2012 (7) TMI 417 - AT - Central Excise

Entitlement to refund claim - difference in rate at which excise duty was paid at the time of clearance and the rate on which the goods were sold from depot - Held that - Considering Rule 7 of the Central Excise (Valuation) Rules where the goods are not sold by the assessee at the factory gate but are transferred to depot from where the excisable goods are to be sold the transaction value of such goods cleared from depot for the purpose of excise duty shall be the rate at which goods are sold from such depot on or about the same time and if such goods are not sold at or about the same time, at the time nearest to the time of removal of goods under assessment. the invoices supplied by the respondent regarding sale at the time nearest to the date and time for removal of the goods from factory to the depot normal transaction value of the goods was much more than the rate at which the excise duty was paid at the time of clearance of goods from the factory and the appellants submitted all the relevant documents including depot invoices which are indicative of the price at depot sale. Duty being advalorem is proportionately reduced with the fall of price at the depot. As a result the appellants have to bear the burden of excess duty paid on the ex-factory value of the goods that is higher than the actual transaction value - though Commissioner (Appeals) has correctly noted the provision of Rule 7 of Valuation Rules, he has not followed the same while deciding the appeal.

Summary

Issues:
1. Claim for refund of excess excise duty paid due to difference in transaction value at the time of clearance and sale from depot.
2. Interpretation of Rule 7 of Central Excise (Valuation) Rules, 2000.
3. Validity of the Commissioner (Appeals) order allowing the refund claim.

Analysis:

1. The appellant, engaged in manufacturing sponge iron and billets, cleared a consignment to its depot on provisional valuation. The goods were later sold from the depot at different rates, leading to a claim for refund of excess excise duty paid. The department contested the claim based on Rule 7 of Valuation Rules, and the Assistant Commissioner dismissed the refund claim. However, the Commissioner (Appeals) allowed the appeal, stating that the appellant was entitled to the refund of duty paid in excess at the time of clearance from the factory to the depot.

2. The main contention revolved around the interpretation of Rule 7 of Central Excise (Valuation) Rules, which governs the valuation of goods transferred to a depot for sale. The rule stipulates that the value for excise duty purposes should be based on the normal transaction value of goods sold from the depot at or about the same time as clearance from the factory. The Tribunal noted that the appellant failed to provide evidence of sale transactions from the depot at the time of factory clearance. The invoices submitted by the appellant showed lower rates for sales from the depot after the clearance date, contrary to the excise duty paid rate. The Tribunal emphasized that the normal transaction value at the time of depot sale was higher than the rate paid at the time of factory clearance, as per Rule 7.

3. The Commissioner (Appeals) had allowed the refund claim, citing the decrease in market value at the depot as a reason for excess duty payment. However, the Tribunal found that the Commissioner's order conflicted with Rule 7 of Valuation Rules. Despite acknowledging the rule's provisions, the Commissioner did not apply them correctly in the decision. The Tribunal concluded that the Commissioner's order could not be sustained due to the direct conflict with Rule 7 and accepted the department's appeal, setting aside the impugned order.

In conclusion, the Tribunal upheld the department's appeal, emphasizing the importance of adhering to Rule 7 for determining the excise duty valuation in cases of goods transferred to a depot for sale. The decision highlighted the necessity of establishing the normal transaction value at the time of depot sale, as per the rule's requirements, to avoid discrepancies in duty payments.