2015 (7) TMI 342 - HC - Central Excise

Valuation - Method of valuation - Whether on facts and circumstances of the case, the 2nd respondent Tribunal was right in holding that revenue neutral situation as the reason for allowing the 1st respondent s appeal irrespective of the fact that the 1st respondent has wilfully suppressed the maintenance of dual accounting system and non-inclusion of profit marging in the assessable value of semi-finished goods cleared to their other unit - Hel that - similar question has been considered by the Gujarat High Court in the case of Commissioner of Central Excise and Customs, Vadodara II, vs. Indeos Abs Ltd. reported in 2010 (3) TMI 656 - GUJARAT HIGH COURT and the issue raised was answered in favour of the assessee. It is not in dispute that, in an identical matter where a similar issue was raised, the Supreme Court, in the case of Nirlon Ltd. vs. Commissioner of Central Excise, Mumbai, reported in 2015 (5) TMI 101 - SUPREME COURT , affirmed the view taken by the concerned High Court. - Decided against Revenue.

Issues:
1. Appeal against Tribunal's order allowing the assessee's appeal.
2. Determination of assessable value of semi-finished goods.
3. Imposition of duty, penalty, and interest.
4. Interpretation of revenue neutral situation.
5. Applicability of Supreme Court ruling on similar cases.

Analysis:
1. The appeal before the High Court stemmed from the Tribunal's decision in favor of the assessee, which the Revenue challenged. The substantial question of law revolved around whether the Tribunal was justified in allowing the appeal despite the alleged willful suppression of dual accounting system and non-inclusion of profit margin in the assessable value of semi-finished goods transferred to another unit.

2. The case involved an assessee manufacturing shock absorbers and transferring semi-finished goods to a sister unit for further processing and sale. The valuation of these goods was done under Rule 6(b)(ii) of Central Excise (Valuation) Rules, 1975 based on the cost construction method. The issue arose when it was discovered that no profit margin had been included in the assessable value, leading to a demand for differential duty through a show cause notice. The adjudicating authority confirmed the duty amount, imposed a penalty, and demanded interest, which the assessee appealed against.

3. The Commissioner (Appeals) upheld the demand order and interest, prompting the assessee to approach the Tribunal. The Tribunal, in its decision, allowed the assessee's appeal, leading to the Revenue's appeal before the High Court through a Civil Miscellaneous Appeal. The imposition of duty, penalty, and interest was a crucial aspect of the case, with the Tribunal's decision favoring the assessee.

4. The High Court noted the Gujarat High Court's ruling in a similar case and the Supreme Court's decision in Nirlon Ltd. v. Commissioner of Central Excise, Mumbai. The Supreme Court's judgment emphasized the absence of mala fide intentions in achieving a revenue-neutral situation, leading to the dismissal of penalties. The High Court, guided by these precedents, ruled in favor of the assessee, considering the case as revenue neutral and dismissing the appeal by the Revenue.

5. In conclusion, the High Court upheld the Tribunal's decision, following the Supreme Court's ruling on similar matters. The judgment favored the assessee, considering the absence of mala fide intentions and the revenue-neutral nature of the transactions. The Civil Miscellaneous Appeal was dismissed, with no order as to costs in the case.

← Previous Next →