2015 (12) TMI 731 - AT - Central Excise

Duty demand - undervaluation of the goods - appellants paid the duty on their own calculation and they have not followed the provisions of Rule 8 of Central Excise valuation (Determination of Price of Excisable Goods) Rule 2000 and CAS-4 in respect to clearance of the goods to their sister unit during the period from December 2001 to March 2006 - Held that - Larger Bench of the Tribunal in the case of M/s Ispat Industries Ltd (2007 (2) TMI 5 - CESTAT, MUMBAI) held that transfer part of production to another plant of same assessee and balance production sold to independent buyers, Rule 8 could not be applicable and value could be determined by the assessee under Rule 4 of the Valuation i.e., transaction value. It has been held that the provision of Rule 4 are in any case to be preferred over the provisions of Rule 8 not only for the reason that they occur first in the consequential of the valuation Rules but also for the reason that in a case where both the Rules are applicable, the application of Rule 4 will be allowed to determine value which will be more consistent and in accordance with the parent statutory provisions of Section 4 of the Central Excise Act 1944. In the present case, there is no dispute that during the period 2003-04 to 2005-06 the appellant transferred the goods to their sister unit as well as to the independent buyers Demand of duty alongwith interest for the period 2003-04 to 2005-06 is set aside. The demand of duty for the period 2001-02 to 2002-03, the adjudicating Authority is directed to examine in the light of the decision in the case of M/s Bajaj Tempo Ltd (2004 (7) TMI 145 - CESTAT, MUMBAI) after giving adjustment of excess/short duty in accordance with law. The penalty is set aside - Decided partly in favour of assessee.

Summary

Issues:
1. Undervaluation of goods and non-compliance with Central Excise valuation rules.
2. Applicability of Rule 8 of Valuation Rules and CAS-4 system.
3. Sale to independent buyers affecting valuation under Rule 8.
4. Determination of duty payment for different periods.
5. Adjustment of excess payment against short payment for duty calculation.
6. Imposition of penalty.

Analysis:
1. The case involved the appellants, engaged in manufacturing Ortho Nitrate Anisole (ONA), facing a show cause notice for undervaluation of goods and non-compliance with Central Excise valuation rules. The Adjudicating Authority confirmed a duty demand along with interest and penalty on the appellant company.

2. The appellant's counsel argued that Rule 8 of Valuation Rules and CAS-4 system should apply only for specific periods where there were no independent sales. Citing precedents, the counsel contended that if there were sales to independent buyers, Rule 8 would not be applicable. The Tribunal's Larger Bench decision in M/s Ispat Industries Ltd's case supported this argument.

3. The Revenue's Authorized Representative maintained that Rule 8 and CAS-4 should apply for all periods due to non-compliance in earlier years. However, the Tribunal found that during 2003-04 to 2005-06, the appellant had sales to both sister units and independent buyers. Citing the Hon'ble Supreme Court's decision, the Tribunal ruled that duty payment based on transaction value for these years was correct.

4. For the earlier periods of 2001-02 and 2002-03, the appellant acknowledged duty liability under Rule 8 and CAS-4. The Tribunal directed a re-examination of duty calculation for these years, considering adjustments for excess and short payments based on past precedents.

5. The Tribunal highlighted the need to quantify duty demands for the first two years in line with previous decisions allowing adjustments for differential duty payments. Consequently, the demand for duty and penalty for the later years was set aside, and the adjudicating authority was instructed to reevaluate the duty for the initial years.

6. Ultimately, the Tribunal set aside the duty demand and penalty for the later period while directing a reassessment for the earlier years in accordance with legal precedents allowing adjustments for excess and short payments. The impugned order was modified accordingly to reflect these decisions.