2014 (1) TMI 678 - AT - Central Excise

Valuation of goods - Price adopted for sale less than the assessable value - Value arrived at on the basis of raw material costs plus conversion charges Waiver of Pre-deposit Held that - The agreement copy was provided to the department only after a request was made and investigation was taken up - even after giving relief for cost of scrap sold by the appellant by the Commissioner, the total value of goods cleared when Valuation Rules are adopted increases substantially - the basis for value given by the appellant is also not very clear since inasmuch in the statement for calculation of value, the total value of goods cleared does not work out to Rs. 7.63 crores as done by them, because there are two entries of raw materials returned/transferred to SBSPL by the appellant, which creates confusion. There is no clarity as to whether the transaction value represents the full value or not; whether the job charges, raw materials costs have been correctly worked out or not and the stand taken by the appellant has also been confusing and there is lack of clarity - initially by not giving the agreement copy certain important factors could not be seen/verified - there is substantial difference between the value arrived at on the basis of Valuation Rules and the transaction value and there is no explanation for this difference - the appellant has not been able to make out a prima facie case in their favour - the appellant directed to submit Rupees ten lakhs as pre-deposit upon such submission rest of the duty to be stayed till the disposal Partial stay granted.

Summary

Issues:
Valuation of goods for duty calculation based on transaction value vs. Valuation Rules, invocation of extended period for demand, disclosure of agreement details, inclusion of raw materials in manufacturing process, clarity on value calculation, confusion regarding scrap generated, financial difficulties of the appellant.

Valuation of Goods:
The appellant manufactured 'sponge iron' on job work basis for another company and paid duty based on the price set by that company. The department initiated proceedings as they believed the price was lower than the assessable value under Valuation Rules. The appellant argued that the transaction value was correct under Section 4(1A) of the Central Excise Act and Valuation Rules were not applicable if the transaction value was accurate.

Invocation of Extended Period:
The appellant contended that the extended period should not have been invoked as they had informed the department about their manufacturing process beforehand. They claimed no suppression of facts or mis-declaration, making the demand time-barred and unsustainable.

Disclosure of Agreement Details:
The department highlighted that the agreement details between the appellant and the principal manufacturer were not disclosed initially. The agreement allowed the appellant to sell waste/scrap generated during manufacturing, reducing costs significantly. The inclusion of pre-existing raw materials in the manufacturing process was also not revealed.

Clarity on Value Calculation:
The Tribunal found discrepancies in the appellant's value calculation, including confusion regarding raw materials returned/transferred and lack of clarity on total goods value. The appellant's claim of relief for scrap generated was also questioned, with unclear deductions mentioned in their appeal memo.

Financial Difficulties:
The appellant's financial difficulties, including being referred to BIFR and expecting a takeover, were considered. Despite the financial challenges, the Tribunal directed the appellant to predeposit a specific amount for the appeal hearing, granting a stay against recovery of the remaining duty, interest, and penalty during the appeal's pendency.

This detailed analysis covers the key issues addressed in the legal judgment, providing a comprehensive overview of the arguments presented by both parties and the Tribunal's findings and directives.