2019 (7) TMI 1614 - AT - Central Excise

Valuation - normal transaction value or not - value to be adopted as per factory gate or as per depot - duty discharged on the transaction value, as was determined at the factory gate - alleged that had the Central Excise duty been paid on the value at the time of clearances from depot the Central Excise duty would have been more - recovery of short paid duty with interest and penalty - HELD THAT - Rule 2 (b) of the Valuation Rules define normal transaction value to mean the transaction value at which the greatest aggregate quantity of goods are sold. Rule 3 to 11 are relevant for determining the said value. Section 4 of Central Excise Act, 1944 speaks about valuation of excisable goods for the purposes of charging the duty of excise. Sub-section 1 makes it clear that where price is the sole consideration for the same at the time and place of removal and parties are not related, the said price shall be the transaction value. In rest of the other cases the value shall be determined in the manner as prescribed - Rule 7 of Value Determination Rules though has been impressed upon by the adjudicating authority, but the said rule cannot be applied in isolation. The rules have to be read in reference to the context of the specific provision in the statute. Thus, Rule 7 has to be read in reference to the context of above quoted Section 4 of Central Excise Act, 1944 - The conjoint reading does not alter the legal fact that four of the depots herein were the place of the removal for the Appellant. It is not denied that the value of depots invoices had the element of excise duty as was paid at the time of clearance from the factory gate. The transaction value has to be the basic price not including the said excise duty. Thus, it can be safely held that depot can be a place of removal and that the transaction value has not to include the amount of duty of excise, sales tax and other taxes. In the present case, the document of details of prices at factory rate, the amount of excise duty paid and the prices at the depot have been provided by the Appellant to the Tribunal - these documents need verification at the end of the adjudicating authority below, so as to conclude about the value in depot invoice as a whole to have the assessable value/transaction value plus the amount of excise duty or not. The matter remanded requiring the original adjudicating authority to verify and then to conclude accordingly for adjudicating the impugned SCN afresh - appeal allowed by way of remand.

Summary

Issues:
1. Discrepancy in excise duty payment between factory gate and depots.
2. Interpretation of transaction value for excise duty calculation.
3. Application of Rule 7 of Central Excise Valuation Rules.
4. Verification of documents and remand for fresh adjudication.

Analysis:
1. The core issue in this case is whether the Appellant paid excise duty on the correct transaction value. The Appellant was observed to have discharged excise duty at the factory gate value, despite a price difference between factory gate and depot values. The show cause notice alleged short payment of duty, leading to the recovery demand. The Appellant contested this, arguing that excise duty paid at factory gate should be excluded when determining depot sale value. The Tribunal noted the importance of determining the normal transaction value for excise duty calculation.

2. The Tribunal analyzed relevant provisions such as Rule 2(b) of Valuation Rules, Section 4 of Central Excise Act, and the definition of transaction value. It was emphasized that the transaction value should reflect the actual price paid for the goods, excluding excise duty. The place of removal, in this case, the depot, plays a crucial role in determining the assessable value. The Tribunal highlighted the need to consider these legal provisions while interpreting the transaction value for excise duty calculation.

3. The Department justified the application of Rule 7 of Central Excise Valuation Rules, emphasizing that the assessable value should be based on the transaction value at the time of removal from depots due to price differences. However, the Tribunal clarified that Rule 7 must be read in conjunction with Section 4 of the Central Excise Act to ensure a comprehensive understanding of excise duty valuation rules.

4. After considering arguments from both sides, the Tribunal found the need for verification of documents provided by the Appellant to determine the assessable value accurately. Therefore, the Tribunal remanded the matter to the original adjudicating authority for fresh adjudication based on the verified information. The penalty imposition was set aside pending the conclusion of the reassessment. The Tribunal allowed the appeal by way of remand, emphasizing the importance of accurate valuation for excise duty calculation.

This detailed analysis of the judgment highlights the legal intricacies involved in determining excise duty payment based on transaction value and the significance of proper interpretation of relevant provisions to ensure fair adjudication.