2007 (2) TMI 139 - Commission - Central Excise

Valuation(Central Excise) - Question arises whether valuation of slag Heaps should be based on sale price plus segregation cost or equivalent to the price at which so called Comparable goods namely skull scrape - Held that the assessable value of slag arrived on the basis sale price plus segregation cost

Issues Involved:
1. Valuation of iron scrap cleared from the slag dump yard.
2. Determination of the assessable value under the Central Excise Valuation Rules.
3. Applicability of comparable prices for different types of scrap.
4. Calculation of interest on delayed duty payment.
5. Immunity from penalties and prosecution.

Detailed Analysis:

Valuation of Iron Scrap Cleared from the Slag Dump Yard
The primary issue revolved around whether the valuation of iron scrap cleared from the slag dump yard should be based on the tender sale price plus segregation cost or the price of comparable goods, specifically skull scrap from broken ladles. The Settlement Commission concluded that the sale of goods through tender to unrelated parties without additional consideration should form the basis for valuation. The applicant agreed to pay duty on the assessable value derived from the tender price plus the cost of segregation.

Determination of the Assessable Value under the Central Excise Valuation Rules
The Tribunal had remanded the case to the Commissioner for re-determination of the assessable value under Rule 7 of the Central Excise Valuation Rules. The applicant argued that the valuation should consider the tender price and the cost of segregation, as these costs enhance the value of the product. The Revenue, however, contended that the value should be based on the price of skull scrap. The Commission sided with the applicant, noting that the valuation should be based on the form in which the goods are cleared and that the two types of scrap are not comparable.

Applicability of Comparable Prices for Different Types of Scrap
The Commission found that the slag from the slag dump yard and skull scrap from broken ladles are different products and cannot be compared for valuation purposes. The slag contains impurities and is sold as is, whereas skull scrap is a higher-grade product with less impurity. The Commission emphasized that goods must be assessed in the form they are cleared and not based on any subsequent enhancement in value due to further processing.

Calculation of Interest on Delayed Duty Payment
The Commission noted that the applicant had delayed payment of the admitted duty liability from March 1994 to August 2000, only paying on 10-8-2006. Consequently, the applicant benefited financially from this delay. The Commission ordered the applicant to pay interest at 10% simple interest per annum from the date the payment was due until it was paid. However, the applicant was granted immunity from interest exceeding 10% per annum.

Immunity from Penalties and Prosecution
The Commission granted the applicant immunity from penalties and prosecution under the Act and the Rules framed thereunder concerning this case. This immunity was granted under Section 32K(1) of the Act, with the caveat that the order would be void if obtained through fraud or misrepresentation of facts.

Conclusion:
The Commission settled the central excise duty at Rs. 2,57,90,137/-, which had already been paid by the applicant. The applicant was required to pay interest on the delayed payment but was granted immunity from penalties and prosecution. The valuation was to be based on the tender price plus segregation cost, not on the price of skull scrap, as the two were not comparable.

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