2018 (3) TMI 1755 - AT - Central Excise

Valuation - clearance of goods to sister units - related party transaction -it was alleged that duty liability was discharged at the value adopted for clearance of goods at the factory gate to independent person - HELD THAT - It is seen that substantial evidence of the inter connected nature of the two entities in accordance with Section 4 of the Central Excise Act, 1944 is on record. The valuation is of goods cleared to M/s Pawan Casting (Meghalaya) Pvt. Ltd., which Should, therefore, have been computed on cost of production was not undertaken by the appellant. Accordingly the appellant s liability to pay tax does not conform to Central Excise Valuation Rules, 2000. The claim of the appellant that the entire exercise is revenue neutral as they are entitled to the benefit of refund of duty discharged will not suffice for the purpose of excluding them for the application of the said Rules. Penalty - HELD THAT - There has been no suppression on their part and duties have been paid on value which is no different for clearance to independent purchasers and that, in any case, they were entitled to get refund of the tax discharged by them - penalty do not sustain. Appeal allowed in part.

Summary

Issues: Allegation of duty liability on goods cleared to sister unit, Valuation of goods, Application of Central Excise Valuation Rules, Imposition of penalty

In the judgment by the Appellate Tribunal CESTAT KOLKATA, the appellant challenged an order-in-original regarding duty liability on goods cleared to a sister unit. The tribunal noted substantial evidence of the interconnected nature of the two entities, indicating non-compliance with Central Excise Valuation Rules, 2000. The appellant's failure to compute the valuation of goods cleared to the sister unit based on cost of production was highlighted. Despite the appellant's argument that the exercise was revenue neutral due to the entitlement of duty refund, the tribunal held that the proposed value for tax liability computation in the impugned order was valid.

The appellant's counsel contended that there was no suppression on their part as duties were paid on a value similar to that for independent purchasers, and they were eligible for a refund of the discharged tax. Consequently, the tribunal set aside the penalty imposed in the impugned order, considering the circumstances presented. Ultimately, the appeal was partly allowed by the tribunal, with the decision dictated and pronounced in the open court.