2013 (8) TMI 682 - AT - Central Excise

Undervaluation of Goods - Rule 8 - clearance to another unit of the assessee - cost plus valuation - captive consumption - manufacturing of cement - Held that - the provisions of Rule 8 of the Valuation Rules will not apply in a case where some part of the production is cleared to independent buyers. The provisions of Rule 4 are in any case to be preferred over the provisions of Rule 8 not only for the reason that they occur first in the sequential order of the Valuation Rules but also for the reason that in a case where both the rules are applicable, the application of Rule 4 will lead to a determination of a value which will be more consistent and in accordance with the parent statutory provisions of Section 4 of the Central Excise Act, 1944. - Decided against the assessee. Confirmation of Differential Duty - held that - the valuation of Bulk cement needs to be valued on the basis of sale value to independent buyers, but differential duty cannot include the clearances effected by NCMU unit of the appellant, after repacking or sale as such of Bulk cement received from the appellant; as NCMU unit is doing so, after availing CENVAT Credit as such Bulk cement, as NCMU unit is not situated in the Bhavnagar Commissionerate. Period of Limitation - Whether the Show Cause Notice which invoked the extended period of limitation was applicable for period beyond one year or not - Held that - The assesses had every reason to believe that the board s circular would be applicable to them and hence sought to value of the goods based upon the cost of production and as per provisions of Rule 8 of Central Excise Valuation Rules - the demand of duty prior to the period of one year from the date of issuance of Show Cause Notice dt. 09.11.2009 was hit by limitation and that portion of demand was liable to be set aside.

Issues Involved:
1. Under-valuation of goods cleared by the appellant.
2. Applicability of Rule 8 of Valuation Rules, 2000.
3. Jurisdiction of the adjudicating authority.
4. Limitation period for issuing the Show Cause Notice.
5. Imposition of penalty and interest.

Detailed Analysis:

1. Under-valuation of Goods Cleared by the Appellant:
The primary issue was whether the appellant under-valued the cement cleared to their own units by using valuation under Rule 8 read with Rule 9 of Valuation Rules, 2000. The appellant cleared cement to both independent buyers and their own units, adopting different values for these transactions. The Tribunal concluded that the value adopted for independent buyers should be considered for the clearances to their own units. The judgment of the Larger Bench in the case of Ispat Industries Ltd was cited, which stated that Rule 8 applies only where the entire production is captively consumed. Since the appellant sold part of their production to independent buyers, Rule 8 was deemed inapplicable.

2. Applicability of Rule 8 of Valuation Rules, 2000:
The appellant argued that the clearances to their own units should be valued as per Rule 8 of Valuation Rules, 2000, supported by CBE&C circulars. However, the Tribunal held that Rule 8 does not apply when part of the production is sold to independent buyers. Instead, Rule 4 should be applied, which aligns with the transaction value for independent buyers. The Tribunal referenced the Larger Bench decision in Ispat Industries Ltd, which emphasized that Rule 8 is inapplicable in cases where goods are sold to independent buyers.

3. Jurisdiction of the Adjudicating Authority:
The appellant contended that the adjudicating authority lacked jurisdiction to confirm differential duty on clearances made by NMCU to RMC units, as these units were outside the Bhavnagar Commissionerate. The Tribunal found merit in this argument, stating that the adjudicating authority's confirmation of differential duty on clearances from NMCU was beyond its jurisdiction. The Tribunal directed the adjudicating authority to re-quantify the demand, excluding clearances made by NMCU after repacking or as such.

4. Limitation Period for Issuing the Show Cause Notice:
The appellant argued that the Show Cause Notice dated 09.11.2009 was barred by limitation for the period beyond one year. The Tribunal agreed, noting that the appellant had been filing monthly returns, and there was no willful suppression or misstatement. Therefore, the demand for the period beyond one year from the date of the Show Cause Notice was set aside.

5. Imposition of Penalty and Interest:
Given the need for re-quantification of the differential duty, the Tribunal held that the penalties imposed under Rule 25 of Central Excise Rules, 2002 also needed reconsideration. The Tribunal remanded the matter back to the adjudicating authority for recalculating the differential duty and reconsidering the penalties.

Conclusion:
The appeals were disposed of with directions to re-quantify the demand, exclude clearances made by NMCU, and reconsider penalties. The Tribunal upheld the appellant's case on limitation and jurisdiction but found against them on the merits of valuation.

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