2018 (7) TMI 2177 - AT - Central Excise

Short payment of duty - undervaluation of goods - allegation is that the appellant was required to make payment of central excise duty on the said goods upon valuation thereof at the prices sold by Philips India to its customers, which having not been done, there was undervaluation of the products in question resulting in short payment of duty - HELD THAT - The Commissioner s reliance on the decision of the Supreme Court in SIDHOSONS ANR. ETC. VERSUS UNION OF INDIA OTHERS ETC. 1986 (10) TMI 38 - SUPREME COURT in support of the conclusion that valuation of the subject goods had to be on the basis of the prices declared by Philips India to its customers is misconceived and erroneous. It is relevant to state that in the instant case neither in the show cause notices nor in the impugned order there is any allegation or finding that the determination of assessable value of the subject goods cleared by the appellant on which central excise duty was paid did not satisfy the requirements as laid down in UJAGAR PRINTS, ETC. ETC. VERSUS UNION OF INDIA AND OTHERS 1988 (11) TMI 106 - SUPREME COURT and PAWAN BISCUITS CO. (PVT.) LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, PATNA 2000 (7) TMI 78 - SUPREME COURT and that the assessable value on which the central excise duty was paid was lower than the assessable value if determined on the basis of total cost of raw materials, labour charges and profit of job workers as laid down in the said decisions. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Appeal against Order-in-Original confirming central excise duty demand, penalty imposition, undervaluation of goods, reliance on Supreme Court decisions for valuation, Commissioner's findings, unsustainable impugned order.

Analysis:
The appeal challenged an Order-in-Original confirming a differential central excise duty demand of ?2,92,04,218.17 against the appellant, along with interest and penalty under the Central Excise Act, 1944. The demand was based on allegations of undervaluation of goods manufactured by the appellant, resulting in short payment of duty. The appellant contended that they had correctly valued and paid duty on the goods as per agreements with Philips India Ltd., citing Supreme Court decisions like Kulwant Electrical Industries and Commissioner of C.Ex. Vs. Cosme Farma Laboratories Ltd. to support their stance.

The Commissioner upheld the demand, relying on a different interpretation of valuation principles. However, the Tribunal found that the Commissioner's reliance on the Sidhosons case for valuation was erroneous. The Tribunal highlighted a Supreme Court judgment emphasizing that excise duty should be levied based on the price at which the goods are agreed to be sold between the manufacturer and the buyer, not the price at which the buyer sells to wholesalers. This principle was reiterated in subsequent Supreme Court cases, including Cosme Farma Laboratories Ltd., clarifying the assessable value for job workers.

The Tribunal noted that neither the show cause notices nor the impugned order alleged any failure in determining the assessable value of the goods as required by previous Supreme Court decisions. By following the Supreme Court precedents closely, the Tribunal concluded that the impugned order, along with the demand of duty, interest, and penalty, was unsustainable. Therefore, the Tribunal set aside the impugned order and allowed the appeal, ruling in favor of the appellant.

This detailed analysis of the valuation principles, reliance on Supreme Court decisions, and the Tribunal's interpretation of the law led to the conclusion that the impugned order was unsustainable, resulting in the appeal being allowed in favor of the appellant.