2011 (4) TMI 718 - AT - Central Excise

Undervaluation - Rule 6(b)(ii) of Central Excise Valuation Rules, 1975 - Valuation on the basis of comparable goods - circular No.692/08/2003-CX, dt.13.2.03, - held that - if the price is to be arrived at on the basis of the cost of production, the overheads pertaining to non-production activities are not required to be taken into consideration in terms of Board s circular and the price arrived at by them by excluding the overhead expenses and the interest element, would be more or less the same price on which they have discharged their duty liability. - the Commissioner has taken into account the cost of the yarn of same count being manufactured by M/s Soma Textiles. Reference by Revenue to the various technical parameters is only an expression of doubt inasmuch as it stands pleaded that warping of the yarn may differ. - valaution on the basis of comparable accepted - decided in favour of assessee. Extended period of limitation - Held that the activity of dyeing and sizing being the same, the extension of benefit of limitation in respect of own manufactured yarn and non-extension of same benefit of limitation in respect of bought out yarn was not justified in the earlier proceedings, inasmuch as the same facts and circumstances imparting knowledge to the Revenue, were available - Decided in favour of the assessee

Summary

Issues:
1. Discrepancy in assessable value of captively consumed cotton yarn.
2. Duty liability on purchased yarn for captive consumption after dyeing and sizing.
3. Duty liability on yarn manufactured and used captively for dyeing and sizing process.

Analysis:
1. The case involved discrepancies in the assessable value of cotton yarn consumed captively by the respondents. The officers of Cost Audit raised objections regarding undervaluation, leading to duty evasion. The Commissioner's order dropped part of the demand due to limitation issues but confirmed a demand of Rs. 49,65,635 for undervaluation based on cost structure, rejecting the plea of limitation.

2. Regarding duty liability on purchased yarn for captive consumption after dyeing and sizing, the Commissioner upheld the demand of Rs. 77,52,053, considering the absence of declarations regarding purchasing duty-paid yarn for dyeing. The Commissioner did not extend the benefit of limitation in this aspect, leading to the confirmation of the demand.

3. The duty liability on yarn manufactured and used captively for dyeing and sizing was also contested. The Commissioner dropped the demand of Rs. 17,96,096 due to limitation, citing the Revenue's prior knowledge of the activities. The Tribunal remanded the matter for re-adjudication, and in the de-novo proceedings, the Commissioner dropped the proceedings against the respondents, emphasizing the Revenue's awareness of the activities and the absence of suppression of facts.

The Revenue challenged the Commissioner's findings, arguing about the comparability of goods and the prospective applicability of a circular. However, the Tribunal upheld the Commissioner's decision, emphasizing the lack of evidence supporting the Revenue's contentions and affirming the correctness of the Commissioner's approach in determining the assessable value based on cost structure. The Tribunal also noted the Commissioner's consideration of limitation issues and the regular filing of returns by the respondents, supporting the decision to reject the Revenue's appeal and uphold the Commissioner's order.