2019 (9) TMI 1370 - AT - Central Excise

Valuation - iron ore concentrate removed to its factory at Jamshedpur - to be valued as per Rule 8 or Rule 9 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 or not - HELD THAT - Rule 9 of the Valuation Rules provides that when the assessee so arranges that the excisable goods are not sold by an assessee except to or through a related person , the value of the goods shall be the normal transaction value at which such goods are sold by the related persons at the time of removal to buyers not being related person or where such goods are not sold to such buyers, to buyers not being related person, who sells such goods in retail - there are force in the contention of the appellant that this provision can have no application to the instant case. It is not a case herein of valuation of goods sold to or through TML, assuming as held in the impugned order that it is a subsidiary company of the appellant and therefore a related person within the meaning of Section 4(2)(b) of the Act. The goods whose valuation is the subject matter in the instant case are the goods which are transferred for captive consumption to the appellant s factory at Jamshedpur - In the instant case the facts on record, as stated in both the show cause notices and the impugned order, establishes that such is not the case. Hence the condition precedent for applicability of Rule 9 of the Valuation Rules has not been satisfied. The appellant s contention is also agreed that that Rule 10 of the Valuation Rules also, even on the finding of the Commissioner that TML is a subsidiary company of the appellant, is inapplicable in the instant case. The said provision is applicable only in cases where the assessee so arranges that excisable goods are not sold by him except to or through an inter-connected undertaking. The facts on record explicitly demonstrating that such is not the case herein, Rule 10, and, consequently, Rule 9 cannot have any application. Thus, the appellant had correctly valued the subject goods transferred to its Jamshedpur factory in terms of Rule 8 of the Valuation Rules at 110% of the cost of production thereof, determined as per CAS-4 and, hence, there was no undervaluation of the said goods cleared to the factory of the appellant at Jamshedpur for captive consumption therein and, therefore, no short payment of duty - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Duty demand confirmation under Central Excise Act.
2. Allegation of short payment of central excise duty.
3. Application of Valuation Rules to determine assessable value.
4. Barred by limitation for duty demand.
5. Imposition of penalty under Section 11AC of the Act.
6. Applicability of Rule 9 and Rule 10 of the Valuation Rules.
7. Correct valuation of goods transferred for captive consumption.

Analysis:
1. The appeals challenged an Order confirming a duty demand of ?128,84,03,023 against the appellant under Section 11A(1)/11A(4) of Central Excise Act, 1944, along with interest and penalty. The appellant, engaged in manufacturing iron and steel products, faced allegations of short payment of central excise duty due to the clearance of iron ore concentrates at varying prices to different entities. The Commissioner upheld the duty demands, leading to the appeals.

2. The appellant contended that the impugned order deviated from the Department's stand, lacked disclosed reasoning, and contained factual inaccuracies. The appellant argued that the valuation of goods was done correctly, and there was no undervaluation, rendering the duty demands and penalties invalid.

3. The Tribunal analyzed the application of Valuation Rules, particularly Rule 9 and Rule 10. It was established that Rule 9, pertaining to sales to related persons, did not apply as the goods were transferred for captive consumption, not sold to related persons. Similarly, Rule 10, applicable to sales through inter-connected undertakings, was deemed inapplicable based on the facts presented.

4. The Tribunal also addressed the issue of limitation for the duty demand, noting that the extended period of limitation did not apply due to the appellant's compliance with filing returns and providing necessary information to the authorities. The Tribunal found no grounds for invoking the extended period of limitation.

5. Ultimately, the Tribunal found in favor of the appellant, setting aside the impugned order and allowing the appeals. It was concluded that the appellant correctly valued the goods transferred for captive consumption, leading to the dismissal of the duty demands and penalties imposed.

6. The detailed analysis highlighted the discrepancies in the impugned order, the correct application of Valuation Rules, and the absence of undervaluation, resulting in the Tribunal's decision to overturn the Commissioner's order and provide relief to the appellant.