation Rules. The Commissioner (Appeals) set aside the adjudication order, noting that the goods were returned to the respondent after processing, which was not considered by the adjudicating authority. The Commissioner applied Rule 57F and notification No.14/96, leading to the setting aside of the adjudication order.

3. Despite multiple notices, the respondent did not appear before the Tribunal. The Revenue contended that the respondent undervalued their goods and did not follow the procedure under Rule 57F, thus not entitled to its benefits. The Tribunal considered the submissions and found that the adjudicating authority had not properly considered the respondent's submissions. The Commissioner correctly recorded the facts and found no merit in the allegation of undervaluation.

4. The Tribunal examined Rule 57F, clarifying that it did not require the manufacturer to declare the value of partially processed items. The Tribunal upheld the impugned order, stating that the duty paid by the assessee was more than required, and thus, there was no infirmity with the order. The appeal by the Revenue was rejected due to lack of merits, as pronounced in court.