2011 (2) TMI 1057 - AT - Central Excise

Captive consumption of yarn to manufacture grey fabrics - SCN alleging suppression of facts while showing the costing of captively consumed yarn - Held that - Show-cause notice dated 21.5.2002 was issued to the assessee for demanding differential duty for the period from April 98 to April 99 for having not included the elements of interest, profit margin and selling and distribution charges in the value of yarn. It is undisputed that during the relevant period, the respondent had filed price declarations in terms of Rule 173C of erstwhile Central Excise Rules, 1944. The receipts of the declarations have been acknowledged by the jurisdictional authorities on the respective column.The price declarations included the details of the cost of the product alongwith a certificate given by a Cost Accountant. Thus Commissioner (Appeals) was correct in coming to the conclusion that the entire demand is hit by limitation. It was for the revenue to raise queries if the said declaration was erroneous, nothing stopped them from seeking further clarification from the assessee.

Summary

Issues:
1. Short levy of Central Excise duty due to non-inclusion of interest, profit margin, and distribution charges in the valuation of captively consumed yarn.
2. Disposal of the matter on the ground of limitation.
3. Applicability of the judgment of the Hon'ble Supreme Court in the case of Union of India vs. Madras Rubber Factory Ltd.

Analysis:
1. The case involves a short levy of Central Excise duty amounting to Rs.17,53,928 due to the respondent's failure to include interest, profit margin, and selling and distribution charges in the valuation of captively consumed yarn. The Revenue issued a show-cause notice alleging suppression of facts in the costing of the yarn. The adjudicating authority dropped the proceedings on grounds of merits and limitation. The Commissioner (Appeals) upheld the order, stating that the demand was hit by limitation. The Revenue, aggrieved by this decision, filed an appeal before the Appellate Tribunal.

2. The issue of disposal of the matter on the ground of limitation was raised by the Revenue. The learned DR argued that the adjudicating authority and the Commissioner (Appeals) erred in disposing of the case based on limitation. The DR referred to the judgment of the Hon'ble Supreme Court in the case of Union of India vs. Madras Rubber Factory Ltd., emphasizing that the determination of assessable value should be based on the cost of production.

3. Upon careful consideration of the submissions and perusal of records, the Appellate Tribunal found that the show-cause notice was issued to the assessee for demanding differential duty for the period in question. It was noted that the respondent had filed price declarations including cost details certified by a Cost Accountant. The Tribunal agreed with the Commissioner (Appeals) that the entire demand was hit by limitation. The Tribunal highlighted that the Revenue could have raised queries or sought clarification if they believed the declaration was erroneous. Since there was no such correspondence and no provisional assessment conducted, the Tribunal upheld the Commissioner (Appeals)'s decision and dismissed the appeal.

In conclusion, the Appellate Tribunal upheld the decision of the Commissioner (Appeals) regarding the limitation issue, emphasizing the importance of seeking clarification in case of doubts regarding declarations. The appeal by the Revenue against the short levy of Central Excise duty was dismissed.