2015 (12) TMI 740 - SC - Central Excise

Valuation - Contravention of the provisions of Section 4 of the Central Excise Act read with Rule 4 & 5 of the Central Excise Rules - Contravention of Rule 6 of the Central Excise (Determination of price of Excisable Goods) Rules, 2000 - Failure to declare the correct price of its manufactured goods - Failure to correctly assess/determine the central excise duty payable on the goods manufactured - Held that - the assessee has no objection if the price at which the goods were sold by the alleged related persons is made the basis of arriving at the valuation for each month separately, which is covered by the show cause notices. - Benefit of deduction on the ground of excise duty, sale tax, freight and transit insurance should be given. Since these deductions are permissible under the provisions of the Act it hardly requires to mention that the Commissioner shall allow the same once satisfactory proof of incurring these expenses is furnished by the assessee. The assessee shall be permitted to file the required computation as well as documents in support its case. - Decided in favour of Revenue.

Summary

Issues:
1. Alleged contravention of provisions of Central Excise Act and Rules regarding declaration of correct price of goods and assessment of excise duty.
2. Dispute over related persons and valuation of goods sold.
3. Challenge to Commissioner's Order-in-Original by the assessee.
4. Appeal before Customs, Excise and Service Tax Appellate Tribunal (CESTAT).
5. CESTAT's judgment setting aside the Commissioner's order.
6. Revenue's appeal before the Supreme Court.

Issue 1: Alleged contravention of provisions of Central Excise Act and Rules regarding declaration of correct price of goods and assessment of excise duty.

The Supreme Court dealt with show cause notices issued to the respondent/assessee for contravening Section 4 of the Central Excise Act and Rules by failing to declare the correct price of manufactured goods and incorrectly assessing excise duty. The notices covered the period from February 2004 to May 2005, specifically focusing on the product 'Camphor'. The Commissioner confirmed the demand, which was challenged by the assessee before CESTAT.

Issue 2: Dispute over related persons and valuation of goods sold.

The show cause notices alleged that certain persons were 'related persons' to whom goods were supplied at a higher valuation. The Commissioner considered M/s. Royal Chemicals as a related person and used their price of Rs. 118.56 per kg for valuation. The CESTAT, however, rejected this valuation, stating it pertained to a prior period. The Supreme Court directed that the parties named in the notices are related persons, but the valuation should be based on the prices at which goods were sold by these parties in the relevant months.

Issue 3: Challenge to Commissioner's Order-in-Original by the assessee.

The assessee challenged the Commissioner's Order-in-Original, which was upheld by CESTAT, leading to the appeal before the Supreme Court by the Revenue. The Supreme Court set aside CESTAT's order and remitted the case back to the Commissioner with specific directions on valuation and computation.

Issue 4: Appeal before Customs, Excise and Service Tax Appellate Tribunal (CESTAT).

The assessee's appeal before CESTAT resulted in the rejection of the Revenue's case regarding related persons and the valuation based on M/s. Royal Chemicals' price. The CESTAT's decision was a key point of contention in the Supreme Court proceedings.

Issue 5: CESTAT's judgment setting aside the Commissioner's order.

CESTAT's judgment dated 28.03.2007 allowed the assessee's appeal, leading to the Revenue's appeal before the Supreme Court. The Supreme Court analyzed the grounds on which CESTAT set aside the Commissioner's order and provided specific directions for reconsideration.

Issue 6: Revenue's appeal before the Supreme Court.

The Revenue appealed before the Supreme Court challenging CESTAT's decision. The Supreme Court allowed the appeal, setting aside CESTAT's order and remitting the case back to the Commissioner for valuation based on the prices at which goods were sold by related persons in the relevant months, specifically for the product 'Camphor'. The Court also directed the Commissioner to consider allowable deductions and proofs furnished by the assessee for expenses incurred.

This detailed analysis of the Supreme Court judgment highlights the key issues, the sequence of events, and the specific directions given by the Court regarding the valuation and computation of excise duty payable by the assessee.