2014 (7) TMI 63 - AT - Central Excise

Waiver of pre deposit - 100% EOU - valuation - clearance of goods and scrap to sister unit in DTA - benefit of Notification No. 23/2003-C.E., dated 31-3-2003 - Held that - applicants are not taking in consideration the Selling and Distribution Expenses, and fixed overhead expenses, while arriving at the assessable value of goods. - further, applicant cleared scrap to DTA for availing benefit of Notification No. 23/2003-C.E., dated 31-3-2003, Prima facie we find merit in the contention by the Revenue that applicant had not fulfilled the condition of the benefit of notification. In view of these circumstances, we find that applicant had failed to make out a case for total waiver of duty. - stay granted partly.

Summary

Issues involved:
1. Waiver of pre-deposit of duty, interest, and penalty.
2. Valuation of goods cleared to sister units in DTA.
3. Denial of benefit of Notification No. 23/2003-C.E. on the clearance of scrap.
4. Assessable value of goods and expenses considered.
5. Compliance and deposit requirements for the appeal.

Analysis:

1. Waiver of pre-deposit of duty, interest, and penalty:
The applicant sought a waiver of pre-deposit of duty amounting to Rs. 35,94,960/-, interest, and penalty, having already paid Rs. 10,00,000/-. The demand pertained to the period between January 2009 to June 2009. The Tribunal considered the applicant's status as a 100% EOU and the nature of goods cleared during the disputed period. After evaluating the contentions from both sides, the Tribunal directed the applicant to deposit an additional amount of Rs. 10,00,000/- within eight weeks for the appeal to be heard. Upon this deposit, the pre-deposit of the remaining dues was waived, and recovery of the same stayed during the pendency of the appeals.

2. Valuation of goods cleared to sister units in DTA:
Regarding the goods cleared to sister units in DTA, the Revenue added 10% as notional profit to the cost of production, citing Rule 8 of Customs Valuation Rules, 2007. The applicant argued that due to losses incurred during the disputed period, there was no basis for adding notional profit. The Tribunal considered the provisions of Rule 8 and the applicant's financial situation, ultimately directing the deposit of a specified amount for the appeal process.

3. Denial of benefit of Notification No. 23/2003-C.E. on the clearance of scrap:
The benefit of Notification No. 23/2003-C.E. was denied concerning the clearance of scrap, as the scrap was not cleared in accordance with the provisions of para 6.8(e) of the Foreign Trade Policy. The applicant contended that the DGFT had not established any norms regarding the input-output ratio for the scrap, thus challenging the denial of the notification's benefit. However, the Tribunal found merit in the Revenue's argument that the applicant had not fulfilled the conditions of the notification, leading to the direction for a partial deposit for the appeal process.

4. Assessable value of goods and expenses considered:
The Revenue determined the assessable value of goods based on a verification report highlighting that the applicant had not accounted for Selling and Distribution Expenses and fixed overhead expenses. This assessment influenced the Tribunal's decision regarding the waiver of duty pre-deposit, emphasizing the importance of accurate valuation and expense considerations in such cases.

5. Compliance and deposit requirements for the appeal:
In conclusion, the Tribunal directed the applicant to comply with the deposit requirements within a specified timeline for the appeal process to proceed. The Tribunal's decision balanced the applicant's financial circumstances, the legal provisions regarding duty waivers, and the Revenue's justifications for denying certain benefits, ensuring a fair and structured approach to the case.