2015 (3) TMI 910 - AT - Central Excise

Valuation of stock transfer - appellant was collecting other charges - These charges were meant to recover the additional cost that the appellant was incurring in transporting the goods from warehouse to depot, storing the goods in the depot and for the investment made in the storage tanks and pipelines upto the jetties - whether this amount will form part of the assessable value or not - Invocation of extended period of limitation - Suppression of facts - Penalty u/s 11AC - Differnce of opinion - Majority order - Held that - A bare reading of Section 4(1) would indicate the essential criteria for determining the value is the place where the goods are sold by the assessee. If goods are sold at the place of removal, then the sale value is the transaction value for assessment purpose. This is clear from Section 4(1)(a) itself and I need not go to the rules. Thus for the period from 14.5.2003 onwards since the depot was considered as the place of removal, the value at which the goods are sold from the depot will be the assessable value and duty has to be charged accordingly. There is no dispute about the fact that the other charges were collected by the appellant and these were not included in the assessable value while making the payment of duty at the warehouse. There can be no doubt that for all such clearances, they were required to pay the duty at the sale price at the depot. During the period 1st July 2000 to 13th May 2003, the goods were not sold at the place of removal (which is warehouse in this case). In my view, Rule 5 is therefore not applicable to the present case. Further, Rule 7 is applicable when the goods are not sold by the assessee at the time and place of removal but are transferred to depot, etc. from where the excisable goods are to be sold. This is precisely the situation in the present case. The appellant has not sold the goods at the time and place of removal but stock transferred to their depot where the goods were stored and later on sold. In view of the above analysis, in my view, Rule 5 of the Central Excise Valuation Rules, 2000 will not be applicable, but the Rule 7 would applicable. Further, Rule 7 very clearly indicates that the value shall be the normal transaction value of such goods sold from such other place at or about the same time. Thus the transaction value prevailing at the depot will be taken as the transaction value while clearing the goods from the warehouse. Appellant has been paying the duty at their warehouse and such invoices were for STOCK transfer. Normally in such cases, one would expect that the appellant would be collecting the same amount from the buyers. The fact that the appellant was collecting extra amount in the invoices issued from the depot was clearly suppressed from the Revenue and this is a very important aspect. Since there was suppression of the actual sale price from the Revenue, the ingredients of proviso to Section 11A are satisfied and, therefore, extended period of time is invokable. Similarly, penalty under Section 11AC is also leviable as there is a clear cut suppression of facts which are very material in determining the assessable value. - extended period of time is rightly invoked and penalty under Section 11AC is also leviable. - Decided against assessee.

Issues Involved:

1. Whether the place of removal for goods sold and delivered at ONGC Nhava Depot should be the depot or the refinery.
2. Whether the cost of transportation from the refinery to the depot should be included in the assessable value.
3. Whether the extended period of time for demand is invokable.
4. Whether the penalty under Section 11AC is imposable.

Issue-wise Detailed Analysis:

1. Place of Removal:
The primary issue is whether the depot or the refinery should be considered the place of removal for the goods sold and delivered at ONGC Nhava Depot. The appellant argued that before 14/05/2003, the depot was not a place of removal under Section 4(3)(c), making the refinery the place of removal. Thus, the stock transfer price at the warehouse should be relevant for duty purposes. The respondent contended that the sale took place at the depot, where a flat rate was charged, and no bifurcation of charges was indicated in the invoices. The Tribunal, referencing Rule 7 of the Central Excise Valuation Rules, 2000, determined that the depot should be considered the place of removal as the sales took place there, and the total amount charged should be the transaction value.

2. Inclusion of Transportation Costs:
The appellant claimed that additional amounts recovered at the ONGC Nhava Depot were for transportation and handling charges, not includable in the assessable value under Rule 7 of the Valuation Rules. The respondent argued that the total consideration received, including these charges, should be subject to duty. The Tribunal concluded that since the sales occurred at the depot, the total value charged, including transportation and handling costs, should be included in the assessable value per Rule 7, which does not permit abatement for such charges.

3. Extended Period of Time:
The appellant contended that the demand was barred by limitation, arguing that there was no suppression or misstatement. The respondent maintained that the appellant did not comply with the law, justifying the invocation of the extended period. The Tribunal held that the extended period was rightly invoked due to the appellant's failure to declare material particulars, which constituted suppression of facts, irrespective of the appellant being a Public Sector Undertaking.

4. Imposition of Penalty:
The appellant argued that no penalty should be imposed under Section 11AC as there was no intent to evade duty. The Tribunal disagreed, stating that the appellant's failure to disclose the additional charges and the total consideration received amounted to suppression of facts, justifying the penalty under Section 11AC.

Separate Judgments:

Member (Judicial):
Disagreed with the majority view, stating that the additional amounts recovered were for transportation and handling, not includable in the assessable value. The member emphasized that depot was not a place of removal before 14/05/2003, and the cost of transportation should be excluded as per Rule 5 of the Valuation Rules. The member also held that there was no suppression or mis-declaration, and thus, the extended period and penalty were not applicable.

Member (Technical) & Third Member:
Concurred that the depot should be the place of removal, and the total amount charged, including transportation and handling costs, should be included in the assessable value. They upheld the invocation of the extended period and the imposition of the penalty, citing suppression of facts by the appellant.

Final Order:
In view of the majority decision, the appeal was dismissed as devoid of merits.

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