2015 (11) TMI 697 - AT - Central Excise

Penalty u/r 26 - Under Valuation of goods - Demand of differential duty - Held that - The original authority did not examine the contract between the railways and the appellant since the appellant had not appeared for personal hearing. The appellate authority relied upon the conclusions of the original authority. It has been the claim of the appellant that the bifurcation of value of materials and labour is only for convenience and not based on actuals. This claim has not been verified with reference to the contract. When it was a sale by the appellant s second unit to the railways, VAT would have been charged on the same separately and shown separately. - Further the claim of the appellant that they have paid central excise duty adopting a value which is more than 115% has also not been examined. Annexures C & D to the show-cause notice have been mentioned in the show-cause notice as the ones giving the details of basis for demand of duty. These annexures were not available when we heard the matter. The table in the order-in-original indicates differential value and assessable value. In the column for assessable value it is not written as differential assessable value. Therefore we do not know whether the duty paid by the assessee has been taken into account or not. Moreover for limitation purpose also there is a need to examine whether under these circumstances appellant could have entertained a bona fide belief or not. - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
Differential duty demand under Section 11A, interest under Section 11AB, penalty under Section 11AC, personal penalty under Rule 209A, related party transactions, valuation of goods, bifurcation of contract value, undervaluation of goods, imposition of separate penalty on proprietor.

Analysis:
The appellants, M/s. Talupula Industries and its proprietor, filed appeals against an order demanding differential duty, interest, and penalties for under valuation of goods cleared during a specific period. The investigation revealed that both Talupula Industries and Talupula Engineering Company (TEC) were owned by the same proprietor, who was directly involved in undervaluing goods sold to TEC, resulting in short payment of Central Excise Duty. The impugned order imposed various penalties on the appellants and the proprietor for these transactions.

The department contended that the value of goods supplied to TEC should be based on the value indicated in the purchase orders issued by Railways, as TEC received orders for galvanized steel products and separate payments for erection charges. The appellants argued that the valuation method based on purchase order values was correct, as there was no actual sale between the related firms owned by the same person. They claimed that the value adopted was more than 115% of the cost of production, negating any undervaluation. The appellants also challenged the imposition of separate penalty on the proprietor.

The Tribunal noted that both units belonged to the same person and raised concerns about the lack of examination of the contract between Railways and the appellants. The claim that the bifurcation of material and labor costs was for convenience needed verification. The issue of whether the same person could be considered related to each other required further consideration. The Tribunal highlighted the need to examine whether the duty paid by the assessee was taken into account and the bona fide belief of the appellant for limitation purposes.

Consequently, the Tribunal set aside the impugned order and remanded the matters to the original adjudicating authority for a detailed re-consideration. The appellants were granted a reasonable opportunity to present their case during the fresh adjudication process.