2017 (1) TMI 651 - AT - Central Excise

Valuation of scrap - transportation charges have been deducted twice independently and also with the cost of baling which is considered to be improper as the contract for delivery at the foundry includes the cost of transport - Appellant clears scrap on payment of duty to their own foundry and receives the finished products - revenue neutral exercise - Held that - We are not certain if the contract/purchase order is reflected, as it is, in the detailed bills raised by the contractor who was awarded the work or whether baling and transporting were separately reflected there. These are aspects that the adjudicating Commissioner should have gone into and rendered a finding; more particularly, in the context of Rule 11 Central Excise (Valuation of Price of Excisable Goods) Rules, 2000. The matter remanded back to the original authority to determine and record reasons for arriving at an assessable value at variance with that adopted by appellant after analysing the components of the costs that are deductible from the price at which market scrap is procured by the foundries - appeal allowed by way of remand.

Issues Involved:

1. Valuation of scrap cleared by the appellant to its own foundries.
2. Compliance with Central Excise (Valuation of Price of Excisable Goods) Rules, 2000.
3. Allegation of deliberate intent to evade duty.
4. Applicability of Rule 11 of the Central Excise (Valuation of Price of Excisable Goods) Rules, 2000.
5. Revenue neutrality and its implications.
6. Double deduction of transportation charges.
7. Examination of components included in the assessable value.
8. Justification of re-determination of duty.
9. Adequacy of the adjudicating authority's findings and reasoning.
10. Invocation of the extended period for demand and imposition of penalty.

Detailed Analysis:

1. Valuation of Scrap Cleared:
The dispute centers on the valuation of scrap cleared by the appellant, M/s Tata Motors Limited, to its own foundries. The Central Excise authorities issued a notice demanding differential duty of ?64,57,407/- for the period from January 2003 to December 2005, alleging that the value of clearances did not conform with market trends. The appellant had been clearing scrap at a uniform rate of ?7,825/- per metric ton from April 2000, which was later revised upwards to ?9,310/- in May 2003 and to ?17,300/- in March 2005.

2. Compliance with Valuation Rules:
The authorities contended that the appellant did not comply with the Central Excise (Valuation of Price of Excisable Goods) Rules, 2000. The scrap generated was contracted to M/s Sahajeevan Audhyogic Sahakari Sanstha Ltd, and the deduction of transportation charges was disputed. The appellant's transactions were subject to Rule 11, the residuary method of valuation, which requires a reasonable method consistent with the rules and Section 4 of the Central Excise Act, 1944.

3. Allegation of Deliberate Intent to Evade Duty:
The authorities argued that the appellant arranged transactions to evade duty. The appellant relied on previous Tribunal decisions and the concept of revenue neutrality, suggesting no intent to evade duty. However, the authorities cited decisions indicating that deliberate intent to evade duty is sustainable when differing prices are known.

4. Applicability of Rule 11:
The appellant admitted that Rule 11 was applicable, but the adjudicating authority failed to provide adequate findings on the computation variance. The confirmation of demand was based on the alleged failure of the appellant to defend their valuation and the investigators' findings.

5. Revenue Neutrality:
The appellant argued revenue neutrality, suggesting no cause to evade duty. The authorities countered this by referencing decisions that do not support revenue neutrality in such cases.

6. Double Deduction of Transportation Charges:
The show cause notice alleged improper double deduction of transportation charges and baling costs. The adjudicating authority did not adequately address whether these charges were reflected separately in the contractor's bills.

7. Examination of Assessable Value Components:
The adjudicating authority had the responsibility to examine each component included in the assessable value. However, the impugned order lacked detailed findings on this aspect, leading to uncertainty about the correctness of the valuation adopted by the appellant.

8. Justification of Re-determination of Duty:
The Tribunal questioned the necessity of re-determining duty in the given circumstances, particularly when no additional purpose was achieved. The adjudicating authority's approach was criticized for lacking diligence and proper reasoning.

9. Adequacy of Adjudicating Authority's Findings:
The impugned order was found to be sketchy and lacking in detailed reasoning. The adjudicating authority devoted insufficient attention to the core issue of short-payment and focused more on the plea of limitation.

10. Invocation of Extended Period and Penalty:
The adjudicating authority upheld the invocation of the extended period and imposition of penalty, citing the appellant's failure to correctly determine and pay duty, suppression of facts, and intent to evade duty.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter back to the original authority for a fresh determination. The original authority was directed to record reasons for arriving at an assessable value at variance with that adopted by the appellant and to analyze the components of the costs deductible from the market scrap price. The appeal was allowed by way of remand.

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