2012 (4) TMI 506 - AT - Central Excise

Waiver of pre deposit - Duty demand - Incorrect valuation of final products - Held that - valuation is sought to be enhanced by the authorities, on the ground that the goods which are cleared by the appellants to their ICUs are sold by them on higher price. Learned adjudicating authority has proceeded on the ground that Rule 10 of Valuation Rules will apply. On perusal of the said Rule 10, we find that prima facie this Rule will not apply, as the said Rule talks about the arrangement of an assessee for sale of excisable goods, except to or through ICUs. In this case, we find that and it is undisputed that the appellant had sold their finished goods to independent buyers also and to their ICUs - valuation of the goods done by the appellants, even if Rule 11 of the Valuation Rules has to be applied, would lead to, prima facie, to the transaction value of the goods sold by the appellants to the independent buyers. In sum, we find that the appellants have made out a prima facie case for the waiver of pre-deposit of amounts involved - Stay granted.

Summary

Issues:
1. Waiver of pre-deposit of duty and penalty amounts on Unit-I and Unit-III of the appellant.
2. Penalty imposed on partner of Unit-I.
3. Application of Central Excise Valuation Rules in determining the correct valuation of goods sold to interconnected undertakings (ICUs).
4. Interpretation of Rule 10 of Valuation Rules in the context of goods sold to ICUs.
5. Prima facie case for waiver of pre-deposit of amounts involved.

Analysis:
The judgment dealt with two stay petitions seeking the waiver of pre-deposit of duty and penalty amounts on Unit-I and Unit-III of the appellant, along with a penalty imposed on a partner of Unit-I. The adjudicating authority had confirmed the amounts as differential duty payable by the appellant due to incorrectly valued final products cleared to or through ICUs. The appellant argued that the Revenue tried to tax them based on higher prices charged by ICUs compared to independent customers, highlighting the rejection of Rule 9 and 10 of the Valuation Rules by the authority. The Revenue, however, contended that the valuation was correctly determined under the Valuation Rules as the goods were sold to both independent customers and ICUs.

Upon reviewing the submissions, the Tribunal found that the authorities sought to enhance the valuation based on goods cleared to ICUs being sold at higher prices. The adjudicating authority applied Rule 10 of the Valuation Rules, but the Tribunal observed that Rule 10 did not apply in this case as it excludes goods sold to or through ICUs. Since the appellant sold goods to both independent buyers and ICUs, the Tribunal concluded that even if Rule 11 of the Valuation Rules applied, the transaction value to independent buyers should be considered. Consequently, the Tribunal determined that the appellant established a prima facie case for the waiver of pre-deposit amounts, allowing the applications and staying the recovery until the disposal of appeals.