2016 (1) TMI 765 - AT - Central Excise

Valuation - stock transfer - Differential duty on clearances to their Faridabad unit - comparable price - Held that - The appellants are selling the gases to different set of buyers while comparing the price for valuation purposes, as already stated, it is necessary to have comparable volume and proximity of time and comparable class of buyers. Revenue s stand that the highest of value is a comparable price is not supported by the provisions of law. We find that while the value adopted is to be based on comparable value there is no sanction to take highest of the independent sale price for such purpose. Accordingly, we hold that the price of gases sold to independent buyers of similar class should be considered for valuation of gases cleared by the appellants on stock transfer basis. The appellants claim that during the relevant period their sale to M/s. Saraswati Air Products will satisfy the criteria for comparable price in view of volume and class of buyers. We find that this claim merits consideration. We find in the present case the demands were issued based on scrutinizing of periodical monthly returns filed by the appellants. On advice by departmental officers the appellants paid the differential/additional duty on 5.10.99 well before the adjudication. Certificates under Rule 57E were also issued to them for availing credit. We find in these circumstances imposition of penalties equal to duty difference demanded is not justifiable and accordingly, we set aside the same.

Summary

Issues: Valuation of goods for Central Excise duty on stock transfer basis, imposition of penalties equal to duty difference demanded.

Valuation of Goods for Central Excise Duty:
The case involved two appeals where the appellants, engaged in manufacturing industrial and medical gases liable to Central Excise duty, supplied gases on stock transfer basis to their unit at Faridabad. The revenue alleged incorrect excise duty payment on these clearances, leading to demand for differential duty and penalties. The appellants argued for valuation under section 4(1)(b) with Valuation Rules when value couldn't be determined under section 4(1)(a). They contended that comparable value as per Rule 6(b) should apply, emphasizing no mis-declaration on their part. The issue revolved around the lack of clear findings on comparable value in original and appellate orders, with the department calculating differential duty based on the highest sale price, deemed legally unsustainable. The Tribunal emphasized the need for comparable prices from similarly placed buyers for correct valuation and cited precedents to support adopting the most conservative price, not the highest, for valuation.

Imposition of Penalties:
The Tribunal found that penalties equal to duty difference demanded were unjustifiable, considering the appellants' proactive payment of differential/additional duty before adjudication and issuance of certificates under Rule 57E to avail credit. The imposition of penalties was set aside based on these circumstances. The judgment concluded by disposing of the appeals on the terms discussed and addressing the miscellaneous application related to linking the appeals.