2014 (4) TMI 835 - AT - Central Excise

Valuation of goods - sister concern - revenue neutral exercise - Revenue contends that assessee should have cleared the goods to their sister units at the assessable value arrived at in terms of Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, which provided for adoption of assessable value as 110% of the cost of production or manufacture of such goods - Held that - admittedly goods were being cleared by the respondents on payment of duty and it is not a case of clandestine removal. The only objection of the Revenue was that the assessable value was adopted on the lower side inasmuch as the same should have been arrived at by taking into consideration 110% of cost of production. At this stage, we note that whatever duty was paid by the respondents was being availed as Cenvat credit by their sister concern. As such, the differential duty required to be paid by the present respondents was available as Cenvat credit to their sister concern, thus making the entire exercise as revenue neutral. There are umpteen number of decisions holding that in such a scenario, no mala fide can be attributed to the assessee. As such, we find no favours with the Revenue s contention that short payment was made by the respondents on account of any mala fide so as to ignore the provisions of Section 11A(2B) - Decided against Revenue.

Summary

Issues:
- Interpretation of Central Excise Valuation Rules regarding assessable value.
- Applicability of Section 11A(2B) of the Central Excise Act.
- Imposition of penalty under Section 11AC.
- Allegations of mala fide intent and suppression by the assessee.

Interpretation of Central Excise Valuation Rules:
The case involved a dispute where the respondent, engaged in manufacturing iron and steel products, was clearing goods to their sister concern at Raipur by paying the appropriate excise duty. The Revenue contended that the goods should have been cleared at an assessable value of 110% of the cost of production as per the Central Excise Valuation Rules. The respondents then deposited the differential duty amount along with Education Cess and interest. A show cause notice was issued proposing appropriation of the duty deposit and imposition of penalty under Section 11AC.

Applicability of Section 11A(2B) of the Central Excise Act:
The Commissioner (Appeals) noted that the entire duty was deposited by the appellant before the show cause notice was issued, and therefore, held that there was no requirement for the notice. Consequently, the penalty under Section 11AC was set aside. The Revenue, being dissatisfied, filed an appeal arguing that Section 11A(2B) did not apply due to alleged mala fide intent and suppression by the assessee.

Imposition of Penalty under Section 11AC:
The Revenue contended that the duty payment was made on a lesser assessable value with mala fide intent, leading to suppression by the assessee. However, the Tribunal found that the goods were cleared with duty payment, not clandestine removal. The duty paid was utilized as Cenvat credit by the sister concern, making the exercise revenue neutral. Numerous precedents were cited to support the view that no mala fide could be attributed to the assessee in such scenarios. Consequently, the Tribunal upheld the Commissioner (Appeals) order, rejecting the Revenue's appeal.

The judgment highlights the importance of correctly interpreting valuation rules, the application of penalty provisions under the Central Excise Act, and the consideration of mala fide intent in duty payment disputes.